Displaying items by tag: Adani Group

India: Adani Group subsidiary ACC has started commercial clinker production from the kiln of its new Ametha cement plant in Madhya Pradesh’s Katni District. BQ Prime News has reported that the kiln line has a clinker capacity of 3.3Mt/yr. It is capable of co-processing up to 15% alternative fuel (AF). The plant is also equipped with a 1Mt/yr grinding unit and a 16.3MW waste heat recovery (WHR) plant.

The Ametha cement plant raises ACC’s installed cement and clinker capacity by 9.8% to 37Mt/yr.

Nepal/India: Chaudhary Group has signed a memorandum of understanding (MoU) for a strategic partnership with India-based conglomerate Adani Group. According to the MoU, Adani Group will support the Nepal-based cement producer in its distribution of cement into neighbouring states of India.

The Kathmandu Post newspaper has reported that Chaudhary Group’s managing director Varun Chaudhary said "This collaborative effort stands as a pivotal milestone, underlining our commitment to augmenting economic cooperation and trade relations between the two nations.” He added “Through this strategic collaboration, we aspire to fortify the harmonious rapport that characterises the Nepal-India relationship, while actively contributing to the growth and development of the adjoining states."

India: The Organized Crime and Corruption Reporting Project (OCCRP) has obtained documents which allegedly show how two people with close ties to the owners of Adani Group invested significantly in the group. Nasser Ali Shaban Ahli and Chang Chung-Ling traded in Adani Group shares through a Mauritius-based investment fund. The OCCRP reports that Ahli and Chang might be found to have been acting on behalf of Adani promoters. If so, their shareholding would bring insider investment in Adani Group to over 75%. This would potentially indicate stock manipulation under Indian law. Ahli and Changs’ investment management company reportedly paid a company owned by Vinod Adani, the brother of Adani Group chair Gautam Adani, for investment advice.

Nasser Ali Shaban Ahli is a Dubai-based business consultant, who is listed as an officer in a British Virgin Islands-based securities investment firm linked to Adani Group. Meanwhile, China-based Chang Chung-Ling has held positions on the boards of multiple Adani Group companies.

Adani Group replied “Contrary to your claim of new evidence/proofs, these are nothing but a rehash of unsubstantiated allegations levelled in the Hindenburg report. Our response to the Hindenburg report is available on our website. Suffice it to state that there is neither any truth to nor any basis for making any of the said allegations against the Adani Group and its promoters, and we expressly reject all of them."

India: Adani Group recorded earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$2.85bn in the first quarter of the 2024 financial year, up by 42% year-on-year. The conglomerate’s cement business contributed an EBITDA of US$235m, up by 54% year-on-year. This represented 8.2% of the quarterly total. The group sold 15.4Mt of cement.

Financial Express Online News has reported that Adani Group said “The robust portfolio performance was primarily driven by the renewable power business under Adani Green, the infrastructure businesses under Adani Enterprises and the cement businesses under Adani Cement.”

India: Ambuja Cements’ open offer to acquire an additional 26% stake in Sanghi Industries will run from 29 September 2023 to 13 October 2023. Press Trust of India News has reported the value of shares under the offer as up to US$767m. Ambuja Cements concluded a deal to acquire a 57% stake in Sanghi Industries, for the smaller sum of US$603m, on 3 August 2023.

Adani Group announced this week that it was set to acquire a majority stake in Sanghi Cement. Its subsidiary Ambuja Cements said it was going to spend an enterprise value of just over US$600m on buying a 57% share in Sanghi Industries. The acquisition will be fully funded through internal accruals. The transaction works out at about US$99/t of clinker production capacity, a similar amount to what Adani Group paid Holcim to buy Ambuja Cements and ACC in 2022.

The acquisition has generally been perceived as consolidation in a crowded market. Profits have been under pressure in recent years due to the coronavirus pandemic lockdowns, logistics issues and then energy and other input price rises. However, commentators from ICICI Securities, cited in the local press, took the alternative view that Adani Group might be trying to start a price war in the west of India. They noted that demand for cement was 70Mt/yr in the region versus a production capacity of 82Mt/yr. Yet Sanghi Cement has reportedly been operating at less than a third of its capacity. Adani Group also revealed its intention to increase the cement production capacity at Sanghi Cement’s Sanghipuram plant to 15Mtyr by mid-2025 from 6.1Mt/yr at present. If the plant were upgraded it would potentially increase Adani Group’s market share from 19% to 37%.

Another aspect to consider with any large corporate action by Adani Group is the political angle. Adani Group’s chair Gautam Adani is often linked in the local press to the country’s ruling Bharatiya Janata Party (BJP) and Prime Minister Narendra Modi. So, every time Adani Group does something newsworthy, opponents of the BJP play up the perceived connections. This time the Indian National Congress (INC) simply noted publicly that a rival bidder for Sanghi Cement had encountered a tax investigation before it withdrew from the auction. There is no evidence suggesting that anything underhand happened here. Yet the point to consider going forward is that anything that Adani Group does is likely to be subject to more scrutiny than its peers. This may have unexpected consequences.

