‘Adani’s cement foray likely to intensify competition’

‘Ambuja-ACC combine capacity may rise to 80 MT’

The ‘grand’ entry of the Adani Group into the cement sector through the likely acquisition of Ambuja Cement Ltd. and ACC Ltd. from Holcim Ltd. will spur consolidation in the sector as the group is known for assuming market leadership in any segment it operates in said analysts.

However, industry insiders preferred to wait and watch before offering any comment.  

“Over the longer term, we expect it [the $10.5 billion acquisition by Adani Family offshore Special Purpose Vehicle Endeavour Trade & Investment] to positively impact the cement sector with expectations of industry consolidation along with better pricing discipline,”Ronald Siyoni, AVP - research, Sharekhan by BNP Paribas said,

“The acquisition would place Adani Group at number two position in India’s cement sector. The high valuation ascribed to Holcim’s assets may lead to the acquirer opting for generating better returns vis-a-vis employing aggressive competitive behaviour,” Mr Siyoni added.

According to Kamlesh Bagmar, Deputy Head of Research, Prabhudas Lilladher both the companies [Ambuja & ACC] would become very aggressive on cost competitiveness and capacity expansion which had been missing in a big way over the years.

“This could increase competition in the industry, he said adding there is not much of consolidation opportunities of this magnitude left in the industry.

Under the deal with Holcim, Adani Group has agreed to pay 7.3% premium over the last trading price of Ambuja Cement and 8.8% premium over the last trading price of ACC which augurs well for the shareholders, analysts said.