The Adani Group, the new owner of Ambuja Cements and its subsidiary ACC, is looking to double the combined cement manufacturing capacity of the two companies by 2030 to 140 million tonnes per year, putting it close on the heels of market leader UltraTech Cement.
“We anticipate going from the current 70 million tonnes capacity to 140 million tonnes in the next five years,” Gautam Adani, the chairman of the Adani Group said Monday in a speech after completing the acquisition on Friday. The port-to-renewable-energy conglomerate’s adjacencies give its cement business a competitive advantage, he said.
The Adani Group is infusing ₹20,000 crore into Ambuja Cements through a preferential allotment of shares. The funds seek to “further strengthen” Ambuja’s balance sheet and meet the capital requirements for capacity enhancement, acquisitions and investments in technology.
The capital infusion and the mention of acquisitions sparked talk of further consolidation in the cement sector.
Growth Potential in the Sector
A southern-India based cement maker with manufacturing units in Tamil Nadu and Andhra Pradesh and a Gujarat-based player with interests in the eastern parts of the country have been cited as likely targets.
While the Adani Group has ambitious aims, the Aditya Birla Group’s UltraTech Cement is also aiming to significantly increase its capacity to almost 160 million tonnes per year by 2030 from about 120 million tonnes at present.
Adani said he chose to invest in the cement sector convinced by the growth potential of India and the headroom for growth in consumption. India is the second-largest producer of cement in the world, he said, yet the country’s per capita consumption was just 250 kg compared to China’s 1,600 kg.
Supported by New Delhi’s various infrastructure and growth programmes, cement demand will have a long-term average growth of 1.2-1.5 times GDP growth, he said. “We anticipate growing at twice this number.”
The richest person in India said that the new cement business will also benefit from the group’s competency in driving operational efficiency.
“As a result, we expect significant margin expansion to become the most profitable cement manufacturer in the country,” he said.
The Adani Group chairman was also bullish on India’s growth prospects based on four vectors-demography, the largest middle class, the global push for sustainability and digitisation.
“The combination of India’s youth and the growth in our middle class will accelerate our nation’s digital transformation to create new opportunities,” he said. “I believe the unmatched digital ecosystem India is creating will generate significant additional uplift on top of our anticipated 8% GDP growth. It will accelerate our journey towards the $30 trillion GDP target by 2050.”