Adani Group Pledges Shares Worth $13 Billion In Newly Acquired ACC, Ambuja Cements

The value of the Holcim stake and open offer consideration for Ambuja Cements and ACC is $6.50 billion, which makes this the largest ever acquisition by Gautam Adani

Gautam Adani will hold 63.15 per cent stake in Ambuja Cements and 56.69 per cent in ACC (of which 50.05 per cent is held through Ambuja Cements).

Indian business tycoon, billionaire Gautam Adani’s group pledged shares valued about $13 billion in two cement companies just days after it completed the acquisition from Holcim Ltd, as reported by news agency Bloomberg on Wednesday. This move by the conglomerate reflects the Gautam Adani’s hunger for capital as his business expands rapidly.

According to separate filings made to the stock exchanges by Deutsche Bank AG's Hong Kong branch, stakes in two of those companies, about 57 per cent of ACC Ltd and 63 per cent in Ambuja Cements Ltd, have been encumbered “for the benefit of certain lenders and other finance parties.” The report by Bloomberg said that the transaction is a so-called non-disposal undertaking, which means the shares can’t be sold until the debt is repaid.

The value of the Holcim stake and open offer consideration for Ambuja Cements and ACC is $6.50 billion, which makes this the largest ever acquisition by Adani, and also India's largest ever M&A transaction in the infrastructure and materials space.

Gautam Adani said, "What makes cement an exciting business is the headroom for growth in India, which exceeds that of every other country well beyond 2050." In May this year, Adani Group announced that it has clinched a deal to acquire a controlling stake in Holcim Ltd's businesses in India.

The pledge comes as the Adani’s ambitious dealmaking in an array of new sectors from green energy to media raises concerns over the high-level of debt across Adani Group. While the conglomerate has moved to curtail some pledges across its listed entities, other units continue to have elevated leverage ratios that stand out among peer companies globally.

Currently, Ambuja Cements and ACC have a combined installed production capacity of 67.5 MTPA. The two firms are among the strongest brands in India with immense depth of manufacturing and supply chain infrastructure, represented by their 14 integrated units, 16 grinding units, 79 ready-mix concrete plants and over 78,000 channel partners across India.

The acquisitions give Adani Group access to about Rs 11,000 crore ($1.4 billion) of cash with the two listed firms, according to Jefferies Financial Group Inc. Prateek Kumar, a Jefferies analyst, in a note wrote that along with Rs 20,000 crore fund infusion from their new owners, the combined entity has enough of a “war chest to scale up new expansions, organically or inorganically”.

Based on Monday's close, the encumbered stake in ACC and Ambuja is valued at $13 billion. Endeavour Trade and Investment Ltd. and Xcent Trade and Investment Ltd., entities linked to the Adani Group, are part of the agreements under which the shares have been pledged.

The acquisition move into cement and the easing of commodity prices have led to a rally in Indian cement stocks. Shares of ACC and Ambuja have soared 29 per cent and 60 per cent since Holcim's sale was announced in May.