Displaying items by tag: Sanghi Industries

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.”

Adani Group and JK Lakshmi Cement were reported to be leading the race to acquire Sanghi Cement this week. The Economic Times newspaper reported sources who said that both companies are about to start due diligence processes ahead of making formal offers in the next few months. The enterprise value of Gujarat-based Sanghi Cement is around US$730m. Shree Cement, Nirma Group and Dalmia Bharat were said to have been interested previously, but no longer at this stage. However, none of the companies involved have commented directly on any bidding process so far.

Coverage in the India-based press earlier in July 2023 suggested that Shree Cement had dropped out of the bidding process for a 40 - 70% stake in Sanghi Cement. Although the exact reasons for Shree Cement withdrawal were not expressed, it was noted that the enterprise value for Sanghi Cement included debts of around US$220m. In late 2022 the Kotak Mahindra Bank made an investment of around US$67m in Sanghi Cement to ‘help the company's liquidity profile and enhance its operations.’ The head of the bank’s Special Situations Fund added that the cement producer’s performance had been under pressure due to high energy costs and that this had been further exacerbated by impending debt repayments stemming from expansion capital expenditure.

Sanghi Cement had the misfortune of commissioning a new line at its integrated plant during the Covid-19 pandemic. The subsidiary of Sanghi Industries operates a 6.6Mt/yr unit at Kutch in Gujarat, with a 130MW captive power plant and a 13MW waste heat recovery (WHR) unit, making it one of the largest plants in the country. It also owns three cement terminals in Gujarat, Maharashtra and Goa. Its annual power and fuel costs rose by 79% year-on-year to US$49.9m in the year to March 2022. Then its finance costs tripled to US$29m in the year to March 2023. Some of the increased fuel costs may have been down to the new production line but its total income in the year to March 2023 was lower than in the year to March 2019.

Adani Group and JK Lakshmi Cement both operate plants in Gujarat. Adani Group runs one integrated and one grinding plant in the state via its Ambuja Cement subsidiary. JK Lakshmi Cement owns a grinding plant. A number of other companies additionally manufacture cement in the state. The biggest of these is the country’s largest cement producer, UltraTech Cement, with three integrated plants and two grinding ones in Gujarat. It would be a surprise if this company tried to buy a share of Sanghi Cement. One prominent India-based cement company that does not have a manufacturing presence in the state is Shree Cement. This made it a compelling candidate for the acquisition before it ruled itself out.

On the national stage, ratings agency ICRA’s June 2023 cement sector report forecast a ‘stable’ outlook for the sector, with cement volumes expected to grow by 7 - 8% in the 2024 financial year. This should be supported by the residential market and infrastructure projects. Crucially, it also noted that power and fuel costs, which peaked in the July - December 2022, eased in early 2023 and are anticipated to further soften in the 2024 financial year. The agency’s view was that this would help company earnings margins, but not to the levels seen in the five years prior to the Russian invasion of Ukraine. This may be cold comfort for Sanghi Cement, but it may have implications for any bidding process.

Lastly, ICRA also warned of the weakening effects that El Niño could have on the monsoon season and, in turn, rural house building during this period. The weather has been a ‘hot’ topic globally this year, as various records have been broken. Yet on a day-to-day basis the weather can also affect the business of making and selling cement. ICRA’s concern was for the latter. An example of the former occurred in June 2023 when Cyclone Biporjoy caused disruption at Sanghi Cement’s Sanghipuram plant. The unit was shut down in mid-June 2023 to protect the staff. Some damage was reported and the plant reopened at the end of the month. Again, as with fuel prices, the weather may also play a part in the calculations of any company considering buying a stake in Sanghi Cement.

India: Adani Cement and JK Lakshmi Cement have emerged as frontrunners in the contest to acquire Sanghi Cement for US$733m. The Business Standard newspaper has reported that the prospective buyers are expected to submit formal offers before October 2023.

India: Shree Cement has pulled out of the race to acquire a 40 – 70% stake in Sanghi Cement for US$205 – 369m. The Financial Express newspaper has reported that Shree Cement said that it will shift its short-term focus to ‘internal expansion.’

Sanghi Cement operates 6.1Mt/yr of cement capacity and a 143MW captive power plant in Western India. It has debts of US$219m.

India: Sanghi Industries suspended operations at it Sanghipuram cement plant in Gujarat from 13 June 2023, ahead of the landfall of Cyclone Biparjoy on 15 June 2023. EB News has reported that Sanghi Industries has established refuges for its workers and host community, and has prepared food and first aid deliveries, emergency transport and monitoring. The company said that it will restart operations when normal conditions resume and in compliance with the advice of the government.

Times Now News has reported that Cyclone Biparjoy killed two people and injured 22 on the coast of Gujarat. Extremely heavy rain is forecast for 17 June 2023 in Kachchh District, where the Sanghipuram cement plant is located.

India: JK Organisation and Nirma Group have submitted non-binding offers to acquire 40 - 72% stakes in Sanghi Cement. The Economic Times newspaper has reported that promoters value the company at US$726m.

Shree Cement also previously entered non-binding talks to acquire Sanghi Cement on 29 April 2023.

India: Sanghi Industries has borrowed US$60.6m from Kotak Investment Advisors. The cement producer secured the funds in the form of non-convertible debentures (NCDs).

Sanghi Industries produces its Sanghi Cement brand cement in Gujarat.

India: Sanghi Industries has signed a memorandum of interest with the Gujarat state government to expand its Kutch cement plant. It plans to invest around US$213m on the project, according to the Times of Indian newspaper. The plant will be expanded to a cement production capacity of 8.6t/yr from 4Mt/yr. The project is scheduled for completion by 2020 and it will create 350 new jobs.

India: Sanghi Industries has received environment clearance for an upgrade to its cement plant at Sanghipuram, Kutch district in Gujarat. The unit’s clinker production capacity is being raised to 7.5Mt/yr from 3.5Mt/yr, according to the Times of India newspaper. Its cement production capacity is being increased to 8.6Mt/yr from 4Mt/yr. The US$194m project also involves building a cement grinding plant at Surat. The project is expected to be completed in 2020.

India: Sanghi Cement plans to upgrade its production capacity to 8.1Mt/yr from 4.1Mt/yr. The expansion plan will consist of a 3.3Mt/yr upgrade to its cement plant at Sanghipuram in Gujarat and a 2Mt/yr upgrade to its satellite grinding plant. In addition the cement producer plans to build a 65MW thermal power plant at the main plant. The cost of the project will be US$197m and this will be mostly funded from borrowing.