Why did Adani decide to become an entrepreneur in cement?
Our move in the cement business is a story of our country’s growth and a legitimacy of our belief in our own capabilities. We said last year that this is a sector where we will invest and have already included Adani Cement as a wholly owned subsidiary. The driver for this decision is based on two primary factors. Demand-supply gap, and coordination with our existing business. Not only is India expected to remain one of the world’s largest demand-driven economies for decades to come, India continues to be the world’s second largest cement market and still accounts for less than half of the global average per capita cement consumption. When we combine this demand pattern of cement with the engagement of several of our existing businesses including Adani Group’s port and logistics business, energy business and real estate business, our vision is that we are in a good position to build a uniquely integrated and distinct business. Models that will be competitive and difficult to match.
“In terms of growth, we expect to expand aggressively and double the existing 70 million tons per year capacity over the next five years.”
How is the acquisition funded? Will the acquired entity be part of the listed entity? Which offshore entity is involved?
The acquisition is being carried out by an offshore special purpose vehicle of the Adani family, which is not part of the listed company or operating entity. The acquisition is fully funded by the authorized commitments of our relationship banks – Barclays, Deutsche Bank and Standard Chartered Bank – and equity infusion from the Adani family.
What do you see as the long-term potential of cement demand in India?
The per capita consumption of cement in India is about 240 kg, compared to the global average of 525 kg per capita. As the number of middle class in India is increasing, there will be a fair comparison with China where per capita cement consumption is more than 1,600 kg. In addition to the large consumer demand coming from the rapid growth of the middle class, I also see an increase in the government’s focus on infrastructure. As part of the Prime Minister’s Housing Scheme, 100 smart cities, 200 new airports, housing for all, large-scale concrete highways and ministry orders that require the use of national highways, expressways and a minimum of 25% concrete volume. The emergence of other centrally sponsored road projects, dedicated freight corridors – the list of possibilities that will increase the cost of cement is endless. Cement is not a material you import – you naturally have to be self-sufficient.
What is the combination of this acquisition with your current portfolio?
Cement is basically a game of supply chain and energy efficiency, and so our natural adhesion looks extremely attractive to us. Whether it is excavation, ensuring availability of raw materials, supply of fuel, supply of electricity or efficient logistical capabilities, these are all existing combinations. For example, as the principles of the circular economy become increasingly important, the ability to use fly ash from our power plants and use it all in cement production is a significant component advantage. Also, as Adani is India’s largest full-fledged logistics player, our understanding of the economy of moving cement as well as warehousing, be it from our own ports via coastal shipping, multi-model road or rail network, and then able to deliver to multiple locations across the country. India is a significant factor in our ability to efficiently serve a huge set of customers. After all, our power as a power generator and increasingly a renewable energy producer gives us a significant advantage – not only in terms of energy consumption but also in terms of being able to supply green energy. In terms of demand, we are carrying out a wide range of construction activities in each of our infrastructure businesses. So I hope we can be the biggest customer of our own cement business.
What is Adani’s growth strategy in the context of Ambuja?
We consider ourselves lucky to have that opportunity to buy
And the ACC comes up. These are some of the most well-known and trusted brands in India, both urban and rural. Also, the existing capabilities of Ambuja and ACC, commonality in their best practices, an extremely strong Pan-India distribution footprint, a strong partner network, and manufacturing and R&D skills provide us with a strong foundation for building a strong growth strategy. What we will add to the mix of power is what I have already described – our expertise in power generation, green energy, multi-model logistics presence and Pan-India presence. There is no better way for us to start this business and become the second largest cement manufacturer in the country. In terms of growth, we expect to expand aggressively and double the existing 70 million tons per year capacity over the next five years.
What is the group’s assessment of the current leadership of Ambuja and the ACC? Will you change?
Although we still know the leadership team across the company, I have no doubt that we will find highly skilled leaders across both companies. The decades-long legacy and strong market position of the two companies give us deep faith in the existing leadership capabilities and I do not see any immediate change in the management team. We fundamentally believe that existing teams will be able to bring in skills to achieve the growth plans we have in mind for the next level. Iconic, Pan-India brands like Ambuja Cements and ACC are created by incredibly enthusiastic people and we want to make it happen. To increase this point, in the last five years, Adani Group has acquired 35 companies. Our track record of integrating teams into our organization is a testament to our successful M&A philosophy. Be it airport, port or renewable, we have added thousands of new members and new leaders have not only grown with us but also improved. I’ve always seen new people as the breadth of Adani’s talent pool.
With a focus on energy transition and climate finance, how does the deal stack up with Adani’s ESG roadmap?
We acknowledge that the cement industry needs to be greener and in this context, I am extremely confident that we are uniquely positioned to be the largest green cement manufacturer in the world and at the same time provide affordable value to every Indian. Consumer demand.