On Thursday, Adani Group’s Ambuja Cements announced the acquisition of Hyderabad-based Penna Cement Industries Ltd (PCIL) for Rs 10,422 crore. This is the group’s third acquisition since its entry into the cement industry less than two years ago, in September 2022.
Ambuja Cements would purchase 100% of PCIL’s shares from its current promoter group, P Pratap Reddy and family.
Ambuja Cements said the acquisition will increase its capacity by 14 million tonnes per annum (mtpa), bringing the total capacity of the Adani group’s cement division (ACC-Ambuja combined) to 89 mtpa. The transaction is likely to finalize in three to four months.
Penna Cement made an unsuccessful attempt to go public in 2019. In a January note on the company, India Ratings stated that Penna Cement recorded an Ebitda loss of Rs 11 crore in the first half of 2023-24, owing to diminished operational efficiencies and weaker fixed-cost absorption amid high-cost coal inventory and weak realisations. Ebitda refers to profits before interest, taxes, depreciation, and amortization.
Penna Cement now runs at a capacity of 10 mtpa and has another 4 mtpa under construction at Krishnapatnam (2 mtpa) and Jodhpur (2 mtpa), which are projected to be finished within the next six to twelve months.
Ambuja Cements said the acquisition would be fully funded through internal accruals.
Ajay Kapur, the CEO and full-time director of Ambuja Cements, stated, “Ambuja is poised to expand its market presence in South India and reinforce its position as a pan-Indian leader in the cement industry by acquiring PCIL.”
The acquisition will increase Adani Group’s market share in India’s cement industry by 2% to 16%, per the press release. The company stated that it wanted to hold a 20 percent share in the Indian cement market by 2028 in its investor presentation from May.
The group had already shared targets to increase capacity to 140 mtpa by 2028. UltraTech Cement, the largest cement maker in India with 152 mtpa capacity, plans to take its capacity to 200 mtpa in a similar timeframe.
Since assuming promoter control at Ambuja-ACC in September 2022, the Adani group has made three acquisitions in the cement industry, as of Thursday’s statement. Ambuja Cement purchased the Gujarati cement capacity of Sanghi Industries in FY24. The Adani business consented to buy the Tamil Nadu grinding division of MyHome Industries in April.
According to Kapur, Ambuja Cements hopes to take advantage of Penna Cement’s location to get access to the eastern and southern regions of the Indian peninsula as well as a maritime route to Sri Lanka. According to the announcement, in order to create a powerful synergy, PCIL’s current dealers will relocate to the Adani Cement network.