Adani's Ambuja buys rival in $1.25 bln deal to boost southern hold (updated)

Ramco Cements

13/06/2024 14:09

(Adds details, background, analyst quote in paragraph 4)
    By Hritam Mukherjee
       BENGALURU, June 13 (Reuters) - Adani-backed Ambuja
Cements  ABUJ.NS  bought out smaller rival Penna Cement
Industries  PENC.NS  on Thursday for an enterprise value of
104.22 billion rupees ($1.25 billion), dialling up its presence
in India's southern region. 
    The deal comes nearly a year after the conglomerate, through
Ambuja, bought a majority stake in debt-ridden Sanghi Industries
 SNGI.NS , to boost its cement presence in the country and
compete with market leader UltraTech Cement  ULTC.NS .
    Ambuja said the buyout of Penna Cement will help improve
Adani's share in India's southern cement market by roughly 8%,
with the deal coming a few months after UltraTech bolstered its
own hold in the region by buying Kesoram's  KSRM.NS  cement
assets. 
    "The acquisition of Penna is very favourable for Ambuja, as
Adani's plants in the southern region were unmatched to
UltraTech before. This region is key to Adani to boost its
pan-India market share and narrow the lead UltraTech has across
the country," said Ashutosh Murarka, research analyst at Choice
Broking.
    Indian cement makers are looking for ways, including
dealmaking, to ramp up production and meet demand for the
construction material amid upbeat housing momentum and strong
government spending on infrastructure.
    Adani Group, the ports-to-power conglomerate, had said in
December it plans to spend $84 billion over the next decade
towards infrastructure projects. 
    Ambuja will fund the buyout of Penna through internal
accruals. The deal will give Ambuja access to Penna's
operational facilities in Andhra Pradesh and Telangana, and
under-construction facilities in Rajasthan.
    Penna's cement assets, which total to 14 million tons per
annum (MTPA), will help the conglomerate beef up its capacity as
it aims to reach 140 MTPA by 2028. The latter's capacity, as of
March-end, stood at 79 MTPA.  

($1 = 83.5406 Indian rupees)

 (Reporting by Hritam Mukherjee in Bengaluru; Editing by Mrigank
Dhaniwala, Varun H K and Krishna Chandra Eluri)
 ((Hritam.Mukherjee@thomsonreuters.com; X: @MukherjeeHritam;))