APL Apollo
9th EPC World Awards EPC Awards - India Infra Forum 2022
On the Block: Ambuja Cements and ACC

On the Block: Ambuja Cements and ACC

News reports of Holcim Group putting on sale its cement entities have set the ball rolling amongst the cement majors. In the fray are currently are JSW Group, Adani Group, Shree Cement, Dalmia, UltraTech, but we don’t rule out mid-sized players entering the fray supported by cash-rich PE firms and lenders. This article is based on the News Reports

Business Newspapers have reported the likely sale of stock exchanges listed entities Ambuja Cements and ACC by Holcim Group. Both the cement makers are major players in India’s cement market and hold considerable market share pan-India. Ambuja and ACC’s combined market share ranges from 10% in central to 26% in north. Both combined, they are the second largest cement manufacturers in India.

As per the latest shareholding details, Holcim owns 63.1% via Holderind Investments in Ambuja Cements and Ambuja Cements holds 50.05% of ACC Ltd,  while Holcim through Holderind Investment owns another 4.48% in ACC. As per their websites, currently, Ambuja Cements has a cement capacity of 31 million tonnes per annum (mtpa) with six integrated cement manufacturing plants and eight cement grinding units across the country. ACC has an installed capacity of 33.05 mtpa and operates 17 cement plants and 9 captive power plants. Though there were speculations of a merger between Ambuja Cements and ACC, it was put to rest when in a filing to the stock exchanges Ambuja Cements said it was not pursuing a merger with ACC at this point of time, though it remains the ultimate goal. While ACC too in its filing said, "On the basis of a comprehensive evaluation carried out by both the special committee and Board of Directors of the company, the board is of the opinion that there are at present certain constraints in implementing a merger between the company and Ambuja Cements’

By the time of writing this article, the market capitalisation of Ambuja Cements is Rs. 71,040 crores and the market capitalisation of ACC is Rs. 39,520 crores. The combined market capitalisation of the two companies is Rs. 1.11 lakh crores (approximately US$ 14.46 billion).

In 2004, Holcim took management control of ACC (then The Associated Cement Companies) and in 2005, Holcim entered into a multi-layered $800 million deal, along with Ambuja Cements, to acquire 50.01 per cent stake in ACC. In 2006, Holcim Group acquired 14.8 percent promoters' stake in Gujarat Ambuja Cements. Gujarat Ambuja Cements was later renamed Ambuja Cements. Currently Holcim holds 61.62% of the shares in Ambuja Cements.

In 2015 Switzerland-based Holcim Group merged with Paris-based Lafarge, The merged entity was rechristain LafargeHolcim. LafargeHolcim ran into litigations with anti-trust regulators around the world, and has to go through several restructurings by divesting assets to reduce debt and to transform Holcim to become the global leader in innovative and sustainable building solutions. Holcim disinvested its Brazil and Zambia business. The Brazil disinvestment included Holcim’s five integrated cement plants, four grinding stations, six aggregates sites and 19 ready-mix concrete facilities, while its Zambia business was sold to the Chinese cement group Huaxin for an enterprise value of US$150 million. Holcim continued its divestment strategy by selling its Northern Ireland cement business to the newly-formed Cookstown Cement.

Holcim has set its sight to be a net zero company and to become a global leader in innovation and sustainability. On one hand the company started disinvesting in cement companies while at the same time it was investing in acquiring companies that suit their ‘Strategy 2025 – Accelerating Green Growth’ vision. The company acquired Malarkey Roofing Products, which provides complete solutions for residential roofing, followed by Belgium-based PTB-Compaktuna (PTB), a leading specialty building solutions producer. The PTB acquisition was followed by acquisition of France-based PRB Group which offers a broad range of high performance building solutions, from coatings and insulations to adhesives and flooring systems with advanced energy-efficiency and renovation solutions and US-based Cowden Inc, a ready-mix concrete and aggregates. In 2021, Holcim acquisition includes US-based Marshall Concrete Products, a supplier of concrete products and services; Utelite Corporation, a leading producer of lightweight aggregates; Heinrich Teufel GmbH & Co KG, a regional player in aggregates and ready-mix concrete in southern Germany; US-based Firestone Building Products, a commercial roofing and building envelope solutions; to name a few.

Both Ambuja Cements and ACC are expansion their cement capacity. They have announced a series of expansion plans and commissioning of projects. As per news reports, Ambuja Cements plans to add 20 mtpa at an estimated cost of Rs 10,000 crore. The company has announced plans to expand the production capacity of its Ropar plant in Punjab and will also be commissioning new capacity in Marwar, Rajasthan that will enhance clinker capacity by 3 mtpa and help increase cement sales by 5 mtpa. ACC has successful commissioned 1.6 mtpa grinding unit at Tikaria in the Uttar Pradesh, taking the total capacity at Tikaria grinding unit to 3.91 mtpa. The company has successfully completed a new cement grinding unit at Sindri in Jharkhand with a capacity of 1.4 mtpa. In addition to these, ACC will be commissioning 2.7 mtpa Ametha integrated cement plant near Kymore, Madhya Pradesh which is expected to be completed by Q4 2022, and has broke ground for 2.2 mtpa greenfield cement grinding unit at Salai Banwa, in Eastern Uttar Pradesh.

