Acquisitions made by the company to acquire Ultratech

Ambuja Cements: We all know that the Indian construction industry is a vast canvas that is constantly evolving. Ambuja Cement, being the trusted brand that has been the building block supplier for this progress, has entered a new chapter. Their recent acquisition has brightened things up and promises to redefine the company’s position.

This move is not just about money, it is a strategic move made by them to strengthen their presence and influence in the industry. As the ink on the deal dries, shareholders are curious to see how it will impact the company’s financial performance and its role in the future. Come learn more about the company’s acquisitions.

Ambuja Cements – Company Overview

Ambuja Cements operates as a prominent player in the Indian construction industry. The company started its operations in 1983 and was originally named Gujarat Ambuja Cement Limited (GACL). The core business of Ambuja includes the manufacturing and distribution of cement and cement related products.

Ambuja supplies a wide range of products such as Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC) and other cement products such as Ambuja Railcem for railway construction and Ambuja Cool Walls for thermal insulation.

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In 2006, 61.62% of Ambuja Cement shares were acquired by global cement giant Holcim. In 2022, Adani Group bought Holcim’s entire stake in Ambuja for $10.5 billion. As a company, Ambuja operates from multiple locations in India and is headquartered in Mumbai.

With a significant presence across India, the company has manufacturing facilities in Gujarat, Rajasthan, Himachal Pradesh, Chhattisgarh and Maharashtra. It also has grinding facilities in various other locations across India to cater to the market needs.

Ambuja Cement is primarily active in the Infrastructure and Construction segment, supplying cement to commercial, residential and industrial projects. As a company, it has made a significant contribution to the development of India’s infrastructure by helping in the construction of roads, dams, bridges and various other projects.

Acquisition of Sangha Industries

In late 2023, Ambuja Cements acquired 54.51% stake in Sanghi Industries for Rs 5,185 crores. Sanghi Industries is India’s largest single-location cement and clinker manufacturing unit with a cement grinding capacity of 6.0 MTPA and clinker capacity of 6.6 MTPA.

Reasons for this acquisition include:

Since Sanghi Industries has a presence in Kutch, Gujarat, it gives Ambuja the opportunity to expand its presence in the western and coastal markets of India. With the help of Sanghi Industries, 1 billion tonnes of high quality limestone reserves, Ambuja can support cement production for the next 40 years. It also allows them to increase the cement capacity at the Sanghipuram plant to 15 MTPA and produce low cost clinker. Since Sanghi Industries has port facilities, Ambuja Cement can transport its goods via the coastal route.

Acquisition of Asian Concretes and Cements by ACC Ltd, a subsidiary of Ambuja Cements

ACC Ltd had in January 2024 acquired its already held stake in Asian Concrete and Cement. It acquired the remaining 55% stake for Rs 775 crores and increased its stake to 100%. Asian Concretes and Cements Ltd is a Himachal Pradesh based company.

Why did they take over this company?

With this acquisition, the company can strengthen its position in the North Indian market, especially in the Himachal Pradesh, Punjab and Haryana regions. This acquisition has helped ACC increase its cement production capacity to 38.55 MTPA and is in line with the Adani Group’s objective of doubling its cement production capacity. It also strengthens operational synergies and helps in servicing a huge base in three states.

Acquisition of My Home Group’s grinding unit in Tamil Nadu

On April 15, 2024, Ambuja Cements, a part of the Adani Group, acquired 100% stake in the 1.5 MTPA cement grinding unit of My Home Group, located in Tuticorin, Tamil Nadu. They acquired this stake for an amount of Rs 413.75 crore.

What was the reason for this takeover?

With this acquisition, Ambuja Cements can strengthen its presence, especially in the Tamil Nadu and Kerala region. The Tuticorin port allows Ambuja to efficiently serve high-growth markets through coastal distribution. Being close to the port and having a long-term fly ash agreement also provides Ambuja with cost advantages and logistical support. Even the company can leverage the limited limestone of Tamil Nadu by utilizing coastal traffic from its Sanghipuram plant.

Ambuja may also inherit the existing dealers and retain the existing employees of My Home Group. This will help facilitate a smooth transition and enable quick capacity utilisation. Now with this acquisition, the company has increased its production capacity to 78.9 MTPA and consolidated its position as the second largest cement producer in India.

Acquisition of Penna Cement Industries Limited (PCIL)

Penna Cement Industries Limited, established in 1991, has a significant presence in South and Western India. The cement was considered as one of the most trusted cement brands by small homeowners and organized real estate developers in these regions. On June 13, 2024, Ambuja Cements acquired the entire shares of Penna Cement Industries Limited for an amount of Rs 10,422 crores. Ambuja Cement informed that the acquisition will be fully funded from internal settlements.

What are the reasons for this acquisition?

With the acquisition of PCIL, Ambuja Cements has added 14 MTPA of cement grinding capacity and 10.3 MTPA of clinker grinding capacity to its existing operations. This will now give the company a total production capacity of around 89 MTPA. This will help the company achieve its target of producing 140 MTPA by 2028.

As PCIL’s operations are mainly located in Andhra Pradesh, Rajasthan and Telangana, this allows Ambuja to gain market share in the southern regions of India. Ambuja expects to increase its market share by 8% in this region with this acquisition. PCIL’s competitive advantages, such as strategic locations near railway sidings and ports, as well as waste heat recovery systems and on-site power plants, provide significant benefits to the company.

The company’s cement terminals will give Ambuja access to the southern and eastern parts of the Indian subcontinent. The company also has the opportunity to enter the Sri Lankan market via sea route. Ambuja also plans to leverage PCIL’s assets and resources to increase its cement capacity through additional investments and debottlenecking. This will help the company generate an additional 3 MTPA of cement capacity from PCIL’s Jodhpur plant.

Even the company wants to make PCIL more competitive in terms of cost and productivity, improving overall operational efficiency. Ambuja wants to achieve this by increasing its share in green energy, Logistics optimization and long-term supply strategies.

Merger of Adani Cementation and Ambuja Cements

On June 27, 2024, Adani Cementation entered into a merger with Ambuja Cements. As part of this merger, there was no cash outflow from Ambuja Cements, but instead a share exchange agreement was entered into. The exchange ratio was set at 174 Ambuja Cements shares for every 1 share of Adani Cementation, and Adani Enterprises will receive 8.7 million Ambuja Cements shares as a result.

Reasons for this connection

The main motive of Ambuja Cements for this merger is to increase operational efficiency and strengthen their coastal presence. This provides better synergy for Ambuja Cements as Adani Cementation has strategic locations on the Amba River in Raigad and Dahej port. This enables them to serve high growth markets like Mumbai and South Gujarat.

With these acquisitions and mergers, Ambuja Cements aims to consolidate its position as the leading cement producer in India and become a strong competitor to Ultratech cements.

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