On
31st May 2023, Adani Group is planning to acquire ACC- Ambuja cement
to double its production capacity to 140 MT by the end of the fiscal year 2028,
with a total capex of USD 5520 million, the cost being roughly equally split
between the two companies.
The
merger of the two companies is still in the works, but the immediate priority
is to merge operations, though the two brands will not be merged. The Adani group is looking to take over
Ultratech Cement, the third-largest cement producer in the world (after China)
and one of the market leaders, with a production capacity of more than 135 mt.
It is currently expanding its capacity to get near 160 MT and then to 200 MT.
An
important area of concentration for Adani is capacity expansion, and
acquisitions are the fastest way to achieve this. The group has a history of
making big-ticket acquisitions to scale up rapidly. In India, there are more
than 170 cement manufacturing facilities, the majority of which are small regional
players.
After
doubling capacity, the cement companies intend to pause for a while and
consolidate before moving on to the next phase. The management has grown
cautious as a result of recent revelations regarding its debt commitments,
impending group-level debt repayments, and significant levels of pledged shares
in the recent past. The group is still paying off expensive debt obtained as a
bridging loan to finance the purchase of the cement companies.
Earlier
in May 2023, Ambuja Cements placed orders to increase the Bhatapara and Maratha
facilities' clinker capacity by 8 mt. This year, approximately USD 840 million
is expected to be spent by the company to enhance its capacity.
The
merger of ACC-Ambuja Cement has been hotly debated ever since the group
acquired the companies last year. In the past, the management has suggested
that a merger was inevitable in order to gain cost savings and lessen resource
duplication.
More
recently, the group appears to have put the merger on the back burner, although
they are still combining each company's operations. However, the brands of the
two companies will not be merged. Although both companies have a network
over all of India, Ambuja Cements has a greater footprint in the east than ACC
has in the north and west.