Ambuja Cements Limited, a cement industry company owned by the Adani Group, on Tuesday released information about the major transaction. Ambuja Cement said it would acquire 46.8% stake in Oriental Cement Ltd for Rs 8,100 crore or Rs 395.40 per share. Gautam Adani’s company said in an exchange filing that the deal will be funded entirely from internal sources.
Adani said it has a cement operating capacity of 8.5 MTPA. Additionally, it has projects ready to implement 8.1 MTPA. The high-quality limestone mine located in Chittorgarh (Rajasthan) can support an additional 6.0 MTPA of cement production capacity in northern India. With this acquisition, Adani Cement’s operating capacity will increase to 97.4 MTPA and its production capacity will reach over 100 MTPA by March 2025.
Why should Adani take a stake?
Talking about the rationale behind the investment, Ambuja said it will help the company increase its presence in the core markets of south and west India to 8.5 MTPA. Its pan-India market share is expected to increase by 2%. The company said it expects capacity utilization to increase to 85% by the third year. The Ambuja and ACC brands will further boost business sales. Premium cement will also be sold.
What did Karan Adani say?
Karan Adani, Director, Ambuja Cement, said that this timely acquisition is another important step in Ambuja Cement’s accelerated growth journey, adding 30 MTPA to Ambuja Cement’s production capacity within two years of the acquisition. He said Ambuja is ready to reach 100 MTPA cement production capacity by FY25.
Karan Adani said Oriental Cement’s assets are highly efficient, equipped with dedicated railway lines and well supported by captive power plants, renewable energy, waste heat recovery and AFR facilities. Its strategic location, high quality limestone reserves and necessary statutory approvals provide the opportunity to increase cement production capacity to 16.6 MTPA in the near future.
The company is debt-free
Ambuja said Oriental Cement has almost no debt and the acquisition will further strengthen its balance sheet. It also said the acquisition will also boost its overall ROCE. On Tuesday, Ambuja Cement shares were trading at Rs 564, down 1.38%.
