Ambuja Cements Acquires Sanghi Industries At Enterprise Value Of Rs 5,000 Crore

Ambuja Cements Acquires Sanghi Industries At Enterprise Value Of Rs 5,000 Crore

The acquisition of Sanghi Industries by Ambuja Cements is a significant move in the cement and building material industry. Ambuja Cements, which is part of the Adani Group, is expanding its market presence and product portfolio through this acquisition. By acquiring 56.74% shares of Sanghi Industries from the existing promoter group Ravi Sanghi and family, Ambuja Cements aims to strengthen its position in the market and potentially enhance its production capacity.

One notable aspect of this acquisition is that it is being completely funded through internal accruals. This suggests that Ambuja Cements has the financial capability to make such a strategic move without resorting to external funding sources. It reflects the company’s confidence in its financial position and potential for growth in the cement sector.

Furthermore, Adani Group chairman Gautam Adani‘s statement about achieving the targeted cement manufacturing capacity of 140 MTPA by 2028 ahead of time shows the group’s ambition and determination to expand its presence in the cement industry. Such a large-scale target indicates the Adani Group’s belief in the growth potential of the cement sector in India and its commitment to becoming a major player in the industry.

Overall, the acquisition of Sanghi Industries aligns with Ambuja Cements’ and the Adani Group’s broader strategic objectives of expansion, market dominance, and achieving ambitious production targets in the cement and building materials market. It will be interesting to see how this acquisition unfolds and how it impacts the overall competitive landscape in the industry.

The statements made by Gautam Adani, the chairman of Adani Group, highlight the strategic importance of the acquisition of Sanghi Industries for Ambuja Cements and the Adani Group’s overall expansion plans in the construction materials sector.

1. Market Presence and Product Portfolio Expansion: By joining forces with Sanghi Industries, Ambuja Cements aims to expand its market presence. The acquisition will likely provide them with access to new markets and distribution networks, enabling them to reach a wider customer base. Additionally, the integration of Sanghi Industries’ product portfolio into Ambuja’s existing offerings will strengthen its position as a leading player in the construction materials sector.

2. Achieving Cement Manufacturing Capacity Target: The acquisition of Sanghi Industries will contribute significantly to the Adani Group’s goal of achieving a cement manufacturing capacity of 140 MTPA by 2028. The additional production capacity from Sanghi Industries’ plant in Sanghipuram, Gujarat, will bolster Ambuja Cements’ overall cement production capabilities, bringing them closer to their ambitious target well ahead of the set timeline.

3. Limestone Reserves and Capacity Expansion: The limestone reserves of a billion tonnes held by Sanghi Industries are a valuable asset for Ambuja Cements. Limestone is a critical raw material in cement production, and having access to such substantial reserves will ensure a stable supply chain and reduce dependence on external sources. Furthermore, Ambuja plans to increase the capacity at the Sanghipuram plant to 15 MTPA, which will significantly contribute to their overall production capacity.

4. Investment in Infrastructure: To support the increased production capacity and efficiency, Ambuja Cements plans to invest in expanding the captive port at Sanghipuram. A larger port facility will enable the handling of larger vessels, streamlining logistics and potentially reducing transportation costs.

In summary, the acquisition of Sanghi Industries appears to be a strategically sound move for Ambuja Cements and the Adani Group. It aligns with their vision of becoming a dominant player in the cement industry, achieving aggressive production targets, and strengthening their position in the construction materials market in India. The utilization of internal accruals for funding the acquisition demonstrates their financial strength and confidence in the growth prospects of the industry.

The statement from Adani Group’s chairman further emphasizes the strategic value of the acquisition and sheds light on the key assets and capabilities that Sanghi Industries brings to the table:

1. Lowest Cost Producer of Clinker: One of the primary objectives of the acquisition is to transform Sanghi Industries into the lowest cost producer of clinker in the country. Clinker is a crucial component in cement production, and being the lowest cost producer would provide a competitive advantage, enabling Ambuja Cements to offer more competitive prices and potentially increase market share.

2. India’s Largest Single-Location Cement and Clinker Unit: Sanghi Industries’ integrated manufacturing unit at Sanghipuram is the largest single-location cement and clinker unit in India by capacity. This signifies the scale of production and its potential to meet significant portions of the country’s cement demand.

