Following a high-profile acquisition in 2004, marking Holcim’s departure from India, the Adani family has acquired about 70 million tons of cement capacity at a cost of .5 10.5 billion a year through a special purpose vehicle. According to a media statement from Adani, the deal makes it the largest in terms of infrastructure and materials.
The purchase will make Adani Group the second largest player in India’s cement industry with an installed capacity of about 500 million tonnes. With 120 million tons annually, Ultratech will remain the largest by a distance.
The acquisition of Holcim’s operations in India brought Adani Group’s two cement companies – Ambuja Cements and ACC. In terms of shareholding, Holsim has 63.19 per cent in Ambuja and 54.53 per cent in ACC. The transaction will trigger an open offer for both companies (both listed) and take into account the size of the contract.
From a strategic point of view, buying Holcim brings a number of benefits to the Adani Group. With ports, electricity and road play in infrastructure, cement complements it well and places it in an important position in products.
Last June when it was first announced plans to enter the cement business and this acquisition will bring, in one stroke, the scale and quality of the table. Ambuja and ACC are known to have high quality plants complying with environmental standards. A global merger between Holcim and Lafarge, in addition to the reluctance to raise cement resources in India, Ambuja and ACC have not been able to significantly increase their capacity.
For Adani, without any readymade operation in the cement, the deal is not likely to face any serious difficulties with the Competition Commission of India. In terms of packing orders, the third largest players will now be Mr. Cement and Dalmia.
With presence in ports, Adani Group can transport cement from west to east coast by sea, saving both time and money. Again, staying in the power transmission business lends itself to reducing costs in another important area. It would not consider large-ticket campaigns in renewable energy, where the emphasis would be on hydrogen. It is assumed that with the existing FMCG business, the management of agro-waste will focus on reducing costs at each point.
From a geographical point of view, the ACC is known throughout the country, while Ambuja is strongest to the north and west. The agreement puts an end to any dominance of international cement players in India, leaving Heidelberg Cement alone with 12.6 million tonnes per annum.