Adani Cement eyeing more buys in South India, due diligence underway

Adani Cement is carrying out “due diligence” for at least two South India based cement companies, while the group continues to be interested in bidding for Jaypee Cement — owned by the debt-ridden Jaiprakash Associates currently undergoing corporate insolvency process, sources close to the discussions told businessline. Besides South, acquisition opportunities are being “aggressively” explored in the North-East too, they said..

According to sources, the company has initiated discussions with cement makers in the South which have “smaller capacities” between 5 million tonnes per annum (mtpa) and 10 mtpa. Initial discussions with a “mid-sized” entity has not yielded results so far, they said.

Expansion plans

Bidding for Jaiprakash’s cement assets would allow Adani Cement greater presence in Central India. Jaiprakash’s last financials show cement business seeing a standalone loss (before tax) of nearly ₹176 crore.

“Acquisitions are being targeted mostly thorough Ambuja ACC and we (Adani Cement) have around $1.5 billion of free cash, which can be leveraged for these buys in South India and in the North-East. Its an aggressive bid that is being made in these two regions. So these would be complete acquisitions, and full cash down probably,” a person in the know said.

Adani Cement has been generating cash to the tune of $800 million – $1 billion annually; while EBITDA per tonnes across offerings have improved to ₹1,400/tonne, from a previous low of ₹350/tonne. Going forward, the plan is to take it to ₹1,600 per tonne by 2027, sources said.

Adani Cement did not respond to queries from businessline.

Meanwhile, the company has also announced a $3 billion war-chest for acquisitions in the ports and cement sectors.

Most of the existing expansion in the cement sector is planned through acquisitions, with Adani Cement looking to take up its capacities to nearly 140 mtpa by 2028.

Post Orient Cement acquisition, the group’s capacity is expected to be in the 97 mtpa range while it targets to end FY25 at 100 mtpa capacity; and FY26 at 118 mtpa. The FY28 plan is to have a capacity of 140 mtpa.

South India markets

People in the know said, South (India) markets are “largely OPC (ordinary portland cement)-led markets”; and in comparison, Ambuja ACC, they sell very high ratio of blended cements, largely to trade segments. This has been a reason for Adani Cement exploring acquisitions there. Blended cement includes OPC and other supplementary cementitious materials — like slag, fly ash, silica, etc. It has higher durability.

In South, OPC is popular because of wider application, affordability, among others.

“But if you go down South, Bangalore, Hyderabad, Chennai, many of these markets have a very strong OPC, which is B2B segment,” the person in know said pointing out that in South, “the overall price player itself is depressed”.

Acquisitions So Far

A source in the know said, Adani Cement has announced “one set of transactions to merge some entities, including Penna Cements, Adani Cementation and Sanghi” and it was hopeful that in the next financial year, this whole transaction should get consummated.

Adani Cement, the second largest cement-maker in India, entered the space in 2022. Last year, the conglomerate acquired Penna Cement for over ₹10,000 crore in June; and in October, Ambuja Cements entered into a binding agreement to acquire 46.8 per cent stake in Orient Cement, valuing the latter at ₹8,100 crore. A two stage acquisition process is under-way.