ACC, Ambuja to ramp up capacity as Adani vies with UltraTech for top slot

Adani group aiming at 100 mn tonnes per annum combined, from present 70 mn tonnes; both firms to invest with own cash and fresh debt; ACC-Ambuja merger on cards

With the acquisition of Ambuja Cements and ACC, the Adani group is focusing on raising the capacity to 100 million tonnes per annum of both companies from the present 70 million tonnes per annum, thus taking on the industry's leader, UltraTech.

Ambuja and ACC will be investing in new capacities with their own cash and taking fresh debt, analysts said on Monday.

With new aggressive owners, the expansion plans of both companies will be put on fast track with a goal to raise the capacity to 140 million tonnes per annum, bankers said.

One of the first tasks of the Adani group is to merge Ambuja and ACC into a single entity to get synergy benefits, say bankers and analysts.

As per Ambuja and ACC present plans, the combined capacity would rise to 73 mtpa by next year, which is 12 per cent of market capacity. With various cost cutting exercises in place including synergy benefits post merger, Adani’s cement could reach 100 mtpa capacity through brownfield capacity at an attractive $80-90 a tonne, said analysts with Kotak Institutional Equities.

Under the deal, Adani will first pay $6.5 billion (Rs 50,200 crore) to Holcim at an offer price of Rs 385 a share for Ambuja and Rs 2,300 a share for ACC – an 8-9 per cent premium to the current market price.

The open offers of  both Ambuja and ACC will cost an additional $4 billion to Adani for an additional 26 per cent stake.    

“If the share price goes above the open offer price in the coming days, then shareholders will not sell their shares in the open offer thus saving the cash of Adani,” the banker said.

Ambuja Cements shares closed 2.6% up at Rs 368 a share while ACC shares closed 3.84% at Rs 2,195 a share.