According to the details shared by Holcim, Adani will be paying ₹385 for a share of Ambuja Cements and ₹2,300 for a share of ACC. This amounts to a premium of 7-8% to their current market price. Analysts had estimated a higher premium to the current market price of ACC and Ambuja Cement.
Adding new cement capacity is time consuming. According to industry estimates, it takes around five years to install a 5 MT capacity. The acquisition of ACC-Ambuja capacities therefore will give Adani Group access to substantial capacity in one fell swoop. Cement business will be complementary to Adani Group given its presence in the infrastructure segment. Acquisition of cement capacities will give the Adani Group the benefit of backward integration as cement is a major input for the infrastructure business.
There is an increasing view among analysts that pricing trend in the industry may change in the near term. An analyst, on condition of anonymity, said, “Adani will be the second-largest player in the sector with a strong distribution network and wide geographical presence. There is a strong possibility that it may lead to aggressive pricing in the industry.”
As per calendar year 2021 financials, ACC and Ambuja Cements together have cash and cash equivalents of around ₹19,276 crore. In addition, both the companies are debt free. An analyst, who wished not to be named, said that given the cash on books, Adani will not find it difficult to fund this deal. As of calendar year 2021, the combined cashflow of ACC and Ambuja Cements amounts to over ₹5,000 crore. This would lessen the debt burden for Adani.