The news that Holcim Group is going to sell off its stock exchange listed entities Ambuja Cements and ACC spread like a wild fire. With no time, the Indian cement majors were on their feet strategizing way to buy out these two entities. As per news reports UltraTech Cement, JSW, Shree Cement, Dalmia and Adani Group, among others, are exploring options to buy out these two cement entities. Sajjan Jindal-led JSW Group is in talks with private equity firms and lenders to fund the deal. As per news report, American PE major Carlyle Group, Advent International and Apollo Private Equity Investment, among others, have teamed up with JSW Group to bid for Holcim Group’s Indian entities. JSW Group has an installed capacity of 16 mtpa spread across South, East and West region and has plans to increase it to 25 mtpa by FY24. Recently, JSW Cement entered into the ready mix concrete business. If, JSW Group is successful in acquiring ACC and Ambuja Cements, it would make them the second largest cement manufacturer in the country with a total capacity of 81.9 mtpa.

Adani Group too has evinced keen interest in acquiring ACC and Ambuja Cements. Adani Enterprises, the flagship company of Adani Group has two cement subsidiaries - Adani Cementation and Adani Cement. Adani Cementation plans to set up 10 mtpa cement plant at Lakhpat in Kutch district, Gujarat, is currently on hold. Adani Group has huge requirement for cement as the Group has secured contracts from governments – both centre and state - to build infrastructure projects across the country. Adani Group is evaluating strategies to make foray into cement sector – either through acquiring or be setting up cement plants.

UltraTech Cement, the market leader in India, with cement production capacity of 120 mtpa is also in the fray to acquire ACC and Ambuja Cements. As per reports Kumar Mangalam Birla is exploring ways to acquire Holcim's India entities. Being the market leader in India, UltraTech requires approval from Competition Commission of India for acquiring ACC and Ambuja Cements, as acquiring these two entities may affect competitive environment. In the past (in 2015-16) the Competition Commission of India has intervened, when the global merger of Lafarge with Holcim made its India subsidiary Lafarge India a dominant player. For a better level play among the cement player, the Competition Commission of India regulated the possible market dominance by forcing Lafarge India to disinvest 11 MTPA of capacity in eastern India, including three cement plants and two grinding stations, as a remedy to ensure level playing.

Radhakishan Damani, the billion investor, businessman and founder of super market chain DMart (Avenue Supermarts), is also in race to acquire ACC and Ambuja Cements. Currently, he holds 22.76% stake in India Cements.

Mergers and acquisitions are not new in India’s sector. UltraTech Cement consolidated its market position by acquiring cement assets of Jaiprakash Associates, Binani Cement, and Century Cement. JSW Group acquired Shiva Cement. Dalmia Bharat added Murli Industries and OCL India to it cement assets. Nirma Group acquired Lafarge India and Emami Cement and Reliance Cement was acquired by Birla Corporation. India Cements acquired Raasi Cements. Sagar Cements acquired Jajpur Cements and Satguru Cements.

Amidst the ongoing talks to acquire Ambuja Cements and ACC, the companies have announced their Q1CY22 results. Ambuja Cements has reported a standalone net profit of Rs 495.2 crore for Q1CY22. In the corresponding quarter last year, the company posted a net profit of Rs 664.6 crore. The company’s net profit declined 25.56% YoY. The company’s net sales during the quarter increased to Rs 3,855 crore compared to Rs 3,579 crore in the corresponding quarter of the previous year, a increase of 7.11% YoY. ACC reported a 29.6% YoY drop in consolidated net profit at Rs 396.3 crore for Q1CY22. The posted a net profit of Rs Rs 563 crore in the corresponding quarter last year. Total revenue for the quarter rose 3.1 percent YoY to Rs 4,426.5 crore from Rs 4,292 crore in the year-ago quarter.

India has lined up huge infrastructure projects for the development of the country. To create this huge infrastructure development requires huge amount of cement. In addition to infrastructure sector, the housing sector too consume enormous amount of cement. India has huge shortages of houses. The Ministry of Housing and Urban Affairs (MoHUA) has projected a housing shortage of 30 million units by 2022. The demand for cement is ever increasing. As per ICRA report, cement demand is expected to grow by 7-8% to around 382 million metric tonnes in the current fiscal, helped by tailwinds of strong demand from rural housing and infrastructure sectors.

Cement is a lucrative business and on the block is the second largest cement producer in India. In the coming months we expect new players supported by cash-rich private equity firms and lenders to enter the fray.   

 

 




  • About Us

    EPC World Media Group is a one stop knowledge information hub for Infrastructure, EPC and Construction sector. It strives to promote, propagate and assist the decision and policy makers from government and private organizations along with the technology developers and service providers to enhance and develop their capabilities. EPC World Media facilitates knowledge transfer to grassroots and strengthens their productivity.....

    Read More.....
  • Featured Videos

  • Connect Us