The cement sector in the country is on a capacity-addition spree, banking mainly on the rise in infrastructure spend through both greenfield and brownfield expansions.
However, with nearly 25 million tonne per annum (MTPA) of stressed assets available, mergers and acquisitions could be the easy way out.
The acquisition of a 56.74% stake in Sanghi Industries (SIL) by Ambuja Cements (ACL), now part of the Adani Group, at an enterprise value of Rs 5,000 crore is just the start. Following the acquisition, Adani Cements’ (Ambuja Cements and ACC) capacity will increase to 73.6 MTPA from the current 67.5 MTPA but it will not change the pecking order.
UltraTech Cement with a total capacity of 133 MTPA continues to top the chart, followed by Adani Cement (ACC & Ambuja Cements) at 67.5 MTPA. Shree Cement with 49.9 MTPA, Dalmia Cement (Bharat) with 43.7 MTPA, Nuvoco Vistas with (25 MTPA), JSW (19 MTPA) and India Cements (16 MTPA) are others in the list.
According to Adani Group chairman Gautam Adani, using SIL’s limestone reserves of a billion tonnes, ACL will increase cement capacity at Sanghipuram to 15 MTPA in the next two years. Further, with ongoing capacity additions of 14 MTPA and commissioning of 5.5 MTPA capacity at Dahej and Ametha, the Adani Group’s capacity will be 101 MTPA by 2025.
ACL was planning increase to capacity to 140 MTPA by 2028, and with this acquisition it will be “achieved ahead of time”, ACL director Karan Adani said.
India is the second-largest producer and consumer of cement after China, with a total capacity of 570 MT by the end of FY22.
“We forecast a cement demand CAGR of 5% over FY24-26 against 3.8% over FY13-22. We expect the India cement industry to witness 8% y-y volume growth in FY24,” a report by Nomura said, adding it estimates cement capacity to grow 7% over FY23-25 versus 5.6% over FY13-22.
On its part, UltraTech Cement has plans to increase installed capacity to 159 MTPA by FY25. The Aditya Birla group company plans to add 42 MTPA of capacity across the country along with grinding units and bulk terminals.
“This growth will solidify our standing as the third-largest cement company globally, outside of China, and the unrivalled leader in India,” Aditya Birla group chairman Kumar Mangalam Birla said in his address to shareholders in annual report.
“This year, we commissioned an additional 12.4 MTPA capacity of grey cement and further inaugurated a 2.2 MTPA brownfield cement capacity at Patliputra in April 2023. Your company has already kick-started work on the next growth phase of 22.6 MTPA,” he said.
Shree Cement was planning to expand capacity to 80 million tonnes by 2030 and the HM Bangur-led company will invest Rs 5,500-6,000 crore across various projects.
Dalmia Cement (Bharat), Nuvoco Vistas and JSW are among others looking for capacity additions.
The industry has also seen a number of consolidations over the past decade such as Adani’s acquisition of Ambuja Cements and ACC, Dalmia’s buy of Jaiprakash Associates and Anjani Portland Cement’s buy of majority stake in Bhavya Cements.
This could also be the a way forward for Indian cement companies, an industry expert said.