LafargeHolcim-controlled Ambuja Cement is looking to acquire capacities in ready-mix concrete (RMC) and aggregates businesses to fuel growth.
The company is also on the look out for adding cement capacities, if the valuations serve right. “The company continues to look at all growth options in cement and other building materials segments like ready-mix concrete (RMC) and aggregates,” a company official told Business Standard last week. The official added, “Inorganic growth in cement business depends on value-accretive options.” Ambuja Cements was one of the firms which had bid for Binani Cement last year, but lost out to UltraTech over a higher valuation.
Analysts see the move as an attempt to move towards being a building materials company and not a pure cement maker.
“Globally, cement giants have looked at developing a building materials image besides that of a cement maker. The focus for Ambuja looks to be on similar lines,” said Nitin Bhasin, head of research — institutional equities — at Ambit Capital. RMC has been a significant revenue and profit generator for ACC, which is now a subsidiary of Ambuja Cement.
In its 2018 annual report, ACC said, “The RMC business has consistently been performing well. RMC sales volume & earnings before interest taxation depreciation and ammortisation or Ebitda rose 16 per cent in 2018 compared to the previous year. During the year, the RMC business expanded its footprint by adding 18 plants.”
However, the company may find it difficult to spot acquisition opportunities as RMC is a highly unorganised sector. “However, RMC’s capacity in India is largely unorganised. So, it will be difficult for a Holcim entity to make acquisitions in such a market. In addition, the company has so far disappointed in term of growth capital as the Rajashtan greenfield expansion is yet to be complete,” Bhasin added.
Ambuja Cements has a consolidated cement capacity of 63 million tones per annum (MTPA), which includes capacity of its arm ACC. Ambuja Cements has 50.05 per cent stake in ACC. People in the know said Ambuja Cements is open to looking at acquisitions through ACC, depending on the geographic advantage of the asset.
Both the firms have also entered into a master supply agreement to unlock synergies in the areas of sales, marketing and logistics. “The master supply agreement is under implementation and savings from the same would be visible from CY 2019,” said the official quoted earlier. The agreement looks to unlock synergies in sales, marketing and logistics.
In addition to inorganic opportunities, Ambuja is also adding 4.6 MTPA cement volumes from a greenfield integrated cement plant at Marwar Mundwa in Rajasthan.
Its subsidiary ACC plans a greenfield integrated cement plant at Ametha, in Madhya Pradesh, with clinker capacity of 3 MTPA and cement capacity of 1 MTPA.
There is also a brownfield expansion of 1.6 MTPA at Tikaria, Uttar Pradesh, a third grinding unit of 2.2 MTPA cement capacity in Uttar Pradesh and a 1.1 MTPA cement grinding facility at the existing location at Sindri, Jharkhand.