Adani Group's Ambuja Cements to buy Penna Cement for Rs 10,422 crore

This is Adani group's third acquisition since Ambuja-ACC takeover

Adani Group’s Ambuja Cements on Thursday ann­o­unced it would acquire Hyderabad-based Penna Cement Industries Ltd (PCIL) at an enterprise value of Rs 10,422 crore. This is the group’s third acquisition since it entered the cement business less than two years ago, in September 2022.

Ambuja Cements will acquire 100 per cent of the shares of PCIL from its existing promoter group — P Pratap Reddy and family.

The acquisition, Ambuja Cements said, would add 14 million tonnes per annum (mtpa) to its capacity, taking the total capacity of Adani group’s cement business (ACC-Ambuja consolidated) to 89 mtpa. The deal is expected to be closed in three to four months.
 

Penna Cement had made a failed attempt to go public in 2019. India Ratings, in a January note on the company, had said Penna Cement reported an Ebitda loss of Rs 11 crore in the first half of 2023-24, owing to reduced operational efficiencies and lower fixed-cost absorption amid high-cost coal inventory and weak realisations. Ebitda is earnings before interest, taxation, depreciation, and amortisation.

At present, Penna Cement operates a 10 mtpa capacity and has another 4 mtpa under construction at Krishnapatnam (2 mtpa) and Jodhpur (2 mtpa), expected to be completed in the next six to 12 months. 

Ambuja Cements said the acquisition would be fully funded through internal accruals.

“By acquiring PCIL, Ambuja is poised to expand its market presence in South India and reinforce its position as a pan-Indian leader in the cement industry,” said Ajay Kapur, chief executive officer and whole-time director of Ambuja Cements.

According to the press statement, the acquisition will improve Adani group’s market share in India's cement business by 2 per cent to 16 per cent. In its May investor presentation, the company had said it aimed for a 20 per cent share in the Indian cement market by 2028.

The group had already shared targets to increase capacity to 140 mtpa by 2028. UltraTech Cement, the largest cement maker in India with 152 mtpa capacity, plans to take its capacity to 200 mtpa in a similar timeframe.

The Thursday announcement is Adani group’s third acquisition in the cement sector since it took promoter control at Ambuja-ACC in September 2022. In FY24, Ambuja Cement acquired Sanghi Industries cement capacity in Gujarat. In April, the Adani company agreed to acquire MyHome Industries’ grinding unit in Tamil Nadu.

Ambuja Cements expects to leverage Penna Cement’s location to access the eastern and southern parts of peninsular India, apart from an entry to Sri Lanka, through the sea route, Kapur said. PCIL’s existing dealers will move to the Adani Cement network to bring in formidable synergy, the statement said.