Ambuja Cements Acquires 24 Limestone Mines for Self-Sufficiency

Ambuja Cements Limited is the second-largest Indian cement-producing company globally. The company is in the production of cement and clinker for both domestic and export markets. On May 15, 2022, Adani Group acquired a 61.62% stake in Ambuja and ACC, previously held by Holcim, for US $10.5 Billion. The cement industry had a projected growth of 9-10% during 2023-24. Therefore, according to Ambuja Cements’ annual report, the company has aggressive plans for expansion, as it has recently won 24 bids for new limestone mines. These mines have an estimated total resource of 587 million tonnes of limestone.

Importance of these mines:

The Adani Group has expressed its ambition to have a capacity of 140 Million tonnes per annum by 2028. For such an achievement, the company stated that winning bids for coal and limestone mines is critical to ensure self-sufficiency. A step towards attaining self-sufficiency is the establishment of coal mines in Dahegaon-Gowari and the existing Gare Palma coal block catering to 40% of Ambuja Cement Limited’s requirements.

Other endeavors:

These 24 new bids are in addition to the 1 Billion tonne reserve of Sanghi Industries. Sanghi Industries was acquired by Ambuja Cements last November at an enterprise value of Rs. 51.85 Billion. The Adani Group, in pursuit of their goal of 140 MTPA, also acquired Hyderabad-based Penna Cement at an enterprise value of Rs. 10,422 Crore, taking Ambuja’s total capacity to 89 MTPA. This acquisition will help increase Ambuja’s market share in the southern market and facilitate the company’s entry into the Sri Lankan Market. Another notable thing about this acquisition was that it was an all-cash deal with 15% Return on Capital Employed. Post-transaction, Ambuja’s CFO Vinod Bahety said that even after acquiring Penna Cement Ambuja Cement will still hold 100 Billion in cash by the end of this year.

Conclusion: These 24 new bids are a part of Ambuja’s self-sufficiency plans. Ambuja Cement recorded a total revenue of Rs. 33,000 Crore in FY24, showcasing that the previous agreements have helped them to achieve operational efficiency and have driven the company to be more profitable. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.