ADANI HOLCIM DEAL

On September 16, the Adani family completed the

acquisition of Ambuja Cements and ACC from Holcim
India, making the group India's second-largest cement
maker after Ultratech Cement Ltd. The family has
acquired a 63.15% stake in Ambuja Cements and
56.69% in ACC (of which 50.05% is held through
Ambuja Cements) and has the deal financed through
loans worth $4.5 billion from 14 international banks.
Barclays Bank Plc and Deutsche Bank AG acted as
advisers to the Adani family, with Standard Chartered
Bank as the structuring adviser. Swiss-based Holcim
announced that the Group had closed the sale of its
business in India to the Adani Group, comprising its
entire stakes in Ambuja Cements at a share price of
₹385 and in ACC at a share price of ₹2,300, resulting in
cash proceeds of $6.4 billion for Holcim.

Rationale for acquisition

Adani Group plans to double its annual cement-making
capacity by 2027 after closing the acquisition of Holcim
Ltd.'s Indian assets. While India is the second largest
cement producer in the world, its per capita
consumption is just 250 kg compared to 1,600
kilograms of China which is almost a 7x headroom for
growth. There is also a potential for a multifold rise in
cement demand in India on the back of record-
breaking economic growth and the government's
infrastructure creation push, which will give significant
margin expansion.
Adani group is also looking for synergies with its
existing ports and infrastructure business with the
current acquisition of Holcim's India businesses. The
backward integration will enable the Adani group to
perform massive cost optimization for existing
businesses. Adani group could merge the different
brands of ACC and Ambuja, leading to economies of
scope as the majority of expenses in the cement
industry are tied to the supply chain. 

Industry effect
The acquisition has already started the next wave of
significant movements in the cement industry after
2013-16, which saw many prominent players merging
or leaving the field. As per industry estimates, the
cement capacity in the country is expected to rise to
150-160 million tonnes per annum (MTPA) over the
next five years, while there are more than 25 MTPA of
stressed assets in the country. UltraTech Cement is
adding another 22.6 MTPA capacity through a mix of
brownfield and greenfield expansion plans. The Aditya
Birla Group firm, the country's largest with a current
production capacity of 120 MTPA, had earlier approved
a capital infusion of 12,886 crores 550 for the capacity
additions. Shree Cement, which has a production
capacity of 47.4 MTPA (including overseas), intends to
add another 80 MTPA by 2030. Dalmia Bharat is
planning to expand cement capacity to more than 48
TPA by the end of FY24 PA from the current 35.9 MTPA
through both organic and inorganic modes.