Adani Group investing $3 billion to rival UltraTech Cement

Adani Group aims to overtake UltraTech Cement: Adani Group is exploring the possibility of purchasing various cement companies such as Penna Cement, Saurashtra Cement, the cement division of Jaiprakash Associates, and Vadraj Cement owned by ABG Shipyard. This decision is in line with the anticipated increase in cement demand driven by the government's infrastructure projects and high capital spending.

With an investment of 3 billion USD, the group seeks to increase its capabilities and establish itself as the top cement producer within the next three to four years, exceeding UltraTech of the Aditya Birla Group.

The Adani Group is prepared to provide an enterprise value (EV) of 85-120 USD per ton for these purchases and could pay extra for companies with opportunities for growth, limestone mines, and packing terminals, as stated in the report.

Penna Cement, valued at approximately Rs 9,000 crore, is in the process of increasing its capacity from 10 MTPA to 15.5 MTPA, potentially resulting in a higher valuation. The group is also contemplating the cement assets of Jaiprakash Associates, along with Saurashtra Cement, which is valued at Rs 1,487 crore in market capitalisation.

The strategic approach of the group is indicated by their recent purchase of Sanghi Cement at a price of $100 per ton in terms of enterprise value. Penna Cement and Saurashtra Cement have capacity of 2.8 MTPA and approximately 5 MTPA, while Jaiprakash Associates and Vadraj Cement have capacity of 9.5 MTPA and 6 MTPA, respectively. Jaiprakash Associates and Vadraj Cement are currently in the process of bankruptcy proceedings.

Ambuja Cement is expected to be the top choice for the group's purchases, thanks to its significant cash and cash equivalents of Rs 24,338 crore at the end of April, supported by Rs 8,339 crore from promoter warrant funds. The company is debt-free. Nevertheless, Adani might choose ACC instead if synergies are found to be more beneficial, particularly in the southern region of India, where the company has a smaller market presence.