Ambuja Cements to Acquire Penna Cement Industries for ₹10,422 Crore

Adani Group-owned Ambuja Cements has announced its acquisition of 100% stake in Penna Cement Industries Ltd (PCIL) for an enterprise value of ₹10,422 crore. This strategic move is part of Adani's broader objective to reach a cement production capacity of 140 million tonnes per annum (MTPA) by FY28, aiming to strengthen its market presence and operational capabilities.

Key Details of the Acquisition

- Completion Timeline: The acquisition is expected to be completed within 3 to 4 months, as outlined in the stock exchange filing by Ambuja Cements.

- Funding: The purchase will be fully financed through internal accruals, indicating the company’s strong financial position.

- Seller: The stake will be acquired from PCIL's promoter group, P Pratap Reddy and family, marking a significant shift in the ownership structure of Penna Cement.

Strategic Benefits

This acquisition is poised to significantly enhance Ambuja Cements' market presence in South India, reinforcing its position as a leading player in the pan-India cement industry. By acquiring PCIL, Ambuja aims to capture a substantial market share, targeting 20% by FY28, amidst robust demand for building materials in the country. The deal aligns with Adani's growth strategy in the cement sector, leveraging synergies and expanding its geographic footprint.

Expansion and Market Reach

In addition to this acquisition, Ambuja Cements signed another agreement in April to acquire a grinding unit in Tamil Nadu for ₹413.75 crore, further expanding its footprint in the South Indian market. Through the PCIL deal, Ambuja aims to benefit from PCIL's strategic location, ample limestone reserves, and bulk cement terminals (BCTs). This will provide the company access to the eastern and southern parts of peninsular India and an entry to Sri Lanka via the sea route, enhancing its export potential.

PCIL's Current Capacity

PCIL boasts an installed cement production capacity of 10 MTPA, distributed across four integrated manufacturing facilities and two grinding units in Andhra Pradesh, Telangana, and Maharashtra. An additional 4 MTPA capacity is under construction at Krishnapatnam (2 MTPA) and Jodhpur (2 MTPA), expected to be completed within the next 6 to 12 months. This expansion will further bolster Ambuja’s production capabilities.

Additional Infrastructure

Approximately 90% of PCIL's cement capacity includes railway sidings, supported by captive power plants and waste heat recovery systems, enhancing operational efficiency and reducing logistics costs. Surplus clinker from the Jodhpur plant will support an extra 3 MTPA cement grinding capacity, increasing the total capacity to 14 MTPA. These infrastructural advantages are expected to provide significant operational benefits and cost savings.

Market Synergy

Existing PCIL dealers will transition to Adani Cement's market network, fostering significant synergy and ensuring a seamless integration of operations. This transition is expected to bring formidable market strength and enhance distribution capabilities.

This acquisition marks a strategic step for Ambuja Cements, bolstering its capacity and market reach. By integrating PCIL's assets and leveraging its strategic advantages, Ambuja Cements is well-positioned to strengthen its competitive edge in the dynamic Indian cement industry. This move underscores Adani Group’s commitment to becoming a dominant player in the sector and meeting the growing demand for building materials across the region.