Displaying items by tag: Adani Group
Adani aims at Heidelberg Materials in India
09 October 2024Adani 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.
Adani Group may merge Ambuja Cements and ACC
08 October 2024India: Adani Group is considering a merger of Ambuja Cements and ACC into a single entity, Adani Cement, by 2028. Mint News has reported that the group, which began integrating the operations of the two companies recently, may also include Sanghi Industries in the merger. The proposed merger would involve a share swap between the companies, with all existing brand identities retained.
India: Adani Group is negotiating the purchase of Heidelberg Materials' cement business in India, potentially valued at US$1.2bn, according to Reuters. Heidelberg Materials has been present in India since 2006, and owns four plants with a total capacity of 12.6Mt/yr. The acquisition discussions come amidst increased consolidation in the Indian cement sector, driven by heightened demand due to government investment in housing and infrastructure.
India: Adani Ports and Special Economic Zone has opened a 2Mt/yr grinding plant in Guna, Madhya Pradesh, Mint News has reported. Together with a neighbouring firearms plant, the Adani Group subsidiary invested US$417m in the project.
GQG Partners enlarges stake in Ambuja Cements to 2.4%
27 August 2024India: Ambuja Cements’ minority shareholder GQG Partners has increased its stake in the company from 1.4% to 2.4%. The value of the newly acquired shares was US$200m, the New Indian Express newspaper has reported. Other recent investors in the company, following a divestment of 2.8% of shares by its parent, Adani Group, include the Indian National Pension System Trust and SBI Life Insurance. They bought total shares worth US$62.6m and US$59.6m respectively. Following the deals, majority shareholder Adani Group now holds an 67% stake in Ambuja Cements.
Adani Group to sell stake in Ambuja Cements
23 August 2024India: Adani Group is planning to sell a 2.84% stake in Ambuja Cements through its entity Holderind Investments, aiming to raise US$500m. The sale of 69.96 million shares will be at a price of US$7.15 per share. This move is part of a strategy to divest part of its substantial 70.33% holding in the cement company. Holderind Investments itself accounts for 50.90% of this ownership.
India: JSW Cement has entered the competition to acquire a 38% stake in Orient Cement from the CK Birla Group, against UltraTech Cement and Adani Group. UltraTech Cement is reportedly in advanced discussions with CK Birla, having proposed a share price range of US$4.18 - 4.48, which places the enterprise value at US$872m-931m. The Adani Group has also expressed interest in acquiring Orient Cement, although their negotiations have been hindered by valuation disputes and environmental clearance issues.
Adani Group to acquire Jaypee Group's cement assets
19 July 2024India: Adani Group is planning to acquire cement assets from Jaypee Group, which include over 9Mt/yr of cement capacity, following Jaiprakash Associates' insolvency proceedings initiated in early June 2024. The National Company Law Tribunal in Allahabad admitted Jaiprakash Associates for corporate insolvency on 3 June 2024. Adani would acquire significant assets in the deal, including limestone mines and a power plant, although formal asset sale processes have not yet commenced.
India: Adani Group plans to invest US$15.7bn in the current, 2025 financial year. The investments will support Adani Group’s expansion and diversification across various sectors, including cement. The group plans to reach 140Mt/yr in cement production capacity by the end of the 2028 financial year. The 2025 financial year will end on 31 March 2025.
Adani Group speeds up its expansion plans in India
19 June 2024Adani Group’s subsidiary Ambuja Cements signed a deal this week to buy Penna Cement for US$1.25bn. The agreement adds 14Mt/yr of cement production capacity to the group with a focus in the south of India. The acquisition is a big step towards the group’s target of reaching a capacity of 140Mt/yr by 2028. Ajay Kapur, the head of Ambuja Cements, also singled out the advantage the company hopes to gain from taking control of Penna Cement’s terminals saying that they would “prove to be a gamechanger by giving access to the eastern and southern parts of peninsular India.” The move is expected to increase the group’s market share in India by 2%, and by 8% in South India.
Penna Cement operates four integrated plants in Andhra Pradesh and Telangana with a capacity of 7Mt/yr. Two of these units also include waste heat recovery installations and one has a captive power plant. It runs two grinding plants in Andhra Pradesh and Maharashtra with a capacity of 3Mt/yr. Another integrated plant is being built at Jodhpur in Rajasthan and a grinding plant at Krishnapatnam in Andhra Pradesh. Finally, the company owns four bulk cement terminals at Kolkata, Gopalpur, Karaikal and Kochi in India, one at Colombo in Sri Lanka and it also owns a 25,000t cement carrier.
Adani Group’s march towards that target of 140Mt/yr by 2028 started off in mid-2022 when it purchased Ambuja Cements and ACC from Holcim. This gave it a starting capacity of 68Mt/yr in the cement sector. Various smaller additions followed including new plants at Ametha and Dahej and the acquisitions of Asian Cement and Concrete, MyHome Industries and Sanghi Industries. The latter company was the biggest of these purchases. Once the in-progress projects from Penna Cement are built, Adani Group should have a capacity of 93Mt/yr. Another 20Mt/yr is reportedly at various stages of execution. The remaining 27Mt/yr is described as being ‘blueprint ready.’
Generally, the local financial press has been in favour of the transaction agreeing with the geographic advantages of Adani Group increasing its presence in the southern states. The benefits of the high number of railway sidings at Penna Cement’s plants were also commented upon as a means for Ambuja Cements to reduce its costs per tonne of cement. The logistics benefit from the port terminals is also expected by Adani Group’s chief financial officer to reduce the group’s logistics costs with an impact expected within the next year. However, it has been reported that Penna Cement’s operating performance had been weaker in the last financial year due to low sales volumes, poor operational efficiency and high coal costs. A takeover by Adani Group could certainly fix the latter two issues. Yet, it has also been reported that competition in the cement markets in Andhra Pradesh and Telangana is up, due to a mismatch between supply and demand. So, improving Penna Cement’s capacity utilisation in these regions might be harder to solve than simply being absorbed into Adani Group.
India’s two largest cement producers both have plans in motion to mount up production capacity by the end of the decade in what has been dubbed ‘the battle of the billionaires.’ The market leader is UltraTech Cement and it has shown reluctance to cede ground to the cement newcomer Adani Group. The former company’s current target is to make it to just under 190Mt/yr by 2027. It said it had a capacity of 152Mt/yr in May 2024. It is ahead of Adani Group by this measure but there is still plenty of scope for surprises. Given the rivalry between the companies there is a regular stream of speculation about which of the smaller cement producers they might be about to buy at any given time. For example, in October 2023 HeidelbergCement India was rumoured to be courting offers from UltraTech Cement, Adani Group and JSW Cement. Last week, Adani Group was reportedly interested in buying either Saurashtra Cement, the cement business of Jaiprakash Associates, Vadraj Cement or… Penna Cement. Occasionally the rumours are true after all. UltraTech Cement remains in first place for now but the situation may change.