The Adani group is planning on acquisitions as a way to augment capacities in ACC-Ambuja Cement, in addition to the existing strategy of expanding through organic means.
The ACC-Ambuja Cement combine said it planned to double capacity to 140 million tonnes (MT) by FY28, with a total capex of around ₹46,000 crore, 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.
There was no response to an email sent to the Adani group for clarification.
Focus on expansion
The Adani group is looking to catch up with market leader Ultratech Cement, the third largest cement manufacturer in the world (outside China), with a production capacity of over 135 mt. It is in the process of adding capacity to take it close to 160 mt, and then to 200 mt.
For the Adanis, capacity addition is a key focus area, and the fastest way to do that is through acquisitions. The group has a history of making big-ticket acquisitions to scale up rapidly. There are over 170 cement companies in India and the bulk of them 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. Recent disclosures on its debt obligations, upcoming debt repayments at the group level, and high levels of pledged shares in the recent past, have made the management cautious.
Earlier in May, Ambuja Cements placed orders to expand clinker capacity by 8 mt at the Bhatapara and Maratha units. About ₹7,000 crore is expected to be spent this year.
The two companies ended FY23 with cash of over ₹11,000 crore.
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 indicated that a merger was inevitable in order to realise cost efficiencies and reduce duplication of resources.
More recently, the group seems to have put the merger on the back-burner, but is going ahead with merging the operations of the two companies. However, the brands of the two companies will not be merged. Though both companies have a pan-India network, the ACC brand is strong in the north and west, while Ambuja Cements has a bigger presence in the east.
Bringing in efficiencies in the supply chain and logistics is the main goal now.