Adani-owned Ambuja Cements’ acquisition of Sanghi Industries gets a thumbs up from analysts

Adani Group-owned Ambuja Cements Limited will get a strategic advantage thanks to its Rs 5000-crore buyout of Sanghi Industries. Sanghi’s Sanghipuram cement plant is housed in Gujarat’s Kutch region and is located on the coast. It straightaway allows Ambuja to transport the commodity to the coastal parts of Maharashtra, Karnataka and Kerala.  

Sanghi has a clinker capacity of 6.6 million tonnes per annum (mtpa), cement capacity of 6.1 mtpa, and most critically, limestone reserves of 1 billion tonnes. The plant, according to a statement, is India’s largest single-location cement and clinker unit by capacity, with a captive jetty and power plant. 

After the announcement was made, Karan Adani, CEO of Adani Ports and SEZ, said the plan was to increase Sanghi’s capacity to 15 mtpa in the next two years. “We will be also investing in deepening and expanding the captive port capacity in order to accommodate vessel sizes of 8,000 DWT (deadweight tonnage, the capacity of a ship). Our vision is to produce lowest cost clinker in the country at Sanghipuram and then transport clinker as well as bulk cement through coastal route to the market of Saurashtra, South Gujarat, Mumbai and Mumbai Metropolitan region, Karnataka and Kerala. Synergy with the assets of Adani ports will help us accelerate in implementation of this strategy,” he explained. This is the first buyout for Ambuja after the takeover by the Adani Group last June—the deal also brought ACC to the table for a ticket size of $10.5 billion. From a capacity of 67.5 mtpa, the buyout will now take that number to 73.6 mtpa. 

In terms of numbers, the 1 billion tonnes of limestone translate to 600 million tonnes of clinker. Assuming the life of a plant is 40 years, it can produce 15 mtpa of cement each year—clearly, the buyout has been driven by the large limestone reserves. Deven Choksey, Promoter and MD of KRChoksey Group, a wealth management firm, points out that Adani has key advantages in cement like logistics, a strong presence in energy and limestone reserves. “They already have a market post the buyout of Ambuja and ACC. Now, there is an opportunity for a more value-added play,” he says. Besides, the Adani Group has a play in infrastructure, more specifically in roads and ports connectivity. “Getting it right in commodities calls for a large footprint and the ability to sell. Adani’s cement business is well-placed on both.” Sanghi has a bulk cement terminal each at Navlakhi Port in Gujarat and Dharamtar Port in Maharashtra, apart from a network of 850 dealers, with a presence in Gujarat, Madhya Pradesh, Rajasthan, Maharashtra and Kerala.  

According to a cement industry official, the deal could also see Sanghi exporting its cement to locations such as Dubai, Bahrain and Muscat. “With the sea route option at their disposal, the ability to disrupt markets like the south is quite high,” he said. In his address, Adani said the ongoing capex for Sanghi will take the group cement capacity to 101 mtpa by 2025. “Ambuja’s goal of 140 mtpa capacity by 2028 is well on track and with this acquisition will be achieved ahead of time.”