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All you need to know: Adani Group and Ambuja Cement Deal

18 May 2022

Finally, the speculation and gossips around Holcim’s (holding company of Ambuja Cement and ACC) stake sale has come to rest.

Adani Group has bid for the stakes of both Ambuja and ACC. And has agreed to buy Holcim’s entire stake. This includes all of Holcim’s Indian operating entities for a total consideration of US$ 10.5bn (including open offer).

The shares of Ambuja Cement and ACC are already up 5% and 8% respectively (at 10:30AM).

Other bidders for this deal include JSW and UltraTech Cement.

Adani Group and Holcim Deal Details

As per the exchange filings, Holcim has signed a binding agreement for the Adani Group to acquire its business in India. This comprises of 63.11% stake of Holcim in Ambuja, which owns a 50.05% interest in ACC, as well as its 4.48% direct stake in ACC. The corresponding offer is Rs 385 per share for Ambuja Cement and Rs 2,300 per share for ACC. This translates into cash proceeds of CHF 6.4 billion for Holcim (around $10.5 billion).

This deal is expected to close in the second half of the calendar year 2022.

Adani Group is likely to emerge as the second-largest cement player in the country, next only to UltraTech Cement. Adani is expected to have 70 million tonnes per annum capacity.  Ambuja and ACC each have about 35 million tonnes of capacity per year.

But note that the deal is yet to receive approval from the competition commission of India (CCI).

Factors 

Ambuja Cement

ACC

Offer price per share (Rs) 385 2300
Current share price (Rs) 364.95 2185.10
P/E Ratio  28.63 23.45 
Holcim stake (%) 63.11 4.48
Manufacturing Units 6 17
Grinding Units  8 6
Cement Production Capacity  31.45 MTPA 36 MTPA
Capacity Utilization (%) 86 78
Distribution Network (no. of dealers) 50,000  56,000 
Presence in India  50 districts across 11 states  Across 12 states 

Reasons for the Adani Group-Holcim Acquisition 

Adani Group sees potential in India’s cement industry due to the following:

  • According to media reports, India’s cement consumption is about 242 Kg per capita. It is too little compared to the global average of 525 kg per capita. There is a significant potential for growth for cement companies in India.
  • Further, cement is the key raw material for all kinds of infrastructure development. And with rapid urbanisation, affordable housing projects, recovery in construction and other infrastructure projects, cement companies are likely to flourish in the coming years.
  • Ambuja and ACC are the strongest cement players with Pan-India presence and operations. As per reports, this is represented by the companies’ 23 manufacturing plants, 14 grinding stations, and 80 ready-mix concrete plants. And they also have over 50,000 channel partners across India. The brand recognition of these players in the industry is strong as well. It could be easier for Adani Group to establish its presence in the cement industry through this acquisition.
  • Adani Group’s acquisition will help Ambuja and ACC as well. They are likely to benefit from synergies with Adani Group which could result in high margins and cost efficiencies. That is, other Adani Group’s platforms including Adani ports and logistics, real estate, and energy businesses, can help grow the cement business.

To read the RA disclaimer, please click here
Research Analyst: Bavadharini KS

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