Ambuja Cements acquisition

Ambuja Cements’ ₹8,100 Crore Acquisition of Orient Cement: The Bold Move to 100 MTPA Dominance!”

In a strategic move that cements its position as a leader in the industry, Ambuja Cements, part of the Adani Group, has signed a binding agreement to acquire a 46.8% stake in Orient Cement Ltd (OCL) for a whopping Rs 8,100 crore. This acquisition is a crucial step in Ambuja’s ambitious goal of achieving a 100 million tonnes per annum (MTPA) cement capacity by FY25, beating Ultratech, owned by the Aditya Birla Group, in the race to buy OCL.

This isn’t the first bold move by Ambuja this year. In December, the company acquired a majority stake in Sanghi Cement for Rs 5,185 crore, and just this August, it completed a Rs 10,422 crore purchase of Penna Cement. With this latest acquisition, Ambuja is solidifying its position as a powerhouse in India’s cement industry.

The Acquisition Process

To comply with SEBI regulations regarding Substantial Acquisition of Shares and Takeovers (SAST), Ambuja will make an open offer to OCL’s public shareholders at Rs 395.40 per equity share. Under the share purchase agreement, Ambuja will acquire a 37.90% stake from OCL’s promoters and 8.90% from other shareholders, totaling 46.8%. Additionally, Ambuja plans to acquire 26% of the expanded share capital via the open offer.

Expanding Capacity and Market Share

OCL currently boasts an operational capacity of 5.6 MTPA clinker and 8.5 MTPA cement, a significant addition to Ambuja’s existing capacity. This acquisition is expected to increase Adani Group’s market share in India’s cement industry by 2%.

OCL’s growth potential is underscored by its recent concession from Madhya Pradesh Power Generating Company Ltd, allowing it to set up a 2 MTPA cement grinding unit at the Satpura Thermal Power Station in Sarni. Moreover, OCL holds a limestone mining lease in Chittorgarh, Rajasthan, offering a potential to add 6 MTPA capacity in North India, a move that would further boost Ambuja’s competitive edge.

Ambuja Cements highlighted the strategic benefits of this acquisition in a statement, emphasizing how it reduces overall lead distances and cuts logistics costs for its cement business, thereby improving efficiency.

Debt-Free Expansion: A Bold Strategic Choice

Unlike many acquisitions of this scale, Ambuja Cements plans to fund this deal through internal accruals, keeping the company debt-free. This financial strategy reinforces the Adani Group’s commitment to maintaining a strong balance sheet while driving aggressive growth.

Karan Adani, Director of Ambuja Cements, described the acquisition as a “timely and significant step forward in Ambuja’s growth journey,” boosting cement capacity by 30 MTPA within two years of Adani’s acquisition of Ambuja.

“With this acquisition, we’re on track to hit 100 MTPA cement capacity in FY25. This move strengthens Adani Cement’s presence in core markets and enhances our pan-India market share by 2%. OCL’s assets are highly efficient, featuring railway sidings and captive power plants, including renewable energy sources. The strategic locations, high-quality limestone reserves, and statutory approvals present a tremendous opportunity to expand cement capacity to 16.6 MTPA in the near future,” said Karan Adani.

CK Birla Group: Focused on the Future

The acquisition also aligns with the CK Birla Group’s long-term strategy of reallocating capital to focus on consumer-centric, technology-driven businesses. C K Birla, Chairman of Orient Cement and the CK Birla Group, expressed confidence in the Adani Group’s ability to continue growing OCL.

“We are confident that the Adani Group, with its strong focus on cement and infrastructure, is the ideal new owner to drive continued growth at Orient Cement,” Birla said.

Amita Birla, Co-Chairman of CK Birla Group, echoed this sentiment: “Orient Cement has a strong market presence and is committed to sustainability initiatives, especially in renewable energy. I am convinced that Ambuja Cements is the right home for our people and customers.”

Operational Optimization and Future Growth

Ambuja Cements plans to optimize OCL’s capacity to enhance its cost-effectiveness and competitiveness. The goal is to improve operating performance and deliver a stronger return on investment, further propelling Ambuja’s leadership in the Indian cement market.

Conclusion:

Ambuja Cements’ acquisition of Orient Cement marks a pivotal moment in its growth journey, pushing the company closer to its 100 MTPA capacity goal for FY25. With this strategic acquisition, Ambuja not only enhances its market presence but also strengthens its logistical and operational efficiency. Ambuja Cements acquisition, The decision to fund this acquisition through internal accruals further showcases the Adani Group’s commitment to financial prudence while achieving aggressive growth targets. As Ambuja continues to optimize OCL’s assets, the cement giant is well-positioned to lead the industry in the years to come.