Mumbai: The Adani Group is evaluating multiple cement companies for acquisition including Hyderabad-based Penna Cement, Gujarat-headquartered Saurashtra Cement and the cement business of Jaiprakash Associates as well as ABG Shipyard-owned Vadraj Cement, according to people familiar with the matter.
It is keeping aside a war chest of $3 billion for these acquisitions, these people said. The group is aggressively pursuing an inorganic strategy to boost capacity and emerge as the largest cement manufacturer within the next three to four years, overtaking the Aditya Birla Group’s UltraTech. India’s cement giants are betting on a surge in demand as the Centre pushes ahead with its infrastructure development plan, driven by record capital expenditure. Penna Cement could be valued at around Rs 9,000 crore, the people said. The valuation could go up depending on the progress of capacity expansion from 10 MTPA (million tonnes per annum) to 15.5 MTPA.
Saurashtra Cement has a market capitalisation of Rs 1,487 crore. Dalmia Bharat had in April 2022 signed a definitive agreement with Jaiprakash Associates to acquire the latter’s cement, clinker and power plants for Rs 5,666 crore.
The deal got stuck because of shareholder disputes. ET has learnt that the group is looking to offer $85-120 enterprise value (EV) per ton for these mid-sized cement businesses and is open to paying a premium if the target company has potential for capacity expansion, possesses limestone mines and has a packing terminal. The Adani Group’s acquisition, announced late last year, of Sanghi Cement with a capacity of 6.1 MTPA was at $100 EV per ton.
Penna Cement also has a packing terminal capacity of 2.8 MTPA. Saurashtra Cement has a capacity of around 5 MTPA, that of JP Associates is 9.5 MTPA while Vadraj Cement is at 6 MTPA. Both Jaiprakash Associates and Vadraj Cement are in the midst of bankruptcy proceedings.
The Jaiprakash Associates insolvency was triggered by ICICI Bank. The National Company Law Appellate Tribunal (NCLAT) has refused to stay the process although it has told ICICI Bank it may consider a one-time settlement proposal submitted by the company.
Ambuja Cement would be the preferred route for acquisitions by the group, considering it had cash and cash equivalents of `24,338 crore on its books at the end of April, having got warrant money of `8,339 crore from the promoter. The company does not have any debt. Adani may choose ACC if synergies are better, particularly in southern India, where the group has a lower market share.
Adani declined to comment. Penna Cement and Saurashtra Cement didn’t respond to queries. The email sent to the resolution professional of Vadraj Cement remained unanswered till press time and the secretarial department of JP Associates didn’t respond to ET queries.
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