scorecardAdani Group cement buyout is actually a bet on its infrastructure business
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Adani Group cement buyout is actually a bet on its infrastructure business

Adani Group cement buyout is actually a bet on its infrastructure business
Business5 min read
  • Adani Group outbid JSW Group and Ultratech Cements to buy India’s two largest cement companies and make a grand entry into the cement industry.
  • Billionaire Gautam Adani acquired Ambuja Cements and its subsidiary ACC from Switzerland based Holcim for $10.5 billion.
  • Further, Adani Group companies will benefit from backward integration as cement is a key ingredient in all infrastructure businesses.
The Adani Group has many business interests but most of all they’re builders - with presence in sectors like real estate, infrastructure be it airports, ports, power plants, logistics and more. A good way to cement their presence in all these sectors is to be in the business of cement manufacturing.

Putting all rumors to rest, the group released a statement that it acquired two of India’s most valuable cement companies — Ambuja Cements and ACC — outbidding yet another infrastructure major JSW Group and India’s largest cement manufacturer, Ultratech Cement.

The billionaire Gautam Adani paid as much as $10.5 billion to buy the companies from Switzerland-based Holcim. Holcim owned 63.11% stake in Ambuja and 4.48% direct stake in ACC. Ambuja Cements owns 50.05% in ACC.

Infra major Adani will be its biggest customer of its cement business

For the oil-to-coal-to-power conglomerate, acquiring cement business accounts to backward integration which will aid growth in its infrastructure businesses.

“On the demand side, we continue to execute on a massive number of construction activities that span every one of our infrastructure businesses. I therefore expect us to be one of the largest customers of our own cement business,” said Gautam Adani, chairperson of Adani group in an interview to The Economic Times.

Adani expects to utilize the cement business to fulfill some of its goals aligned with the government’s plans.

“The creation of 100 smart cities, 200 new airports, Housing-for-All as part of the Pradhan Mantri Awas Yojana, large-scale concrete highways and the ministry mandate that stipulates minimum of 25% of concrete volume to be used in national highways, expressways and other centrally sponsored road projects, the rise of dedicated freight corridors - the list of possibilities that will drive cement consumption is endless,” Adani told ET.

Further, Adani wishes to aggressively expand and double the existing 70 million tonnes per year capacity within the next five years.

Adani becomes the second largest player in the Indian cement industry

With the acquisition, Adani Group emerges as the second largest cement producer in the country. Analysts believe the buyout can change the fortunes of Adani and also that of the entire industry.

“Adani Group, all of sudden, emerges as the second largest cement producer of the country with its master stroke of buying-out ACEM and ACC from Holcim. However, to us, this master stroke is not just about the buyout, but Adani, in our view, now has the potential to turn around the fortune for the whole industry and not just theirs,” said analysts at Phillip Capital.

After Ultratech Cements, Adani Group (via Ambuja and ACC) has the highest capacity of 70 million tonnes annually. In terms of market capitalisation, Ambuja Cements and ACC are the fourth and fifth largest cement manufacturers in India.
Top five cement companies in stock market

Market cap

Annual capacity

UltraTech Cement

₹1.75 lakh crore

119.95 million tonnes

Shree Cement

₹79,352 crore

43.4 million tonnes

Ambuja Cements

₹74,163crore

31.45 million tonnes

ACC

₹41,924 crore

34.45 million tonnes

Dalmia Bharat

₹26,502 crore

35.9 million tonnes

Source: BSE as at 11:20 p.m. May 16

What’s in for investors from the acquisition?

The acquisition has led to mandatory open offers in both the companies, wherein the acquirer Adani will buy shares from the market at a fixed price. Adani has proposed to buy 48.96 million equity shares at ₹2,300 per share of ACC. Similarly, it will buy 516 million shares of Ambuja Cements at ₹385 per share.

The shares will be bought at a 7-9% premium from Friday’s closing price. As a result, shares of Ambuja Cements surged 5% and those of ACC spiked nearly 8% on May 16.

After the deal, analysts at Phillip Capital have recommended a “buy” rating for the stocks with a target price of ₹2,850 for ACC and ₹440 for Ambuja Cements.

$ACC.NSE , $AMBUJACEM.NSE Stock price of both ACC & AMBUJA cements reacted positive to the acquisition deal by rallying in the first half of the trading session.ACC need to clear 2400 level and will confirm an inverse Head & shoulder pattern.Ambuja has resistance at 390 level. But formed a good base at 350. Critical support is at 350 zone.

— (@vmehta) May 16, 2022]]>


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