Adani Group focus on brownfield expansion; Penna Cement buy to help reach 140 MTPA target capacity
Billionaire Gautam Adani-owned firm on Thursday announced the acquisition of Hyderabad-based Penna Cement at an enterprise value of Rs 10,422 crore in a cash-all deal
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New Delhi: The country's second-largest cement maker Adani Group on Friday said it is focused on brownfield expansion, while acquisition opportunities like Penna Cement will help it reach its 140 MTPA target capacity.
Billionaire Gautam Adani-owned firm on Thursday announced the acquisition of Hyderabad-based Penna Cement at an enterprise value of Rs 10,422 crore in a cash-all deal, which will not only help to strengthen its presence in Southern India but also provide an entry into the Sri Lanka market.
"The interesting thing (of the deal) is it brings back Ambuja into Sri Lanka," said Ambuja Cements CEO and Whole Time Director Ajay Kapur during an Investor Meeting Call on Friday after the deal. Earlier, Ambuja Cement had a bulk cement terminal in Sri Lanka, which later became part of Holcim, the Swiss building material maker, which sold its India cement business to Adani Group in 2022.
"With this deal, we also now have an entry point back into Sri Lanka, where the group is also building a port and it will help us to start capturing market share," he added. When asked about the merger & acquisition, Kapur declined to comment, but said it "accelerates our journey". However, Kapur said, "We remain focused on expanding our brownfield for which we already have a plan of 40 MTPA… Penna's 14 MTPA is on top of what we were doing. It only accelerates our journey".
According to Kapur, Ambuja will continue to work on brownfield sites for which it has the advantages of either getting permits or starting operations of new units. Replying to investors, over the possibility of other acquisition opportunities, Kapur said: "I think there will be another occasion for us to discuss, other than that, I am not going to add something more".
Over the inorganic growth journey of Adani Cements, Kapur in September 2022 said that when the group had entered into the cement business by acquiring Ambuja Cements and ACC Ltd from Holcim in a $6.4 billion (about Rs 51,000 crore) deal, the capacity was 68 million tonnes per annum. "And finally, with the acquisition of MyHome Industries and Sanghi Industries, we are currently already sitting at 79 MTPA. With this 14 MTPA, our capacity will go up to 93 million tonnes," he noted. Moreover, Adani Cement is also having various projects under commissioning as part of its expansion plans.
"We have already announced about 20 MTPA in the last call, which will straightaway take us to 113 MTPA," he said, adding that "for the remaining part also, a blueprint is ready, land has been acquired. Mining is in place". "So, we are well poised to hit our 140 MTPA target as we have been speaking in past," Kapur added.
The acquisition of Penna Cement will add 14 MTPA capacity and increase its market share in Southern India to 8 per cent from 2 per cent. "The asset footprint of Penna Cement beautifully fits into our Southern strategy," he said, adding that it also has a grinding unit in Pune, Maharashtra, which also fits Adani Cement's western market share strategy.
Besides, it also has capacity under construction at Krishnapatnam (2 MTPA) and Jodhpur (2 MTPA), which will be completed within 6 to 12 months, and the deal has "tremendous advantage" on various costs, he added. Moreover, Penna Cement also has surplus clinker, which has a potential of 3 million surplus clinker.
"So, effectively, 17 MPTA is what we get from this acquisition, which improves capacity by 20 per cent. It also takes our South India capacity to 20 per cent," said Ambuja CFO, who was also on the call. Moreover, it will also strengthen Adani Cement's sea transportation logistics to peninsula India to service, as it has bulk cement terminals at Kolkata, Gopalpur, Karaikal and Kochi.
"We have been sitting on good cash and cash equivalents and it will be a good deployment of this amount," he said adding that "the entire equation will be funded through cash and cash equivalents. After all by the end of this year, my estimate is that we will be holding almost Rs 10,000 plus crore of cash".
According to data from the Cement Manufacturers Association, the country has an installed cement capacity of 541 Metric Tonnes (MT). The Indian cement market is led by Aditya Birla group firm UltraTech Cement Ltd, which has a consolidated capacity of 152.7 MTPA.
