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Adani's cement foray to challenge Birla, LafargeHolcim, Dalmia, Jindal

The Adani Group, which has a combined market value of Rs 9.5 lakh crore, will also benefit from value unlocking in cement business, said industry experts.

Adani Group is already in the process of spinning off its airport assets to a company from Adani Enterprises Ltd. Adani Group is already in the process of spinning off its airport assets to a company from Adani Enterprises Ltd.

Industrialist Gautam Adani's foray into cement business is expected to intensify the competition in the segment which is expected to grow at an average of 10 per cent in the next couple of years. The newly instituted Adani Cement Industries Ltd (ACIL) plans to manufacture most types of cements, challenging dominant players like Aditya Birla Group's UltraTech Cement Ltd, LafargeHolcim companies Ambuja and ACC, Dalmia and JSW Cement.

UltraTech, the largest company in the segment, has a consolidated grey cement capacity of 116.8 million tonnes per annum (MTPA). Ambuja Cement has a capacity of 29.65 MTPA, while ACC has a production capacity of 29.65 MTPA.

The Adani Group, which has a combined market value of Rs 9.5 lakh crore, will also benefit from value unlocking in cement business, said industry experts. It is already in the process of spinning off its airport assets to a company from Adani Enterprises Ltd and plans to raise $500 million through private placement of shares, they added.

Shares of Adani Group's six companies, which are listed on Indian bourses, have been rising to record highs since late last year. Adani Green Energy is the most valued company in the group with Rs 1.91 lakh crore market capitalisation. Except Adani Power, which has a market value of Rs 57,000 crore, the other five companies are valued at above Rs 1.7 lakh crore.

"The cement business is natural extension of its power business. They will be able to use the fly ash generated at Adani Power's coal-fired stations for use in the manufacture of cement, concrete, concrete products, cellular concrete products, bricks, among others," said experts.

Also read: Adani Group enters cement business, incorporates Adani Cement Industries

In a report in March, research firm Morgan Stanley had said that macro conditions are supportive for cement demand growth over the next few years after subpar growth in the last seven years as business cycle saw hiccups from various events like demonetisation, GST implementation, RERA implementation, credit squeeze, COVID-19 pandemic.

"The current cycle should be supported by both pickup in the capex cycle and upturn in the housing industry. We expect cement demand to increase at a CAGR of 9 per cent over FY21-23 (in line with real GDP growth) and believe that demand could surprise positively," the report said.

Avishek Kumar, Managing Director, Protiviti Member Firm for the India Region said during the months of April and May, when most part of the country witnessed full or partial lockdown, overall cement consumption increased on quarter-on-quarter basis, coupled with upward price correction in eastern and southern markets.

"As the work resumes at the construction site and (due to) increased capital expenditure spending on infrastructure development, FY21 is poised for 7-10 per cent growth. Most of this demand shall be from rural and semi-urban areas with rural contributing more than 45 per cent of the overall consumption. This consumption shall be mostly due to award of contracts under MGNREGA, PMAY-U and increase in budgetary allocation made towards capital expenditure with inclusion of projects under National Infrastructure Pipeline (NIP)," he said.

A report by Goldman Sachs said that with the government's impetus on capex in FY22 budget and the expected recovery in urban real estate, volume momentum is likely to sustain in FY22. It forecasted 13 per cent year-on-year industry volume growth.

Adani Cement may be targeting to tap the demand expected from the upcoming projects in private sector and the Rs 111-crore worth projects under the Narendra Modi government's ambitious NIP.

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