Ambuja to focus on completing projects amid capex slowdown: Karan Adani

Ambuja Cement Director Karan Adani said project execution lagged group standards due to contractor issues, lack of execution teams and incomplete engineering work, prompting focus on ongoing projects

Ambuja Cements has acknowledged a delay in the execution of expansion projects and said it is keeping its capital expenditure (capex) in FY27 "moderate" in the range of Rs 6,000-6,500 crore as against Rs 7,500 crore last year as it focuses on completion rather than taking on new ones.

Ambuja Cement Director Karan Adani, while replying to a query in a post-earnings investor call, admitted that execution in the cement business has fallen short of the group's standards due to contractor issues, a lack of an execution team, and incomplete engineering work.

The country's second-largest cement maker is "pausing and correcting" itself and "wants to first complete our projects that we have taken in our hand before we start any new projects", Karan Adani said.

 

Among the key reasons for delays was the selection of contractors that did not meet execution expectations.

"We did not choose the right contractor for execution," said Karan Adani, adding that the company had also faced challenges in building a capable project execution team after acquiring Ambuja Cements and ACC.

Besides, the Adani Group also faced challenges after acquiring ACC and Ambuja as there was no ready execution team in place, requiring time to build capabilities internally.

Further, several projects were initiated before full engineering plans had been completed, he said, adding that the company is now using a six-month period to complete engineering work for proposed projects before starting execution.

"So, we are using the six months to complete all our engineering for the new projects that we are thinking of starting. And once that is in place, then we will be looking at starting the project," Adani said, adding that he is "confident" that "at least now we will be able to complete these projects in the time line that were given".

Replying to a query on future expansion strategy, Adani said while the company continues to evaluate inorganic opportunities, its primary focus remains on organic growth and greenfield expansion.

"Inorganically, we keep evaluating, but our focus right now is on organic development and greenfield expansion. That is our number one priority," he said.

Ambuja Cements CEO Vindo Behety, who was also on the investors' call said the turnaround initiatives have taken a little longer than the expected time lines, resulting in elevated costs.

"And some of these plants, especially of Penna, needed higher than expected time for maintenance capex and overall upkeep of the assets. So on a cost front, we have seen a bit of higher cost compared to our own expectations and therefore, some disappointments," said Behety.

Operational breakdowns, which were largely concentrated in acquired assets, particularly at Penna Industries and Sanghi plants, where the company has seen major disruptions.

He said higher repair and maintenance (R&M) costs during the year were partly due to overdue maintenance work that had not been undertaken earlier, contributing to breakdowns at the facilities. The company's teams are currently focused on improving plant reliability at these acquired units, he added.

The Adani Group, the country's second-largest cement manufacturer, crossed the 100 million tonnes per annum (MTPA) capacity milestone in record time -- largely driven by acquisitions -- and has set an ambitious target to expand capacity to 140 MTPA by FY28, primarily through brownfield expansion projects.

The group has witnessed delays of three to six months in some of its efficiency-focused capex projects, though the company expects execution momentum to improve in the coming quarters, Behety added.

"And hopefully, like in coming quarter, we should be gaining momentum to complete and get the benefits of it. So, therefore, in FY27, our focus firmly remains on streamlining the operations and margin expansion," he said.

In FY26, Adani's cement capacity increased to 109 MTPA, which was supported by commissioning of 10.7 million tonnes of new grinding capacity at various locations like Marwar, Farakka, Sankrail, Sindri, Krishnapatnam, and the additional clinker capacity of 7 million tonnes at Jodhpur and Bhatapar, he said.

"We are expecting to hit capacity of almost 119 million tonnes by end of FY27," he added.

Adani Group, a new entrant in the cement sector, jumped into the cement sector in September 2022, after acquiring controlling stakes in Ambuja Cement from Swiss firm Holcim for cash proceeds of USD 6.4 billion (about Rs 51,000 crore).

Ambuja Cements, which owns a 51 per cent stake in ACC Ltd, pursued inorganic growth, acquiring small companies as Hyderabad-based Penna Cement and Saurashtra-based Sanghi Industries. Earlier this year, it also acquired Orient Cement from the CK Birla group.

The Indian cement market is led by Aditya Birla Group firm UltraTech Cement Ltd, which has a consolidated capacity of over 200 MTPA.

The company, which acquired South-based India Cements Ltd, Binani Cement, the cement business of Kesoram Industries and Century Textiles and Industries, among others has plans to invest Rs 16,000 crore to achieve its target capacity of 240 MTPA by FY28.