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Indian tycoon Gautam Adani has made his first acquisition since a short seller report rocked his infrastructure empire earlier this year, buying cement company Sanghi Industries in a $600mn deal.
Adani’s Ambuja Cements, which his group bought last year from Switzerland-headquartered Holcim for $10.5bn, is acquiring 57 per cent of the shares in Gujarat-based Sanghi from its existing family owners, with the company valued at Rs50bn ($600mn) after taking into account debt and liquid assets.
An open offer is being launched for a further 26 per cent stake at 114.22 rupees per share, which represents a 14 per cent premium to Sanghi’s closing price on Wednesday. Adani said it was funding the acquisition entirely through its own cash, signalling a break from its previously debt-fuelled acquisition spree.
The move marks the conglomerate’s return to acquisitions after a seven-month pause following a blistering report by New York-based short seller Hindenburg Research in January. It accused Adani of financial misconduct and knocked some $150bn off the group’s total stock market value. Adani strongly denies the claims and its shares have gradually recovered much of their losses.
“We are optimistic about the acquisition by Ambuja Cements, recognising it as a mutually beneficial opportunity for both of the shareholders,” said Ravi Sanghi, Sanghi Industries’ chair and managing director. Sanghi boasts India’s largest plant for cement and clinker, a crucial ingredient of the building material, and produces 6.1mn tonnes of cement per year at the facility in western India.
The deal strengthens Adani in its battle for market share in India’s lucrative cement market, which is expected to benefit from Prime Minister Narendra Modi’s drive to improve infrastructure.
Adani became India’s second-biggest cement maker virtually overnight after the deal for Ambuja and its subsidiary ACC. It still lags behind UltraTech Cement, part of the Mumbai-based Aditya Birla conglomerate, which has a manufacturing capacity of 132.5mn tonnes of grey cement per year.
Adani said it aimed to increase Sanghi’s production to 15mn tonnes per year. Its current assets produce 67.5mn tonnes a year, with a target of 140mn tonnes by 2028. “With this acquisition, we are very confident that we will achieve this ahead of time,” said Karan Adani, Gautam Adani’s son and chief executive of the group’s logistics and transport business Adani Ports and Special Economic Zone.
The Sanghi acquisition “is a significant step forward in Ambuja Cements’ accelerating growth journey”, Adani Group chair Gautam Adani said.
Ambuja this week reported its standalone quarterly profits fell 39 per cent year on year, to Rs6.4bn from Rs10.5bn for the three months to June last year, as sales climbed by nearly a fifth but expenses such as finance costs rose.
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