The Cement Chase: Birla’s UltraTech and Adani’s Ambuja are shaking up the sector

With the Narendra Modi-led NDA government’s sharp focus on infrastructure creation, one of the sectors being keenly watched is cement. Some years ago, India’s cement industry was fragmented, barring a few large players. Then, in 2005, Swiss cement major Holcim entered by acquiring Ambuja and ACC. This made Holcim the largest player, followed by the Kumar Mangalam Birla-led UltraTech Cement. But another development—the global merger of Holcim with Lafarge of France in 2014—impacted its India operations, slowing it down considerably. Meanwhile, UltraTech decided to step on the gas and up its M&A game, acquiring assets aggressively to increase its capacity. Cut to 2022, and Gautam Adani’s Adani Group threw its hat in the cement ring by acquiring Ambuja and ACC in a $10.5-billion deal that, in one stroke, made it the second-largest cement player. As the country’s infrastructure story gained momentum, it became clear that cement would be one of the industries that would play a key part in building the India of tomorrow. Sensing serious growth opportunities, both Birla and Adani have drawn up aggressive growth strategies to ramp up capacity. No stranger to buyouts, Birla’s UltraTech has inorganic growth as a key strategic growth element, as does Adani.

When two of the country’s biggest business groups chase growth opportunities in an industry, it’s bound to shake up the sector. And that’s exactly what is happening now, as our cover story by Krishna Gopalan will tell you. The chase for increased cement capacity is leading to a wave of buyouts by both sides and consolidation in the sector. Consider the figures: UltraTech plans to quickly ramp up its capacity from the current 155 million tonnes per annum (mtpa) to 200 mtpa, while Adani’s Ambuja aims to move up from 79 mtpa to 140 mtpa by 2028. Not surprisingly, both sides are on the prowl, particularly in south India, which has several small cement assets on offer. The intensity of the race is evident since every buyout starting August 2023 has involved either UltraTech or Ambuja. Between them, the two groups are spending upwards of Rs 1 lakh crore on organic growth and buyouts. In 2024, the race for capacity has intensified, culminating in the recent buyout of the Hyderabad-based Penna Cement by Ambuja and the acquisition of Chennai-based India Cements by UltraTech in late July. As the story unfolds, Deal Street is expected to continue buzzing, with smaller cement companies in the South being primary targets.

Elsewhere in this issue, Surabhi and Richa Sharma bring you a detailed analysis of Budget 2024, where the government announced a major push for employment and skilling by way of employment-linked incentive (ELI) schemes, together with support for MSMEs and the middle class. And while the stock markets were initially spooked by the increases in capital gains tax, the fact that Finance Minister Nirmala Sitharaman announced an accelerated fiscal deficit target of 4.9% for FY25 went down well with investors.