Adani Group’s Ambuja Cement set to acquire Penna Cement in Rs10,422-Cr deal

In an initiative that will expand its footprints in southern India, Billionaire Gautam Adani-led Adani Group is set to acquire Hyderabad-based Penna Cement at an enterprise value of ₹10,422 crore, which will add 14 million tonnes of annual capacity to the country's second largest cement manufacturer.

The deal will increase Adani's market share in cement in southern India and give an entry into Sri Lanka, where Penna Cement Industries Ltd (PCIL) operates a unit through a local subsidiary.

The deal will also provide sufficient limestone reserves to the growth-hungry Adani group firm, which is aspiring to achieve a 140 MTPA (million tonnes per annum) capacity by FY28.

Production capacity to jump to 89 MTPA

“A binding agreement for the acquisition has been signed and Ambuja Cements, an Adani group firm, will acquire 100 per cent shares of PCIL from its existing promoter group P Pratap Reddy and family,” said a statement issued by the company on Thursday (June 13).

After the acquisition, the total production capacity of Adani Cement would climb up to to 89 MTPA, it added.

"This acquisition will be fully funded through internal accruals," said Ambuja Cements.

Ambuja Cements CEO & whole time director Ajay Kapur said it is a "significant step" forward in the company's accelerating growth journey.

‘Ambuja poised to expand market presence in south’

"By acquiring PCIL, Ambuja is poised to expand its market presence in south India and reinforce its position as a pan-India leader in the cement industry," he said.

PCIL has 14 MTPA cement capacity in Andhra Pradesh, Telangana, and Rajasthan, of which 10 MTPA is operational, and the remaining is under-construction at Krishnapatnam (2 MTPA) and Jodhpur (2 MTPA) and will be completed within 6 to 12 months, it added.

The deal "strengthens Adani Cement's sea transportation logistics with five bulk cement terminals at Kolkata, Gopalpur, Karaikal, Kochi and Colombo to serve peninsular India." Besides, the acquisition will also improve Adani Cement's market share pan-India by 2 per cent and 8 per cent in south India, it added.

The company expects to complete the acquisition "within 3–4 months", however said it will be subject to necessary government/regulatory approvals.

"The acquisition is in line with the company's strategy to increase its footprint in the cement manufacturing market," said the Adani group firm.

Adani Cement is expanding its capacity organically and inorganically through acquisitions as per its vision to achieve a 140 MTPA capacity and around 20 per cent market share by 2028.

Expansion bid

The Adani group had last December completed the acquisition of Saurashtra-based Sanghi Industries Ltd at an enterprise value of ₹5,185 crore.

For the financial year ended March 2024, PCIL's consolidated turnover stood at ₹1,241 crore.

PCIL, incorporated in October 1991, has operations in Sri Lanka, directly and through its subsidiaries.

Around 90 per cent of the cement capacity of PCIL comes with railway sidings, and some are supported by captive power plants and waste heat recovery systems.

Further, surplus clinker at the Jodhpur plant will support an additional 3 MTPA cement grinding capacity over and above 14 MTPA, the Adani group firm's statement said.

According to Kapur, PCIL's strategic location and sufficient limestone reserves provide an opportunity to increase cement capacity through debottlenecking and additional investment.

Boost to operating performance 

"Importantly, the bulk cement terminals (BCTs) will prove to be a game changer by giving access to the eastern and southern parts of peninsular India, apart from an entry to Sri Lanka, through the sea route," he said, adding "Our aim is to make PCIL highly competitive on cost and productivity and improve its operating performance." Adani Group entered the cement sector in September 2022 after acquiring controlling stakes in Ambuja Cements from Swiss firm Holcim for cash proceeds of USD 6.4 billion (about ₹51,000 crore). Ambuja Cements owns a 51 per cent stake in ACC Ltd.

Later it also launched a ₹31,000-crore open offer for the acquisition of 26 per cent additional stakes from public shareholders.

According to data from the Cement Manufacturers Association, the country has a total installed cement capacity of 541 metric tonnes.

The Indian cement market is led by Aditya Birla group firm UltraTech Cement Ltd, which has a consolidated capacity of 152.7 MTPA.

(With inputs from agencies)