PE: Adani Group Company Ambuja Cements Ltd acquiring majority stake in Sanghi Cements Ltd.

Transaction:

• Ambuja Cements Ltd announced the acquisition of 56.74% majority stake in Sanghi Industries Ltd at an enterprise value of Rs 5,000 Crore. The acquisition will be fully funded through internal accruals.
• The company will also make an open offer for 26% shares, at the price of Rs. 114 per share, which is at 7.8% premium to current market price.

About Ambuja Cements Limited:

• Incorporated in 1983, Ambuja Cements Ltd. is among the leading cement companies in India. It is a member of the Adani Group – the largest and fastest-growing portfolio of diversified sustainable businesses.
• Currently, Ambuja Cement has a cement capacity of 67.50 MTPA with 14 integrated cement manufacturing plants and eight cement grinding units across the country.
• Ambuja Cement recently released its first-quarter results. The company’s revenue experienced a growth of 8.47%, rising from Rs 8033 Crore Q1FY25 to Rs 8713 Crore Q1FY24, and the operating profit surged significantly, reaching Rs 1667 Crore from Rs 865 Crore.

About Sanghi Industries Limited:

• Incorporated in 1985, Sanghi Cement is a brand owned by Sanghi Industries.
• Sanghi Cement sells ordinary Portland cement, Portland pozzolana cement and Portland slag cement in Gujarat, Rajasthan, Maharashtra and Kerala and its port ships cement to the Middle East, Africa and the countries in the Indian sub-continent.
• It has a grinding capacity of 6.1 million metric tonnes per annum and a clinker capacity of 6.6 million metric tonnes per annum.
• In November 2022, Sanghi Cement had raised Rs 500 Crore through the issuance of NCDs to Kotak Special Situations Fund and Rs 50 Crore through an equity infusion from the promoters, which was used to reduce its debt, to fund the operational requirements.
• Sanghi Cement ended the year through March with net sales of Rs 924.5 Crore, and loss of Rs 325.7 Crore. The cement maker had total assets of Rs 3,502 Crore and outstanding borrowings of 1,343.2 Crore at the end of March, according to its stock exchange disclosure.

Rationale:

• By joining hands with SIL, Ambuja is poised to expand its market presence, strengthen its product portfolio, and reinforce its position as a leader in the construction materials sector.
• ACL will also invest in expanding the captive port at Sanghipuram to handle larger vessels. Adani’s aim is to make SIL lowest cost producer of Clinker in the country.
• Adani Group plans to use its strength in building and operating infrastructure by expanding Sanghipuram port to handle vessel size of 8000 DWT bulk terminal and grinding unit will be created along the western coast to ensure movement of clinker and cement at lowest cost.
• With SIL’s limestone reserves of a billion tonnes, ACL will increase cement capacity at Sanghipuram to 15 MTPA in the next two years.
• The acquisition of SIL will help ACL to strengthen its market leadership and increase its cement capacity to 73.6 MTPA from the current 67.5 MTPA. With the ongoing capex of 14 MTPA and with commissioning of 5.5 MTPA capacity at Dahej and Ametha by Q2 of FY24, the Adani Group’s capacity will be 101 MTPA by 2025.
• With this acquisition, the Adani Group is well on course to achieve its target of 140 MTPA of cement manufacturing capacity by 2028 ahead of time.
• The acquisition is also expected to help Ambuja tap the fly-ash produced at Adani Group’s thermal power plants in Mundra for the acquired cement facility.
• Adani Group acquired Ambuja Cements Ltd. and ACC Ltd. for USD 6.5 billion last year from Holcim Group, becoming country’s second-largest cement maker with 67.5 million tons per annum capacity.