Ambuja Cements Ltd (ACL), the cement and building material company of Adani Cement and part of the diversified Adani Group, today announced the acquisition of Sanghi Industries (SIL) at an enterprise value of ₹5,000 crore.
Ambuja Cements will acquire 56.74% shares of SIL from its existing promoter group, Mr Ravi Sanghi & family. The acquisition will be fully funded through internal accruals, the company said in a regulatory filing.
Following this development, shares of Ambuja Cements jumped 4.4% to ₹481 apiece in Thursday's trade while those of Sanghi Industries hit a new 52-week high of ₹105.40 apiece.
According to Trendlyne shareholding data, promoters of Sanghi Industries own a 72.7% stake in the company as of the June quarter, while the general public holds a 25.2% stake in the company.
Sanghi Industries' integrated manufacturing unit at Sanghipuram in Gujarat’s Kutch district is India’s largest single-location cement and clinker unit by capacity. With 2,700 hectares of land, the integrated unit has two kilns with a clinker production capacity of 6.6 MTPA and a cement grinding unit with a capacity of 6.1 MTPA.
The company has a captive power plant of 130 MW and a Waste Heat Recovery System of 13 MW. The unit is also connected to a captive jetty at Sanghipuram.
Ambuja Cements is the second-largest cement producer in India after Ultratech Cement (the flagship company of the Aditya Birla Group). This acquisition, according to Ambuja Cements, will help to strengthen its market leadership and increase its cement capacity to 73.6 MTPA from the current 67.5 MTPA.
Ultratech Cement, on the other hand, has a consolidated capacity of 137.85 MTPA, and it is the only cement company globally (outside of China) to have more than 100 MTPA of cement manufacturing capacity in a single country, as per the company's website.
With the ongoing capex of 14 MTPA and the commissioning of 5.5 MTPA capacity at Dahej and Ametha by Q2 of FY24, the Adani Group’s capacity will be 101 MTPA by 2025, Ambuja said in an exchange filing.
In May 2022, Adani Group acquired Swiss cement major Holcim's stake in Ambuja Cements and its subsidiary ACC for $10.5 billion (around ₹81,361 crore). Adani has aggressively expanded his empire in recent years by diversifying the business into multiple sectors.
Meanwhile, Ambuja Cements reported its Q1 FY24 performance on Tuesday. It posted a 31% rise in its consolidated net profit to ₹1,135 crore as compared to ₹865 crore in the same quarter last year.
The revenue from operations rose 18% to ₹8,713 crore during the quarter from ₹8,033 crore in the corresponding period of the last fiscal.
Following the Q1 results, brokerage firm Centrum Broking downgraded the stock to "reduce" primarily due to the recent uptick in the stock's value. The brokerage has set a target price of ₹467 apiece for the stock.
"We believe that management’s plans to add capacity aggressively and its efforts to reduce operating costs are likely to result in better profitability and growth post-FY25. However, the challenges in terms of increased competition and delays associated with Greenfield expansion also need to be considered," said the brokerage.
37 analysts polled by MintGenie on average have a 'buy' call on the stock.
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