The Adani family has signed definitive agreements to acquire Switzerland-based Holcim Group’s entire stake in two Indian firms — Ambuja Cements and ACC — for about $10.5 billion. This is also the largest-ever acquisition by Adani, and India’s largest-ever M&A transaction in the infrastructure and materials space. Holcim, through its subsidiaries, holds a 63.19% stake in Ambuja Cements and 54.53% in ACC (of which 50.05% is held through Ambuja Cements).
The $10.5-billion value for the stake includes open offer consideration also. The deal was done through an offshore special purpose vehicle, Adani Group said in a statement. “Our move into the cement business is yet another validation of our belief in our nation’s growth story,” said Gautam Adani, chairman, Adani Group.
Adani Group’s acquisition of Holcim’s stake in Ambuja would immediately propel the company to the second slot, with a total production capacity of 70.9 million tonne per annum (mtpa). Ambuja Cements has an installed capacity of 31.45 mtpa, with the retail segment contributing to about 80% of its sales. On its part, ACC has a production capacity of 34.45 mtpa of cement, and together these companies have a total production capacity of 65.9 mtpa.
Ambuja has a market cap of Rs 71,245 crore, with a promoter holding of 63.19%, while ACC has a market cap of Rs 39,693 crore with a promoter stake of 54.53%.
Adani said not only is India expected to remain one of the world’s largest demand-driven economies for several decades, India also continues to be the world’s second-largest cement market and yet has less than half of the global average per capita cement consumption.
In statistical comparison, China’s cement consumption is over seven times that of India’s. When these factors are combined with the several adjacencies of the Adani group’s existing businesses that include the ports and logistics business, energy business, and real estate business, the group believes that it will be able to build a uniquely integrated and differentiated business model, Adani said.
The acquisition is subject to regulatory approvals and conditions, it added.
With India’s cement consumption at just 242 kg per capita, compared to the global average of 525 kg per capita, there is a significant potential for the growth of the cement sector. The tailwinds of rapid urbanisation, the growing middle class and affordable housing together with the post-pandemic recovery in construction and other infrastructure sectors are expected to continue driving the growth of the cement sector over the next several decades.
Holcim, which has been disposing of non-core assets across certain geographies, was also looking to sell its stake in India cement businesses, Ambuja Cements and ACC. Apart from its 63.1% stake in Ambuja Cements, it holds a 4.48% stake in ACC, while Ambuja Cements holds a 50.05% stake in ACC. Holcim had divested its Brazilian unit for $1 billion in September and now plans to sell its business in Zimbabwe.
Adani Group, which does not have a presence in cement, was believed to be exploring to make a foray into the sector. The Group was planning to set up a 5 mtpa cement manufacturing facility in Maharashtra’s Raigad district with an estimated investment of Rs 1,000 crore.
Industrialist Sajjan Jindal-led JSW Group, Aditya Birla Group’s UltraTech Cement and ArcelorMittal were also believed to be in the race for Holcim Group’s Indian assets. JSW Group was intending to place a $7-billion bid for the twin assets, with $4.5 billion from its own kitty and the remaining $2.5 billion to be raised from private equity players.
JSW Group, which has an installed capacity of 16 mtpa as of March-end, had plans to increase it to 25 mtpa by FY24. However, UltraTech Cement — with a production capacity of 120 mtpa — would continue to be the leader in the country.
India is the second-largest cement producer in the world, accounting for about 8% of global cement production with an estimated production capacity of 550 MTPA.