The financial results for the India-based cement producers covering the first quarter of the 2023 - 2024 year have been released in recent weeks. Generally, revenue and sales are up strongly but profits less so. Due to this, there has been a lot of attention placed on the costs these companies are incurring. Inflation on energy costs reportedly peaked in late 2022, but as Graph 1 below shows, it has been a mixed situation for the larger cement companies.

Graph 1: Comparison of Power & Fuel costs for selected Indian cement producers in first quarter of 2021, 2022 and 2023 financial years. Source: Company financial reports.

UltraTech cement said that its energy cost grew by 3% year-on-year in the first quarter of the 2024 fiscal year and it blamed this mainly on negative currency exchange effects. It also reported higher raw material costs due to the growing price of fly ash and slag. Ambuja Cements (and subsidiary ACC) managed to cut both its fuel costs and increase its earnings, which, while impressive, is not entirely unexpected following the takeover by Adani Group in mid-2022. Similarly to UltraTech Cement, neither Shree Cement nor Dalmia Cement were able to grow earnings faster than revenue, so earnings per tonne of cement fell. Birla Corp, however, did manage to pull off this trick due to a “substantial decline in fuel and power costs.”

One consequence of a competitive cement market with lower profits than previously, is a renewed emphasis on marketing. Adani Group’s subsidiaries Ambuja Cements and ACC both highlighted the companies’ branding and marketing activities in the first quarter. Ambuja Cements has resurrected its television advert with wrestler The Great Khali, ACC is highlighting its part in the building industry since the 1930s with its own campaign and both companies are targeting sporting events such as the India versus Australia World Test Championship. Adani Group is building up brand awareness following the acquisition and potentially leading up to a name change in the future.

The other companies are also doing this but one campaign that sticks out has been Shree Cement’s use of classic video games such as the ‘Shree Cement Bros” video on its website. Computer game character Mario has done a lot of things in his time but he also worked in a cement plant back in the 1980s Game & Watch title ‘Mario’s Cement Factory.’ We are still waiting for the 4k remake with online multiplayer for some reason! Until then, it is worth reflecting that brand awareness is important in the world’s second largest cement market and it may become more so as Adani Group continues to establish itself.

India: Amubja Cements has appointed Hitesh L Marthak as its company secretary and compliance officer. Hitesh holds 25 years professional experience. He was appointed to the same positions at subsidiary ACC in late July 2023. Both Ambuja Cements and ACC are part of Adani Group.

India: Ambuja Cements has concluded a deal to acquire a 57% stake in Sanghi Industries for US$202m. Reuters has reported that the company has offered to subsequently increase its stake in Sanghi Industries to as much as 83% for up to US$295m in total. It will fund the acquisition of any stake through internal accruals. Sanghi Industries operates the 6.1Mt/yr Sanghipuram cement plant, which is equipped with a 130MW captive power plant and a 13MW waste heat recovery (WHR) plant. The cement plant, in Gujarat, also has a single-jetty port on the Arabian Sea coast. Ambuja Cements' parent company Adani Group plans to more than double the Sanghipuram cement plant's capacity to 15Mt/yr.

Adani Group chair Gautam Adani said “By joining hands with Sanghi Industries, Ambuja is poised to expand its market presence, strengthen its product portfolio and reinforce its position as a leader in the construction materials sector. With this acquisition, Adani Group is well on course to achieve its target of 140Mt/yr of cement manufacturing capacity by 2028 ahead of time.”

India: Ambuja Cement recorded revenues of US$1.06bn in the first quarter of the 2024 financial year, up by 9% year-on-year from the previous first quarter. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 55% to US$234m. The producer reported a 17% reduction in its fuel costs, from US$30.16/Mcal to US$27.07/Mcal. Nonetheless, its net profit fell by 38% to US$78.1m from US$127m.

Chief executive officer Ajay Kapur said “Along with the strong demand for our premium cement products, growth was fuelled by our various competences in operational excellence, supply chain management and sales and marketing excellence. Our synergies with the Adani Group companies are lowering input costs, which is boosting EBITDA growth. Furthermore, our blueprint of improvements through group synergies and capital expenditure for efficiency and decarbonisation whilst creating opportunities, will redefine the cement industry landscape. These include lowering the clinker factor, diminishing energy intensity, implementing waste heat recovery (WHR) systems and augmenting renewable energy generation.” He added “Our long-term competitiveness remains robust, ensuring industry-leading profitability as we chase our ambitious growth goals. With a firm belief in our strategic approach, we are poised to continue our trajectory of outstanding performance as we are devoted to sustainable and responsible growth.”

India: ACC says that it will not carry out an independent investigation into its parent company Adani Group. US-based short-seller Hindenburg Research accused the group of stock manipulation and accounting fraud involving a 'labyrinthine network' of shell companies in January 2023. Prior to making its accusations, Hindenburg Research obtained a short position on Adani Group. An investigation into Adani Group's activities by the Securities and Exchange Board of India will conclude on 14 August 2023. Filings have also been submitted to the Supreme Court of India.

The Business Standard newspaper has reported that ACC said "Pending final outcome of regulatory investigations and related proceedings, the company has decided to not carry out any separate independent investigation in the matter, and the financial results do not carry any adjustments in this regard." It added "The expert committee submitted its report in the matter dated 6 May 2023, finding no regulatory failure."

Adani Group's original rebuttal of the allegations can be read online here.