Adani plans $4-5 bn cement bet after Sanghi acquisition

Gautam Adani, chairman, Adani Group. (REUTERS)
Gautam Adani, chairman, Adani Group. (REUTERS)


On Thursday, Ambuja Cements Ltd, part of Adani Cement, announced the purchase of 57% promoter stake in cement maker Sanghi Industries Ltd at an enterprise value of 5,000 crore

MUMBAI : Adani Group will invest $4 billion-$5 billion to expand its cement capacity to over 100 million tonnes in two years, two people aware of the matter said, on a day the conglomerate made yet another acquisition.

On Thursday, Ambuja Cements Ltd, part of Adani Cement, announced the purchase of 57% promoter stake in cement maker Sanghi Industries Ltd at an enterprise value of 5,000 crore.

“Adani will add around 30 million tonne per annum (mtpa) cement making capacity in two years, both via organic and brownfield acquisitions, for which $4-5 billion could be invested, which will be funded mostly through internal accruals," one of the two people cited above said on condition of anonymity.

The acquisition of Sanghi Industries, which will be funded by internal accruals, increases Ambuja’s cement capacity to 73.6 mtpa from the current 67.5 mtpa. “This landmark acquisition is a significant step forward in Ambuja Cements’ accelerating growth journey," said Gautam Adani, the chairman of Adani Group.

The planned $4-5 billion investment in cement business, Thursday’s acquisition of Sanghi Industries, and the recent expansion moves in other group businesses indicate how the conglomerate is regaining its tag as an aggressive corporate group, six months after a scathing report by Hindenburg Research compelled the group to pause investments and trim capital expenditure (capex) plans.

“With the ongoing capex of 14 mtpa and with commissioning of 5.5 mtpa of cement capacity at Dahej and Ametha in Q2 of FY23, Adani group’s capacity will be 101 mtpa by 2025," said Karan Adani, the chief executive officer (CEO) of Adani Ports and Special Economic Zone Ltd, while announcing the takeover of Sanghi Industries, whose cement capacity will be increased to 15 mtpa in two years from 6.1 mtpa now.

“We will be also investing in deepening and expanding the captive port capacity in order to accommodate vessel sizes of 8,000 DWT (deadweight tonnage)," said Karan Adani.

Ambuja’s goal of 140 mtpa capacity by 2028 is well on track and with this acquisition, it will be achieved ahead of time, added Karan Adani.

Almost 80% of Adani Group’s revenues come from infrastructure-oriented businesses, which underpins the group’s aggressive expansion plan in cement-making.

Adani aims to produce lowest cost clinker in the country at Sanghipuram and then transport clinker and cement to Saurashtra, South Gujarat, Mumbai, Karnataka, and Kerala.

“Synergy with the assets of Adani Ports will help us accelerate in the implementation of this strategy," said Adani.

Queries emailed to Adani group remained unanswered till press time.

The group kicked off its mammoth redevelopment work last week to transform Asia’s largest slum Dharavi from a 600-acre dense neighbourhood of rickety tenements into a swanky urban locale with skyscrapers and shopping malls in Mumbai, entailing an investment of over $3 billion by the group and the Maharashtra government.

Alongside, the group has resumed its Mundra Petrochem Ltd project in Gujarat, embarking on plans to become the country’s largest PVC maker, involving an initial investment of at least 14,000 crore.

The total project, which will have a PVC production capacity of 2 mtpa, will cost around 35,000 crore and 70% of the money to be used in the planned capex is likely to come from state-run lenders, said a 6 June Mint report.

Last month, Gautam Adani said as a renewed expansion strategy, the group will grow the capacity of its data centre JV AdaniConneX to 1 gigawatt (GW) in the medium term, which is by far the largest order book in India.

Adani has envisaged a $50 billion investment in developing green energy capabilities by 2030.

In line with this, the group has set a 45GW target of renewable energy capacity by 2030, after Adani Green Energy Ltd recently commissioned the world’s largest hybrid solar-wind project of 2.14GW in Rajasthan.

The group is also building the world’s largest hybrid renewables park right in the middle of the desert in Gujarat’s Khavda. Spread over 72,000 acres, this will generate 20GW of green energy, said Adani.

In April, 2023, Adani Ports completed Karaikal Port acquisition for 1,485 crore. During the June quarter, Adani New Industries Ltd secured 900 crore financial closure for ingot and wafer manufacturing as the group increased solar manufacturing capacity to 4GW.

On Thursday, Adani Power reported 83.3% year-on-year jump in net profit at 8,759 crore and 41.5% annual rise in operating income at 10,618 crore for the June quarter. By commissioning a 1,600 megawatts (MW) Godda Ultra-supercritical power plant, which supplies cross-border power to Bangladesh, during the June quarter, the company increased capacity to 15,250MW from 13,650MW as of June last year.

The group’s flagship AEL reported a 47% year-on-year rise in operating profit to 2,896 crore and a 44% jump in net profit at 674 crore for June quarter.

The group’s return into its original business model is in sync with the massive recovery in stock prices of Adani companies from their historic lows witnessed after the Hindenburg report.

While an investigation on the group by the Securities and Exchange Board of India (Sebi) is awaiting conclusion, stocks of Adani Group firms have recovered $51 billion in total market capitalization from their lows seen after the Hindenburg report.

Adani Enterprises has gained 112.2% from its lowest point (after Hindenburg) to 2,533 now. Adani Green is at 1,036 per share, jumping 124% from its lows, and Adani Power gained 97% from its lowest to 275 on Thursday.

In order to fund its renewed expansion strategies, Adani Group has expressed plans to raise at least $3.5 billion via QIPs and part-sale of promoter stakes in various group firms this fiscal.

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