Adani Group’s latest target for acquisition in the cement sector was revealed this week to be Heidelberg Materials’ India-based business. The Economic Times newspaper reported that talks have started between the companies with a tentative value of US$1.2bn. As might be expected, Adani Group is said to be keen to close the deal down quickly. It wants to avoid an auction situation where it might face competitors. However, there may be some disagreement about the actual production capacity of Heidelberg Materials’ companies in India. If a deal were finalised, it might be completed by early 2027.
Heidelberg Materials’ capacity in India was listed as 14Mt/yr by the press but this could include the company’s grinding plants as well as its integrated ones. Heidelberg Materials, itself, says it has a capacity of 12.1Mt/yr from three integrated cement plants, four grinding plants and a terminal across 12 states. Data from the Global Cement Directory 2024 suggests that this refers to the group’s integrated cement capacity. The plants are roughly split equally between subsidiaries Heidelberg Materials India and Zuari Cement. Heidelberg Materials entered the Indian market in 2006 when it acquired Mysore Cement, Cochin Cement and established a joint-venture with Indorama Cement. It later added Zuari Cement to its portfolio when it bought Italcementi in 2016. The group used to run four integrated plants in India until in May 2024, when it shut down clinker production at its Ammasandra plant in Karnataka, although grinding activity has continued at the site.
Back in 2021 Heidelberg Materials’ CEO Dominik von Achten said that the group had considered selling anything following a business review. "There are no sacred cows. Everything was on the table." Indonesia was generally perceived by analysts as a likely sale target in the developing markets but nothing happened in the end. India wasn’t mentioned at this time, although no doubt it was being considered. Yet Holcim divested its businesses there in 2022. These were picked up by Adani Group for US$6.4bn. This, in turn, kicked off the rivalry in the Indian cement sector between market leader UltraTech Cement and Adani Group. Both companies are now in a race to build production capacity through expansion, new plants and acquisitions.
One reason why Heidelberg Materials may have decided now in particular to talk to Adani Group can be seen in its recent financial reports. In 2023 it said that its “cement and clinker deliveries increased moderately, as massive excess capacities persist in our core markets.” It then followed this up in 2024 by noting that deliveries were slightly down year-on-year in the first half of the year. It blamed this on excess capacity in South India. The subsidiary reported a net loss of €6.3m in 2023. An article by Holtec Consulting in the October 2023 issue of Global Cement Magazine implied that capacity utilisation was 56% in 2023, the lowest of the country’s regions. This is a particular problem for the company given that Zuari Cement is based in the south.
Funnily enough, a sale of 12.1Mt/yr capacity for US$1.2bn suggests a price of US$99/t, a similar figure to what Adani Group paid to buy Holcim’s assets in India in 2022. This may explain why Adani Group is trying to avoid an open sale for the Heidelberg Materials assets. Then again, maybe the market in southern India really is suffering. By comparison, when Adani Group concluded a deal to buy Penna Cements in August 2024 it paid US$1.2bn for an integrated capacity of about 7Mt/yr or around US$170/t. Factor in the low capacity utilisation rate in south India and this potential Adani-Heidelberg Materials deal ends up at roughly the same price.
Something that may help Adani Group reach its goal might be a formal merger between its two main cement companies, Ambuja Cements and ACC. The Mint newspaper reported on it this week, saying that Jefferies and Axis Capital has been hired as an advisor. This certainly makes sense in synergy savings but moving all the mining and leasing rights around might prove cumbersome. Regardless, Adani Group is on an expansion drive, with a capacity of 140Mt/yr targeted by 2028. All the smaller cement companies in the country are potentially targets.
