Adani-owned Ambuja Cements to buy a majority stake in Sanghi Industries

Adani's Ambuja Cements acquired a controlling stake in Sanghi Industries for $729 million, boosting its growth and cement market presence. The move accelerates Ambuja's production goals and signals Adani Group's strategic expansion. Internal funds secure the deal, reflecting financial robustness.

Ambuja Cements Set to Boost Market Presence with Sanghi Industries Acquisition

In a move poised to reshape India's cement industry landscape, Ambuja Cements, a subsidiary of the Adani Group, is primed to acquire a controlling stake in Sanghi Industries, a distinguished cement manufacturer headquartered in Gujarat. The strategic acquisition, valued at a staggering 60 billion rupees (approximately $729 million), is expected to significantly bolster the Adani Group's cement business and contribute to the conglomerate's ambitious growth strategy.

Gautam Adani, the visionary leader at the helm of the Adani Group, remarked, "This acquisition marks a crucial step towards fulfilling Ambuja Cement's commitment to double its cement production capacity by the year 2028. It reflects our unwavering dedication to innovation and progress in the cement sector."

The Adani Group currently ranks as India's second-largest cement producer, trailing only behind UltraTech Cement. which boasts a manufacturing capacity of 132.5 million tonnes annually, the Sanghi Industries acquisition is a pivotal stride toward narrowing the gap. With ownership of both Ambuja Cements and its subsidiary ACC Ltd., the group boasts an impressive combined production capacity exceeding 65 million tonnes.

Sanghi Industries, an established player in the cement manufacturing sector, has solidified its standing with a noteworthy annual production capacity of 6.1 million metric tonnes. Based in Gujarat, the company has established itself as a key player in the region's cement market. 

The impending acquisition has already sparked investor enthusiasm, evident from the notable 5% surge in Sanghi Industries' shares following the announcement. This surge pushed Sanghi Industries' stock to a 52-week high on the Bombay Stock Exchange (BSE), reaching an upper circuit of ₹105.76.

Ambuja Cements' share price also witnessed a commendable increase of 3.48%, reaching ₹477, reflecting the market's positive response to the news. The acquisition involves securing a 56.74% stake in Sanghi Industries from its existing promoter group, Ravi Sanghi & Family. 

It is worth noting that Ambuja Cements itself is a part of the Adani Group, which acquired it from Holcim, a Swiss-based company, for a substantial $10.5 billion the preceding year.

In a resounding display of financial prudence, Ambuja Cement revealed that the financing for the acquisition would be entirely sourced from internal accruals, underlining the group's robust financial position. This landmark deal signals the Adani Group's triumphant return to the realm of acquisitions after a seven-month hiatus, triggered by allegations of financial misconduct outlined in the Hindenburg report. 

Despite the initial setback in stock market value, the Adani Group's shares have demonstrated remarkable resilience and gradual recovery, buoyed by strong denials of the allegations.

The acquisition will see Ambuja Cement acquire a 56.74% stake in Sanghi Industries for 16.74 billion rupees, alongside the initiation of an open offer to secure an additional 26% stake at an attractive rate of 114.22 rupees per share. Ravi Sanghi, Chair and Managing Director of Sanghi Industries lauded the acquisition as a mutually beneficial opportunity for shareholders, positioning it as a strategic move that holds promise for both entities.

This acquisition strategically positions the Adani Group to further consolidate its competitive edge in India's flourishing cement market, anticipated to receive a significant boost from Prime Minister Narendra Modi's ambitious infrastructure enhancement initiatives. 

As part of its vision, the Adani Group aims to elevate Sanghi Industries' production to an impressive 15 million tonnes annually, a substantial expansion from its present output of 6.1 million tonnes. With a long-term target of achieving a staggering production milestone of 140 million tonnes by 2028, Karan Adani, CEO of Adani Ports and Special Economic Zone, exudes confidence in surpassing this goal ahead of schedule.

Ambuja Cements Q1 Results

Ambuja Cement has defied market projections by delivering an impressive financial performance for Q12023. The company's standalone net profit of ₹645 crore from April to June, While this figure represents a 38% decline from the previous fiscal year's comparable quarter.

The company reported a staggering 18.4% year-on-year increase, with revenue reaching an impressive ₹4,729.7 crore. 

However, the path to this success was not without its challenges. Analysts had previously cautioned that the PAT might experience a significant decline due to a higher proportion of other income in the base quarter. Yet, Ambuja Cement's overall performance still managed to impress, showcasing its resilience and ability to adapt to evolving market dynamics.

The company's margin also witnessed a positive upswing, climbing to 20.1% by the close of the June quarter. This margin expansion is attributed to factors such as operating leverage, reduced input costs including pet coke and coal prices, as well as streamlined unitary costs stemming from the temporary shutdown of Ambuja Cement's Himachal Pradesh unit in the preceding quarter. 

The company's total sales volumes reached an impressive 9.1 million metric tons, significantly surpassing the predicted 8.5 million metric tons. This represents a remarkable 23% increase compared to the sales achieved in the corresponding quarter of the previous financial year.

It is imperative to note that Ambuja Cement's consolidated financial results include figures from ACC, another significant player in the industry, as both entities were acquired by the Adani Group in the preceding year. This strategic consolidation has undoubtedly contributed to Ambuja Cement's impressive overall performance.