Adani Cement Arm To Acquire Penna Cement At $1.25 Bln Enterprise Value

The acquisition of Hyderabad-based Penna Cement will be fully funded through internal accruals
Adani Cement Arm To Acquire Penna Cement At $1.25 Bln Enterprise Value
Source: Ambuja Cements

Ambuja Cements Ltd., a part of Adani Group, agreed to acquire Penna Cement Industries Ltd. (PCIL) at an enterprise value of 10,422 crore rupees ($1.25 billion) with an aim to boost its market presence.

Ambuja, the cement and building material company of Adani Cement, will acquire a 100% stake in PCIL from its existing promoter group, P. Pratap Reddy and family, the Indian cement maker said in a stock exchange announcement.

The acquisition of Hyderabad-based cement company will be fully funded through internal accruals.

“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,” Ambuja Chief Executive Officer Ajay Kapur said in a statement.

The company said the existing dealers of PCIL will move to Adani Cement’s market network to bring in synergy and the deal will improve Adani Cement’s market share across the county by around 2% and in south India by about 8%.

The acquisition, which is subject to necessary government and regulatory approvals, is likely to conclude within three to four months.

FURTHER RATIONALE

PCIL has a 14 million tons per annum (MTPA) cement capacity, of which 10 MTPA is operational, while the remaining capacities are under construction at Krishnapatnam (2 MTPA) and Jodhpur (2 MTPA) and will be completed within six to 12 months.

Around 90% of PCIL’s cement capacity comes with railway sidings, while some are supported by captive power plants and waste heat recovery systems, according to the statement. Further, surplus clinker at the Jodhpur plant will support an additional 3 MTPA cement grinding capacity over and above 14 MTPA, it said.

“PCIL’s strategic location and sufficient limestone reserves provide an opportunity to increase cement capacity through debottlenecking and additional investment,” Kapur said. “Importantly, the bulk cement terminals (BCTs) will prove to be a game-changer by giving access to the eastern and southern parts of peninsular India, apart from an entry to Sri Lanka, through the sea route.”

The company said the acquisition strengthens Adani Cement’s sea transportation logistics with five bulk cement terminals at Kolkata, Gopalpur, Karaikal, Kochi and Colombo to serve peninsular India.

PCIL, incorporated on 24 October 1991, has operations in India and Sri Lanka, directly and through its subsidiaries. Its consolidated turnover stood at 1,241 crore rupees in FY24, down from 2,002 crore rupees a year earlier.

Note: $1 = 83.5317 Indian rupees

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