Ambuja Cements, a key player under the Adani Group umbrella, announced on Thursday its acquisition of Penna Cement Industries Ltd (PCIL) at an enterprise value of Rs 10,422 crore. This significant move, disclosed in a filing with the Bombay Stock Exchange (BSE), underscores Ambuja’s strategic intent to solidify its presence in the competitive cement market of South India.
The binding agreement entails Ambuja Cements acquiring 100% of PCIL’s shares from the current promoters, P Pratap Reddy and his family. Remarkably, this acquisition will be financed entirely through internal accruals, reflecting the robust financial health and strategic planning of Ambuja Cements.
Ajay Kapur, CEO and whole-time director of Ambuja Cements, hailed this acquisition as a pivotal milestone in the company’s growth trajectory. “This landmark acquisition is a significant step forward in Ambuja Cements’ accelerating growth journey,” Kapur remarked. He emphasized that the acquisition would not only enhance Ambuja’s market presence in South India but also reinforce its stature as a leading cement producer across India.
One of the notable advantages of acquiring PCIL is its strategic location and abundant limestone reserves, which provide ample opportunities for increasing cement production capacity. The potential for debottlenecking and further investment in these reserves positions Ambuja for substantial growth and market penetration.
Kapur highlighted the importance of PCIL’s bulk cement terminals (BCTs), which are poised to transform the company’s market access. These terminals will facilitate distribution across the eastern and southern parts of peninsular India and offer a strategic entry point to Sri Lanka via sea routes. “Our aim is to make PCIL highly competitive on cost and productivity and improve its operating performance,” Kapur added, underscoring the operational efficiencies expected from this acquisition.
PCIL currently boasts a cement production capacity of 14 million tonnes per annum (MTPA), with 10 MTPA already operational. The remaining 4 MTPA is under construction, with 2 MTPA each at Krishnapatnam and Jodhpur, slated for completion within the next 6 to 12 months. This expansion will significantly bolster Ambuja’s production capabilities and market offerings.
Approximately 90% of PCIL’s cement production capacity is integrated with railway sidings, enhancing logistical efficiency. Additionally, several plants are equipped with captive power plants and waste heat recovery systems, ensuring sustainability and cost-effectiveness. The surplus clinker at the Jodhpur plant is expected to support an additional 3 MTPA of cement grinding capacity, further augmenting the total output beyond the current 14 MTPA.
The acquisition also entails the integration of PCIL’s existing dealer network into Adani Cement’s expansive market framework, promising formidable synergies. This consolidation is anticipated to enhance distribution efficiency and market reach, benefiting from Adani’s established network and market strategies.
In conclusion, Ambuja Cements’ acquisition of Penna Cement marks a strategic expansion aimed at fortifying its market position in South India and beyond. This acquisition not only signifies a robust financial and operational strategy but also exemplifies Ambuja’s commitment to sustainable growth and market leadership in the Indian cement industry.
