Gautam Adani planning a cement coup? A $3 billion war chest report fuels buzz

The Adani Group is reportedly pursuing multiple acquisitions in the cement sector, which includes Penna Cement, Saurashtra Cement, Jaiprakash Associates, and Vadraj Cement owned by ABG Shipyard as it ramps up its efforts to capture around one-fifth of the Indian cement market by FY28.

Adani Cement at present is the second leading company in the sector after UltraTech.

Adani has set aside a kitty of $3 billion for the group's ambitious cement plan, according to an Economic Times report. 

BT could independently verify the report. 

The Indian cement industry is poised for growth, with demand expected to rise at a compound annual growth rate (CAGR) of 7-8% over the next five years. 

The Adani Group's ambitious expansion plans align with this growth trajectory, positioning it to leverage opportunities in the building materials industry.

Adani's acquisition strategy, the report claims,  includes offering $85-120 enterprise value (EV) per ton for mid-sized cement businesses, with a premium for those with potential for capacity expansion and possession of limestone mines. 

Ambuja, with its subsidiaries ACC Ltd, has the capacity to produce 77.4 million tonnes of cement annually from 18 integrated cement manufacturing plants and 18 cement grinding units across the country. It had recently acquired Sanghi Industries Ltd.

The group has certain enablers for capacity enhancement and it already has land in possession and some are in the advanced stages of acquisition.

It has a cumulative 8,000 million metric tonnes of limestone reserve, a major raw material for the cement industry, " in possession at nil to nominal premium," Adani Cements in an April PTI report.

Moreover, it has 40 per cent of Fly Ash requirements under the long-term arrangement, which will increase to over 50 per cent by 2028.
Ambuja further stated it has "better enterprise risk management" and 65 per cent of the total cost of cement has synergies with a group or where the Group is the market leader.

"Accelerated Growth and Cost Leadership supported by Group Synergies is one of the most important differentiating points for Adani Cement," it said.
In addition to that Ambuja continues to remain debt-free with a net worth of Rs 43,000 crore (around USD 5.2 billion), and cash and cash equivalents of Rs 8,591 crore (USD 1.04 billion) as of December 2023.

Over the Indian cement industry, Adani Group said it is also expected to grow at a CAGR of 7 to 8 per cent, it said.