Adani Group Acquires Penna Cement At Enterprise Value Of Rs 10,422 Crore

This acquisition will add 14 million tonnes of annual capacity to Adani Group's portfolio, bolstering its position as the second-largest cement manufacturer in India

Adani Cement is on an expansion trajectory, both organically and through acquisitions, aiming for a 140 MTPA capacity and a 20 per cent market share by 2028.

Source : Adani Group

Gautam Adani-led Adani Group announced on Thursday its plan to acquire Hyderabad-based Penna Cement at an enterprise value of Rs 10,422 crore. This acquisition will add 14 million tonnes of annual capacity to Adani Group's portfolio, bolstering its position as the second-largest cement manufacturer in India.

The acquisition will expand Adani's market share in southern India and mark its entry into Sri Lanka, where Penna Cement Industries Ltd (PCIL) operates a unit through a local subsidiary. This strategic move is in line with Adani's ambitious goal of achieving a 140 million tonnes per annum (MTPA) capacity by the fiscal year 2028.

A binding agreement has been signed, with Ambuja Cements, an Adani Group company, set to acquire 100 per cent of PCIL’s shares from its existing promoter group, P Pratap Reddy and family. Post-acquisition, Adani Cement’s total production capacity will rise to 89 MTPA.

"This acquisition will be fully funded through internal accruals," Ambuja Cements said. Ajay Kapur, CEO & Whole Time Director of Ambuja Cements, hailed the acquisition as a "significant step" in the company's growth strategy. "By acquiring PCIL, Ambuja is poised to expand its market presence in south India and reinforce its position as a pan-India leader in the cement industry," he added.

PCIL's current capacity stands at 14 MTPA, with operations in Andhra Pradesh, Telangana, and Rajasthan. Of this, 10 MTPA is operational, while the remaining capacity is under construction at Krishnapatnam (2 MTPA) and Jodhpur (2 MTPA), expected to be completed within 6 to 12 months.

The acquisition will enhance Adani Cement’s sea transportation logistics with five bulk cement terminals in Kolkata, Gopalpur, Karaikal, Kochi, and Colombo, aiding its service to peninsular India. Additionally, it will improve Adani Cement’s market share by 2 percent nationally and by 8 percent in southern India.

The deal is expected to be finalised within 3-4 months, subject to necessary government and regulatory approvals. "The acquisition is in line with the company's strategy to increase its footprint in the cement manufacturing market," an Adani Group representative said.

Adani Cement is on an expansion trajectory, both organically and through acquisitions, aiming for a 140 MTPA capacity and a 20 per cent market share by 2028. Last December, Adani completed the acquisition of Saurashtra-based Sanghi Industries Ltd at an enterprise value of Rs 5,185 crore.

For the financial year ending March 2024, PCIL reported a consolidated turnover of Rs 1,241 crore. Incorporated in October 1991, PCIL operates in Sri Lanka both directly and through subsidiaries, with around 90 percent of its cement capacity supported by railway sidings, captive power plants, and waste heat recovery systems.

The Jodhpur plant’s surplus clinker will support an additional 3 MTPA cement grinding capacity, over and above the existing 14 MTPA. Kapur highlighted the strategic location and ample limestone reserves of PCIL as key factors for potential capacity expansion.

"Our aim is to make PCIL highly competitive on cost and productivity, and improve its operating performance," Kapur said. He also said that the bulk cement terminals (BCTs) would significantly enhance access to eastern and southern parts of peninsular India, as well as Sri Lanka via the sea route.

Adani Group ventured into the cement sector in September 2022, acquiring controlling stakes in Ambuja Cements from Swiss firm Holcim for $6.4 billion (nearly Rs 51,000 crore). Ambuja Cements holds a 51 per cent stake in ACC Ltd. Subsequently, Adani launched a Rs 31,000-crore open offer for acquiring an additional 26 per cent stake from public shareholders.

According to the Cement Manufacturers Association, India’s total installed cement capacity stands at 541 MTPA. The market is currently led by Aditya Birla group’s UltraTech Cement Ltd, with a consolidated capacity of 152.7 MTPA.