The Adani Group is considering the acquisition of a number of cement firms, including ABG Shipyard's Vadraj Cement, Hyderabad-based Penna Cement, Saurashtra Cement, with its headquarters in Gujarat, and the cement division of Jaiprakash Associates.
A report claims that the company has set aside $3 billion for these purchases. This action is a component of Adani's ambitious inorganic expansion plan, which aims to make it the largest cement maker in India over the next three to four years by growing its cement production capacity and surpassing UltraTech of the Aditya Birla Group.
The story could not be independently verified by Moneycontrol. Adani did not react to ET's inquiries, and neither did Penna Cement nor Saurashtra Cement. By the time of publication, neither the secretarial department of JP Associates nor the resolution specialist for Vadraj Cement had responded to ET's inquiries.
The likelihood of a spike in demand as the Indian government pursues its infrastructure development plans, bolstered by record capital spending, is what has the group interested in these firms. Penna Cement's projected worth, as reported by Economic Times, is about Rs 9,000 crore. The company may be valued higher if it increases its capacity from 10 MTPA (million tonnes per annum) to 15.5 MTPA.
According to report, Saurashtra Cement's market capitalization is presently Rs 1,487 crore. A formal agreement was signed in April 2022 by Dalmia Bharat to purchase the cement, clinker, and power facilities of Jaiprakash Associates for Rs 5,666 crore. However, the sale has been postponed because to shareholder conflicts.
The Adani Group is willing to pay an enterprise value (EV) of $85–120 per ton for these mid-sized cement enterprises. It may also be willing to pay more for businesses that have the ability to expand their capacity, such as packing terminals and limestone mines. Notably, Adani paid $100 EV per ton last year to purchase Sanghi Cement, which has a capacity of 6.1 MTPA.
Additionally, Penna Cement has a 2.8 MTPA packing terminal capability. The capacities of Vadraj Cement, 9.5 MTPA, Jaiprakash Associates, and Saurashtra Cement are respectively, around 5 MTPA and 6 MTPA. Vadraj Cement and Jaiprakash Associates are both presently going through bankruptcy processes.
ICICI Bank was the catalyst for Jaiprakash Associates' insolvency. The National corporation Law Appellate Tribunal (NCLAT) has informed ICICI Bank that it may take into consideration a one-time settlement offer made by the corporation, but it has declined to halt the proceedings.
Given that Ambuja Cement has cash and cash equivalents of Rs 24,338 crore on its books at the end of April, supported by Rs 8,339 crore in warrant money from the promoter, it seems likely that this is the method that the Adani Group would use when making these acquisitions. There is no debt owed by the business. If synergies are greater, Adani may also take ACC into consideration, particularly in southern India, where the business currently holds a smaller market share.
