Adani Cements would rely on operating cash flows and internal accruals to fund its Rs 46,000- crore ($5.5 billion) expansion capex over the next five years, without taking recourse to external borrowings.

The cement arm of the Adani Group, comprising ACC Ltd and Ambuja Cements, has set an ambitious target to achieve a production capacity of 140 million tonnes by FY28, from the current 67.5 million tonnes.

“With the funds available from the cement operations, there is no need to resort to external borrowings for the planned expansion,” an official said.

Generating cashflows

Adani Cements estimates that to set up a 4 million tonne kiln and a 2 million tonne grinding facility, it would cost about $80 a tonne for a modern clinker line and just under $40 a tonne for grinding capacity.

Clinker is produced in the kiln and grinding takes place at the next stage of the process, when clinker is mixed with gypsum to produce various grades of cement.

At the end of the June quarter, ACC and Ambuja Cements had Rs 11,800 crore in cash reserves. Therefore, it would require another Rs 33,000-34,000 crore to reach its projected capex figure.

It expects to generate an EBITDA of Rs 17,500 crore annually till FY28. With the expected EBITDA generation, and accounting for taxes, dividends, and other outgoes, it expects to be left with sufficient cash reserves every year that will add to the capex kitty. When the Adani group had acquired ACC and Ambuja Cements from Holcim and raised $6.3 billion, it had done so without burdening the companies with principal or interest obligations.

Expansion plans

In the next six months, the company plans to take its cement capacity to 83.6 million tonnes, with over 6 million tonnes coming from the acquisition of Sanghi Industries by Ambuja Cements. The company will buy 56.74 per cent of the promoter stake for Rs 1,675 crore and make an open offer for another 26 per cent stake for Rs 767 crore, amounting to a total outgo of over Rs 2,400 crore.

Also read: Goal set. ACC-Ambuja Cement combine explores acquisition route to augmenting capacity

The acquisition of Sanghi Industries will give it access to 6.6 million tonnes of clinker capacity. It has approvals to set up kilns at four approved sites, of which two are in place, with the potential for two more. Adani Cements has planned several brownfield expansions this year and over the next few years. Sanghi Industries has limestone reserves of 1 billion tonnes that will help in the expansion.

It has already filed applications for approvals, started the process of acquiring land, while modernisation and expansion of its existing plants is on.