The Adani Group is exploring the acquisition of several cement companies, including Hyderabad-based Penna Cement, Gujarat-headquartered Saurashtra Cement, the cement business of Jaiprakash Associates, and Vadraj Cement, owned by ABG Shipyard.
According to a report by Economic Times, the group has earmarked $3 billion for these acquisitions. This move is part of Adani’s aggressive inorganic growth strategy aimed at increasing its cement production capacity and surpassing Aditya Birla Group’s UltraTech to become India’s largest cement manufacturer within the next three to four years, ET added.
Adani declined to comment on ET’s inquiry, while Penna Cement and Saurashtra Cement did not respond. The resolution professional for Vadraj Cement and the secretarial department of JP Associates also did not reply to ET’s queries by press time.
The group’s interest in these companies is driven by expectations of a surge in demand as the Indian government continues its infrastructure development initiatives, supported by record capital expenditure. According to Economic Times, Penna Cement is estimated to be valued at around Rs 9,000 crore, with the potential for a higher valuation depending on its capacity expansion from 10 MTPA (million tonnes per annum) to 15.5 MTPA.
Saurashtra Cement currently has a market capitalisation of Rs 1,487 crore, Economic Times reports. In April 2022, Dalmia Bharat signed a definitive agreement to acquire Jaiprakash Associates’ cement, clinker, and power plants for Rs 5,666 crore, but this deal has been delayed due to shareholder disputes.
The ET report also adds that the Adani Group is prepared to offer an enterprise value (EV) of $85-120 per ton for these mid-sized cement businesses and may consider a premium for companies with capacity expansion potential, limestone mines, and packing terminals. Notably, Adani acquired Sanghi Cement, which has a capacity of 6.1 MTPA, at $100 EV per ton last year.
Penna Cement also has a packing terminal capacity of 2.8 MTPA. Saurashtra Cement has a capacity of around 5 MTPA, Jaiprakash Associates 9.5 MTPA, and Vadraj Cement 6 MTPA. Both Jaiprakash Associates and Vadraj Cement are currently undergoing bankruptcy proceedings.
The insolvency of Jaiprakash Associates was triggered by ICICI Bank. The National Company Law Appellate Tribunal (NCLAT) has refused to stay the process but has told ICICI Bank it may consider a one-time settlement proposal submitted by the company.
Ambuja Cement is likely to be the preferred route for these acquisitions by the Adani Group, given it had cash and cash equivalents of Rs 24,338 crore on its books at the end of April, bolstered by Rs 8,339 crore in warrant money from the promoter. The company does not have any debt. Adani may also consider ACC if synergies are better, especially in southern India, where the group currently has a lower market share.
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