Displaying items by tag: Penna Cement
India: Ambuja Cement has announced the completion of its acquisition of Penna Cement Industries Limited, acquiring a 100% stake in the company. The deal, first approved by Ambuja’s Board of Directors on 13 June 2024, has effectively made PCIL a subsidiary of Ambuja Cement from 17 August 2024. The company did not provide further details on the operational or financial impacts of this acquisition.
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.
Ambuja Cement to acquire Penna Cement for US$1.2bn
14 June 2024India: Following the news of Adani’s multiple acquisition of cement companies, more details have come to light regarding the acquisition of Penna Cement. Adani-owned Ambuja Cement has signed an agreement to acquire Penna Cement Industries (PCIL) for US$1.2bn, aiming to reach a production capacity of 140Mt/yr by 2028. This acquisition adds 14Mt/yr to Adani Cement's total capacity, bringing it to 89Mt/yr, and expands Ambuja's market presence in southern India. The purchase will be fully funded through internal accruals.
Ambuja Cement CEO Ajay Kapur said "PCIL’s strategic location and sufficient limestone reserves provide an opportunity to increase cement capacity through debottlenecking and additional investment. Importantly, the bulk cement terminals will prove to be a game changer by giving access to the eastern and southern parts of peninsular India, apart from an entry to Sri Lanka, through the sea route."
India: Adani Group is exploring potential acquisitions of several cement companies including Penna Cement, Saurashtra Cement, the cement business of Jaiprakash Associates and Vadraj Cement owned by ABG Shipyard. The group plans to invest US$3bn in these acquisitions to potentially surpass its rival, UltraTech Cement, within three to four years.
The group is ready to offer an enterprise value of US$85-120/t for these businesses, focusing on those with expansion potential, limestone mines and packing terminals. These acquisitions are part of a strategic push to leverage the ongoing government-driven infrastructure boom, which is expected to increase demand significantly.
Penna Cement to launch US$207m initial public offering
19 October 2021India: Penna Cement has received clearance for a US$207m initial public offering (IPO). The company will offer a US$33.3m stake for sale along with the fresh issue of US$173m. The Times of India newspaper has reported that the company plans to use US$73.3m of the fresh capital to settle its debts and to invest US$14m in the construction of second line at its Krishnapatnam grinding plant Andhra Pradesh. It will invest a further US$10.7m in an upgrade to raw material and clinker grinding mills at its Talaricheruvu cement plant, also in Andhra Pradesh.
India: The Telangana State Pollution Control Board has ordered Cement Corporation of India and Penna Cements to pay pollution fines for breaches of particulate matter restrictions at their respective cement plants at Tandur in Vikarabad district. The Times of India newspaper has reported that both companies exceeded legal limits eight times between November 2019 and July 2021. The board fined Cement Corporation of India US$3210 and Penna Cements US$4410.
India: Penna Cement has filed for an initial public offering (IPO) worth US$212m. It plans to offer US$34m-worth of shares for sale and to issue equity shares worth US$177m. United News of India has reported that part of the money raised will fund capital expenditure (capex) investments worth US$58m. The company’s plans consist of a second line at its Krishnapatnam grinding plant in Andhra Pradesh, an upgrade of raw materials and clinker grinding at its integrated Talaricheruvu plant in Andhra Pradesh, and new waste heat recovery (WHR) units at its Talaricherevu plant and its integrated Tandur plant in Telangana. It additionally plans to repay previous loans.
India: Cement producers in southern India have joined together to form the South Indian Cement Manufacturers’ Association (SICMA). United News of India has reported that the association aims to serve as an intermediary between producers and federal and state governments. In this, it says that it will help to realise Prime Minister Narendra Modi’s vision of ‘affordable housing for all’ and ‘infrastructure for future.’ The India Cements vice-chair and managing director Narayanaswami Srinivasan will head the new organisation, supported by Barathi Cement’s director Ravinder Reddy as vice-president and Penna Cement’s director Krishna Srivastava as secretary.
SICMA alleges that the construction industry has exaggerated the effects of rising cement prices on its costs. In so doing, the association says, it has deprived the public of the housing the government had planned. It added that, with around 30% of India’s limestone reserves situated in Andhra Pradesh, Karnataka and Telangana alone, the South has the potential to become a cement hub for development across India, as well as for export.
Penna Cement cleared for initial public offering
05 June 2019India: Penna Cement has received approval from the Securities and Exchange Board of India (SEBI) for a US$220m initial public offering (IPO). The company intends to use the funds to pay off debts and for general corporate purposes, according to the Hindu newspaper. The cement producer operates four integrated plants and two grinding plants in Andhra Pradesh, Telangana and Maharashtra that share a total production capacity of 10Mt/yr.
India: Penna Cement has signed a five years freight tariff deal with South Central Railway (SCR). As part of the agreement the rate will remain fixed for one year, according to the New Indian Express newspaper. The contract also offers incentives including discounts if the freight volume exceeds the previous year’s amount. Penna Cement is the eighth company to sign such an agreement with the SCR.