Gautam Adani-owned Ambuja Cements Ltd. on Thursday announced the acquisition of a majority stake in Sanghi Industries at an enterprise value of ₹5,000 crore, in a first major deal since Adani Group was rocked by allegations of financial misconduct by Hindenburg Research.
Ambuja Cements, a part of Adani Cement Ltd (ACL), will buy a 56.74% stake in Sanghi Industries Ltd. (SIL) from its existing promoter group Ravi Sanghi & family.
The acquisition will be fully funded through internal accruals, Ambuja Cements said in a statement.
Besides, it would make an offer to acquire another 26% or 6.71 crore equity shares from SIL's public shareholders.
“The open offer would be at a consideration of up to ₹114.22 per sale share,” it said. Adani Group will spend ₹ 767.15 crore for acquiring 26% share from open market.
The company expects the acquisition to be completed within 3-4 months, however, it will be “subject to approval” from the Competition Commission of India.
If the open offer is fully subscribed, Ambuja Cements will own 82.74% in SIL, the cement maker which also owns a captive port capacity at Sanghipuram in Kutch district of Gujarat.
Adani Group plans to make investments to expand the captive port capacity of Sanghipuram to handle vessels of size 8,000 DWT (deadweight tonnage), said Adani Ports and Special Economic Zone (APSEZ) CEO Karan Adani while announcing the deal.
The deal would help ACL, the second biggest cement manufacturer after UltraTech, to expand its capacity to 73.6 mtpa (million tonne per annum) in the segment, in which it had entered last September, after the acquisition of majority stakes in Ambuja Cements and its subsidiary ACC Ltd.
“The acquisition of SIL will help ACL strengthen its market leadership and increase its cement capacity to 73.6 mtpa from the current 67.5 mtpa. With the ongoing capex of 14 mtpa and with commissioning of 5.5 mtpa capacity at Dahej and Ametha by Q2 of FY24, Adani Group’s capacity will be 101 mtpa by 2025,” it said.
Commenting on the development, Adani Group Chairman Gautam Adani said: “This landmark acquisition is a significant step forward in Ambuja Cements’ accelerating growth journey.” “By joining hands with SIL, Ambuja is poised to expand its market presence, strengthen its product portfolio, and reinforce its position as a leader in the construction materials sector. With this acquisition, Adani Group is well on course to achieve its target of 140 mtpa of cement manufacturing capacity by 2028 ahead of time,” he said.
With SIL's limestone reserves of a billion tonne, ACL will increase cement capacity at Sanghipuram to 15 mtpa in the next two years, he added.
ACL will also invest in expanding the captive port at Sanghipuram to handle larger vessels.
“We will also invest in deepening and expanding the captive port capacity in order to accommodate larger vessel sizes of 8,000 DWT,” said Karan Adani.
Bulk terminals and grinding units will be created along the western coast to enable the movement of clinker and cement through the sea route at the lowest possible cost.
“Our vision is to produce lowest cost clinker in the country at Sanghipuram and then transport this clinker as well as bulk cement through coastal roads to the markets of Saurashtra South Gujarat, Mumbai and Mumbai Metropolitan Region, Karnataka and kerala,” he said, adding “synergies with the assets of Adani ports will help us in implementation of this strategy.”
He further said that with the right implementation, he is very “confident” that Adani Group will be the lowest-cost supplier of cement in all of these markets.
Sanghi Industries’ Sanghipuram unit is India’s largest single-location cement and clinker unit by capacity, with a captive jetty and captive power plant.
SIL also has a bulk cement terminal each at Navlakhi Port in Gujarat and Dharamtar Port in Maharashtra.
Most of the cement is transported through the sea route, which is environment-friendly and cost competitive.
SIL has a network of 850 dealers, with market presence in Gujarat, Madhya Pradesh, Rajasthan, Maharashtra and Kerala.
For financial year ended March 31, 2023, SIL’s turnover was ₹928.36 crore.
On Wednesday, Ambuja Cements reported an increase of 31.2% in consolidated net profit at ₹1,135.46 crore and clocked revenue from operations of ₹8,712.90 crore for the June quarter.
Consolidated results of Ambuja Cements include the financial performance of its step-down firm ACC Ltd., in which it owns about 51% stake.
