Here's why Adani and JSW Group are racing to acquire Ambuja Cements and ACC from Holcim

• Gautam Adani and the JSW Group, two of the largest Indian conglomerates, are in a race to buy two of the biggest cement manufacturing companies in a multi-billion dollar bid.
• The Switzerland-based Holcim Group is looking to exit the Indian cement business by selling Ambuja Cements and ACC.
• Here is what makes these businesses attractive enough to be lured by India’s largest and valuable companies.

Asia’s richest man and owner of Adani Group, Gautam Adani and the head of JSW Group, Sajjan Jindal, are in a race to buy two of the largest cement manufacturing companies in India that are on bid – Ambuja Cements and ACC.

Both the cement manufacturing companies are owned by Switzerland-based Holcim Group that is looking to exit the Indian cement business by selling these companies. It wishes to diversify from its core cement business and focus more towards sustainability.

Shares of Ambuja Cements and ACC have seen growth of 17% each in the last 12 months.

When the deal comes through and both companies are sold, it would lead to mandatory open offers in both listed companies, Ambuja and ACC. Analysts say integrating these companies by the acquiring company might take a while.

“Various recent media articles suggesting Holcim exploring exit from India may pose executional challenges for the timely completion of this ongoing capex, in our view,” said analysts at ICICI Securities.

Holcim is the world’s largest cement manufacturing company

Holcim entered the Indian market through these companies 17 years ago and has a presence in 90 countries. It is rated as one of the largest cement manufacturers in the world, according to a report by Construction Kenya, which is a digital publication for the construction community.

It currently operates four business segments – cement, aggregates, ready-mix concrete, and other products consisting of building materials.

Holcim is one of the world's leading suppliers of cement and aggregates (crushed stone, gravel and sand). The group has majority and minority holdings in around 70 countries across all continents.

Both companies are said to be valued around $10 billion

Holcim owns a 63% stake in Ambuja Cements. ACC is a subsidiary of Ambuja Cements in which it owns over 50% stake. So if any group buys a stake in Ambuja, it will get control over ACC as well.

Indian metals-to-cement conglomerate JSW Group is reportedly said to make a bid of $7 billion to acquire both companies.

However, it won’t be easy for the Sajjan Jindal-led manufacturing giant – reports suggest that Gautam Adani, the fifth richest person in the world – is also in the race to acquire Ambuja Cements and ACC.

Gautam Adani had already announced plans to enter the segment in June 2021 when Adani Enterprises, the flagship of the Adani group, had informed stock exchanges of incorporating a new wholly-owned subsidiary Adani Cement Industries.

Adani Group has diversified its businesses into airport, ports, renewable energy, power generation, gas distribution, cooking oil and now cement industry.

What makes Ambuja Cements and ACC attractive? Multi billion dollar revenue machines
Source: Company reports

Ambuja Cements and ACC follow January to December as their financial year as the parent Holcim is a Switzerland-based multinational company.

Ambuja Cements in its March quarter earnings said that they are very optimistic on cement demand growth and the government's focus on infrastructure & housing. The PLI (Production Linked Incentive) scheme for the manufacturing sector is also likely to further boost cement demand.

However, the January to March period for both the companies was impacted due to the global rise in fuel costs driven by the overall geopolitical situation.

Relative position of Ambuja Cements and ACC in the Indian market

Ambuja Cements is a popular brand in the Indian market and is the third largest cement company as per market capitalisation in the stock market followed by UltraTech Cement and Shree Cements.

Currently, Ambuja Cements has a cement manufacturing capacity of 31 million tonnes with six integrated cement manufacturing plants and eight cement grinding units across the country.

On the other hand, ACC has 17 cement manufacturing units, 85 ready mix concrete plants, over 6,600 employees, and a vast distribution network of 56,000 dealers & retailers.

In terms of market capitalisation, Ambuja Cements and ACC are the third and fourth largest cement manufacturers in India.
Source: NSE as at 2:32 p.m. May 10

While the JSW Group is already in the cement business, under the JSW Cement banner, the Adani Group is still new to this sector. However, given the capital at its disposal and the group’s recent efforts at rapid diversification, Gautam Adani could end up as the winner in this race to acquire Ambuja Cements and ACC.

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