Adani Group has agreed to buy Holcim’s India assets, the two publicly listed cement companies Ambuja Cements and ACC, in a $10.5-billion deal. (around Rs 81,361 crore). That marks the ports-to-energy conglomerate’s entry into the cement sector and makes it the second-largest cement producer in the country. Apart from Adani Enterprises, companies such as industrialist Sajjan Jindal-led JSW Group, Dalmia Bharat, Aditya Birla Group’s UltraTech Cement Ltd, and ArcelorMittal were also believed to be in the race for Holcim Group’s Indian assets.
Shares of Ambuja Cements and unit ACC rose 2.9 per cent and 6.4 per cent, respectively, on Monday, a day after conglomerate Adani Group said it would buy Holcim AG’s controlling stake in the companies. Shares of Adani enterprises rose 2.75 per cent, while rivals UltraTech Cement and Shree Cement fell 2.5 per cent and 1.8 per cent, respectively, and were among the top losers on the Nifty 50 index.
Holcim, through its subsidiaries, holds 63.19 per cent in Ambuja Cements and 54.53 per cent in ACC (of which 50.05 per cent is held through Ambuja Cements). Adani Cement has to make a mandatory open offer to acquire an additional 20 per cent stake in Ambuja Cement. The value for the Holcim stake and open offer consideration for Ambuja Cements and ACC is $10.5 billion, which makes this the largest ever acquisition by Adani, and India’s largest-ever M&A transaction in the infrastructure and materials space.
Ambuja Cements and ACC currently have a combined installed production capacity of ~70 MTPA. Both Ambuja and ACC will benefit from synergies with the integrated Adani infrastructure platform, especially in the areas of raw material, renewable power and logistics, where Adani Portfolio companies have vast experience and deep expertise. This will enable higher margins and return on capital employed for the two companies. The companies will also benefit from Adani’s focus on ESG, Circular Economy, and Capital Management Philosophy, Adani Group said.
Gautam Adani, chairman of the Adani Group, said, “Not only is India expected to remain one of the world’s largest demand-driven economies for several decades, but also continues to be the world’s second largest cement market, and yet, has less than half of the global average per capita cement consumption. In statistical comparison, China’s cement consumption is over 7x that of India’s. When these factors are combined with the several adjacencies of our existing businesses that include the Adani Group’s ports and logistics business, energy business, and real estate business, we believe that we will be able to build a uniquely integrated and differentiated business model and set ourselves up for significant capacity expansion.”
Currently, Aditya Birla group, which owns the brand ultra tech cement, is India’s top cement producer. The Aditya Birla Group was also racing to buy out Holcim’s stake after the firm announced its exit from India. But Asia’s richest man Gautam Adani’s group, Sunday, clinched the deal and is seen as a big win for Gautam Adani, chairman of the Adani group. Holcim was planning to exit India following its decision to focus on the group’s ‘strategy 2025’ that aims for sustainable solutions for the building materials sector. But many believe the intense scrutiny of its India operations by the Competition Commission of India (CCI), which opened its second investigation against the company in December 2020, could also be one of the reasons why the company was in a hurry to move out.