3. Captive Jetty and Infrastructure: The presence of a captive jetty in Sanghipuram enhances the logistics capabilities of the manufacturing unit. It allows for easy transportation of raw materials and finished products, which can result in cost efficiencies and smoother operations.

4. Production Capacity and Power Generation: Sanghi Industries’ Sanghipuram unit has substantial clinker production capacity with two kilns producing 6.6 MTPA and a cement grinding unit with a capacity of 6.1 MTPA. Moreover, the captive power generation capacity of 130 MW and a 13 MW waste heat recovery system add to the unit’s self-sufficiency and reduce dependence on external power sources.

5. Dealer Network and Market Presence: Sanghi Industries has established a network of 850 dealers, which indicates a strong distribution reach in various regions of India, including Gujarat, Madhya Pradesh, Rajasthan, Maharashtra, and Kerala. This established market presence could further complement Ambuja Cements’ existing distribution network and provide access to new markets.

By leveraging Sanghi Industries’ strengths, Ambuja Cements aims to optimize production costs, increase efficiency, and potentially become a dominant player in the cement industry. The acquisition aligns with their goal of expanding market presence, enhancing their product portfolio, and achieving their ambitious manufacturing capacity target. Additionally, the strategic location and established dealer network of Sanghi Industries can contribute to Ambuja Cements’ growth and market leadership in the construction materials sector.

The acquisition of Sanghi Industries by Adani Group’s cement and building material arm, Ambuja Cements, is part of a larger growth strategy to increase its cement production capacity and expand its operations. Here are the key points from the company’s release:

1. Increase in Cement Capacity: Through the acquisition of Sanghi Industries, Ambuja Cements aims to increase its cement capacity from the existing 67.5 MTPA (Million Tonnes Per Annum) to 73.6 MTPA. This capacity expansion is expected to be achieved by integrating Sanghi Industries’ existing production capabilities into Ambuja’s portfolio.

2. Adani Group’s Overall Capacity: By 2025, the Adani Group’s cement capacity is projected to reach 101 MTPA. This includes the additional capacity gained from the Sanghi Industries acquisition. The Adani Group plans to commission 5.5 MTPA capacity at Dahej and Ametha by Q2FY24 and has an ongoing capital expenditure (capex) plan to add another 14 MTPA capacity.

3. Expansion of the Port at Sanghipuram: The port at Sanghipuram will be expanded to handle larger vessel sizes of up to 8,000 DWT (Deadweight Tonnage). This expansion aims to improve logistics efficiency, reduce transportation costs, and enhance the company’s ability to import and export raw materials and finished products.

4. Creation of Bulk Terminals and Grinding Units: To facilitate the movement of clinker and cement at the lowest possible cost, Ambuja Cements plans to create bulk terminals and grinding units along the western coast of India. These facilities will likely aid in distributing cement efficiently to various markets and improve the overall supply chain.

Overall, the acquisition of Sanghi Industries, along with the planned capacity expansions and infrastructure improvements, demonstrates the Adani Group’s commitment to solidifying its position as a major player in the cement industry. By strategically increasing production capacity and optimizing logistics, the group aims to tap into the growing demand for construction materials in India and potentially beyond.

Sanghi Industries’ bulk cement terminals at Gujarat’s Navlakhi Port and Maharashtra’s Dharamtar Port provide further strategic advantages to Ambuja Cements through the acquisition. These terminals serve as key distribution hubs that enable the efficient movement of cement to various markets, including Gujarat and Maharashtra. As Gujarat’s top 3 cement players are Ambuja-ACC, JK Lakshmi Cement, and UltraTech, the acquisition of Sanghi Industries will likely enhance Ambuja Cements’ market share and strengthen its position in the highly competitive Gujarat market.

The fact that Sanghi Cement derives a significant portion of its revenues from Gujarat indicates the importance of this region for cement sales. By adding Sanghi Industries’ bulk cement terminals and production capacity in Gujarat to its portfolio, Ambuja Cements can leverage existing distribution channels and potentially streamline its operations to cater to the local demand effectively.

After the announcement of the acquisition, the market responded positively, as evident from the rise in Ambuja Cements’ share price by about 1% to Rs 466.6 on Thursday. This response indicates investor confidence in the strategic move made by Ambuja Cements and reflects their belief in the growth prospects resulting from the acquisition.

The acquisition of Sanghi Industries is expected to provide Ambuja Cements with a competitive edge in the cement market, increase its market presence in key regions, and bolster its overall revenue and profit potential in the coming years.