Ambuja Cements, from Adani Group, will acquire Penna Cement for Rs 10,422 crore

On Thursday, Ambuja Cements of the Adani Group revealed their plan to purchase Penna Cement Industries Ltd (PCIL) in Hyderabad for Rs 10,422 crore.

This marks the third purchase made by the group in the cement industry, within less than two years since entering the business in September 2022. Ambuja Cements is set to purchase all shares of PCIL from current promoter group members P Pratap Reddy and family.

The purchase would increase Ambuja Cements' capacity by 14 million tonnes per year, bringing the total capacity of the Adani group's cement business to 89 mtpa with ACC and Ambuja combined. It is anticipated that the agreement will be finalized within a time frame of three to four months.

In 2019, Penna Cement's attempt to become a publicly traded company was unsuccessful. In January, India Ratings stated that Penna Cement posted an EBITDA loss of Rs 11 crore in the first half of 2023-24 due to lower operational efficiencies and reduced absorption of fixed costs caused by high-cost coal inventory and low realizations. Ebitda is the abbreviation for earnings before interest, taxes, depreciation, and amortization.

Ambuja Cements stated that the acquisition will be financed entirely through internal accruals.

Ambuja's CEO and whole-time director, Ajay Kapur, stated that with the acquisition of PCIL, the company is set to grow its market share in South India and strengthen its status as a nationwide leader in the cement sector.

As per the official announcement, the purchase will increase Adani Group's market dominance in India's cement industry from 14 percent to 16 percent. During its investor presentation in May, the company announced its goal of achieving a 20 percent market share in the Indian cement market by 2028.

The team had already set goals to raise capacity to 140 mtpa by 2028. UltraTech Cement, India's biggest cement producer with a capacity of 152 mtpa, aims to increase its capacity to 200 mtpa within the same time frame.

Adani Group's third purchase in the cement industry was revealed on Thursday, following their takeover of Ambuja-ACC in September 2022. In the fiscal year 2024, Ambuja Cement bought the cement capacity of Sanghi Industries in Gujarat. In April, the Adani company agreed to purchase MyHome Industries’ grinding unit in Tamil Nadu.

Kapur mentioned that Ambuja Cements plans to utilize Penna Cement's location to reach the eastern and southern regions of peninsular India, as well as gain access to Sri Lanka via the sea route. The statement noted that PCIL's current dealers will transition to the Adani Cement network to create a strong synergy.