Has the Adani group hit the jackpot by winning the bid for Holcim India cement?3 min read
Holcim Group is a Swiss multinational company, having its core operations in manufacturing building and construction materials. The group has its footprint spread across 70 different countries across the globe. The group has two principal subsidiaries in India under the flagship name Ambuja Cement Ltd. (63.19% stake) and ACC Ltd. (54.53% stake – out of which 50.05% stake is owned by Ambuja cement and 4.48% stake by Holcim Group.)
Holcim group commenced its operation in India in 2005 with the acquisition of Ambuja cement for US$800 million. ACC Ltd. was acquired by Ambuja cement from the TATA group in three tranches from the year 1999 to 2001.
Holcim Group is withdrawing from the Indian cement industry in order to focus more on construction technologies while diversifying away from its main business of cement and aggregates such as crushed stone, gravel, and sand. Holcim is diversifying away to achieve the target of ‘Strategy 2025 – Accelerating Green Growth’, to become the global leader in innovative and sustainable building solutions. Holcim is targeting to generate 30% of its net sales by 2025 from the Solutions & Products segment, covering businesses ranging from roofing and waterproofing to insulation and renovation.
As the group announced the exit from the Indian market, many prominent big-pocketed players started to bid for the acquisition of the two companies. The non-binding bid was made by India’s biggest steelmaker JSW Steel, Aditya Birla group’s subsidiary Ultratech cement, and Adani Group. Through uncertified sources, it is believed that Dalmia Bharat and ArcelorMittal were also in the race for the bidding. The Holcim India Cement group was valued at US$10.5 Billion (about Rs81000/- cr) for both companies combined.
After a month of negotiation, the Adani group won the bid to acquire the combined entity. Through its offshore Special Purpose Vehicle (SPV), the Adani group will be receiving the entire entity. Adani will be paying Rs 385 per share for the Ambuja cement and Rs 2300 for the ACC Ltd. To acquire the whole stake of Holcim India.
The acquisition by the Adani group of these entities makes strategic sense as Ambuja Cements Limited and ACC Limited currently have a combined installed production capacity of 70 million tonnes per annum (MTPA). The combined entity has 23 cement plants, 14 grinding stations, 80 ready-mix concrete plants and over 50,000 channel partners across India.
The company’s synergies from this acquisition support Adani’s other group companies like the Adani Group’s ports and logistics, energy, and real estate. The group believes that they will be able to build a uniquely integrated and differentiated business model and set themselves up for significant capacity expansion.
With India’s cement consumption at just 242 kg per capita, compared to the global average of 525 kilograms per capita, there is significant potential for the growth of the cement sector in India. The tailwinds of rapid urbanization, the growing middle class, and affordable housing, and the post-pandemic recovery in construction and other infrastructure sectors are expected to continue driving the growth of the cement sector over the next several decades.
With the acquisition of these companies, the combined capacity makes the group the second largest company in India in terms of capacity. Whether the Adani group will merge them into a single entity or operate them separately is unclear.