Penna Cement Industries Limited’s 100% shares have been acquired by Ambuja Cements, establishing Penna Cement as a fully owned subsidiary. Through this transaction, Ambuja Cements will enter new markets in Sri Lanka and strengthen its position in South India.
The entire ₹10,422 crore acquisition will be financed by internal accruals. It comprises the purchase of 14 million tonnes per annum (MTPA) of cement capacity, with the seller to finish building an additional 4 MTPA of capacity at Jodhpur IU and Krishnapatnam GU.
In June 2024, Ambuja Cements, a prominent entity within the Adani Group, announced the acquisition of Penna Cement Industries Ltd (PCIL) for an enterprise value of ₹10,422 crore. This strategic move is set to significantly bolster Ambuja’s production capacity and market presence, particularly in southern India.
Acquisition Details:
- Transaction Structure: Ambuja Cements will acquire a 100% stake in PCIL from its existing promoters, the P. Pratap Reddy family. The acquisition is to be fully funded through internal accruals, reflecting Ambuja’s robust financial health.
- Capacity Expansion: PCIL brings an additional 14 million tonnes per annum (MTPA) to Ambuja’s existing capacity, elevating the total to 89 MTPA. This aligns with Ambuja’s ambitious goal of reaching 140 MTPA by 2028, positioning the company as a formidable competitor in the Indian cement industry.
Strategic Rationale:
- Geographical Diversification: PCIL’s operations are primarily based in Andhra Pradesh, Telangana, and an under-construction plant in Rajasthan. This regional presence enhances Ambuja’s footprint in southern India, increasing its market share by approximately 8% in the region and 2% nationwide.
- Logistical Synergies: The acquisition includes five bulk cement terminals located in Kolkata, Gopalpur, Karaikal, Kochi, and Colombo. These facilities are expected to strengthen Ambuja’s sea transportation logistics, facilitating efficient distribution across peninsular India and neighboring regions.
- Resource Optimization: PCIL’s plant in Jodhpur possesses surplus clinker capacity, which can support an additional 3 MTPA of cement grinding. This offers Ambuja an opportunity to optimize production and meet increasing market demand effectively.
Industry Context:
This acquisition marks the Adani Group’s third major foray into the cement sector since its initial entry in September 2022. The group’s aggressive expansion strategy underscores its commitment to becoming a leading player in the industry, challenging established competitors and reshaping market dynamics.
Leadership Perspective:
Ajay Kapur, CEO of Ambuja Cements, described the acquisition as a “significant step forward” in the company’s accelerated growth trajectory. The integration of PCIL’s assets is anticipated to enhance operational efficiencies, expand market reach, and deliver long-term value to stakeholders.
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