Adani Group — most powerful Cement company in India? Top 3 Highlights you should know!
Adani Group has agreed to acquire a 63% stake in Ambuja Cement and a 54% stake in ACC for a little over Rs. 81,000 Crores. This is the group’s largest acquisition ever and India’s largest ever M&A transaction in the infrastructure and materials space.
Adani Group will become the no.2 cement maker in the country with a capacity of 66–68 million tonnes per annum.
Here are the 3 most important points from this news and how it benefits the Adani Group.
1) ACC/ Ambuja will become promoter-driven
Cement companies like UltraTech Cement, Dalmia Bharat, Shree Cement, JSW Cement, JK Cement are all under direct promoter control — meaning that promoters own a big share of the company and can take management decisions without much pressure from other investors. With this acquisition, ACC and Ambuja Cements will also become promoter-driven, which can bring big improvements in the way these companies are run.
2) Cost synergies if ACC and Ambuja are merged
The Adani Group can save on a lot of fixed costs if it manages to merge both ACC and Ambuja, leading to production-related synergies. For example, if there are multiple cement plants of ACC and Ambuja in the same area, it can reduce the number and focus production on fewer plants. This can save a lot of money!
Around 40 percent of revenues to cement industry go away in just production costs, so cost savings through supply-chain efficiencies can turn out to be a major benefit.
3) Integration with other Adani Group businesses
The Adani Group is mainly into service-oriented businesses like Ports, Energy, etc. This is their first large-scale entry into the hard-core manufacturing sector, which works very differently. When we talk about the cement industry, the main costs in the sector are Power and Fuel, Logistics and Flying Ash.
In each of these areas, Adani already has a strong presence. For example:
- Energy => Adani Power and Adani Green Energy
- Logistics => Adani Ports and Logistics
- Flying Ash => Adani Group is one of the biggest suppliers of flying ash to cement companies
All these factors make Adani Group a perfect fit for Ambuja Cement and ACC. They seem to have big plans for the business and have already announced intentions to double the capacity of production in the next five years. If this development comes true, ACC/Ambuja can gain significant market share and dominate the Cement industry like no other company.