Billionaire businessman Gautam Adani is in discussions with investment groups and funds from the Middle East, including members of the family of Sheikh Tahnoon bin Zayed Al Nahyan, for financing support of up to $2 billion for the acquisition of the listed ACC and Ambuja, Holcim’s twin cement assets in India, multiple sources aware of the talks told ET.
This is part of a unique acquisition and financing structure the Ahmedabad- based conglomerate is putting in place for the potential $7.5-billion buyout of the two listed cement companies, cumulatively the second-largest in India that ranks next only to China in both global output and consumption. ACC is also India’s oldest manufacturer of the primary building material, and is a step-down subsidiary of Ambuja Cements that’s directly controlled by the European cement major.
Sheikh Tahnoon bin Zayed Al Nahyan belongs to the ruling family of the United Arab Emirates.
Adani is likely to use a group entity based in Dubai, as the principal vehicle for the transaction, people privy to the plans told ET. This entity will float a special purpose vehicle (SPV) where the Adani family, as promoters, will infuse $1.25 billion-$1.5 billion as equity. A similar amount, likely in the form of structured equity, is expected from the Middle East investor group the Adani family is engaged with. Together, this vehicle will be capitalised to the tune of $3 billion.
This approximately $3 billion in turn will become the equity of another drop-down SPV in which global banks, such Deutsche Bank, Barclays and Standard Chartered Bank, are expected to lead the funding of another $4.5 billion as acquisition financing. Adani is expected to provide a letter of comfort to the banks as well if the need arises. Besides the three, other banks will join the financing consortium subsequently for share financing.
Different investors, lenders have different risk appetite and thresholds. So a multi-layered structure helps to lever up more while simultaneously offer comfort. Whoever is taking the bigger risk will obviously seek the best return on their investments, explained another official involved, who also did not wish to get identified.
The Adani Group became India’s third conglomerate to cross $200 billion in market capitalisation with the shares of five of its seven listed companies soaring to all-time highs late last month. Those five stocks alone had a market cap of over Rs 1 trillion in April.
Legal sources said Adani Group companies, too, may be used for an open offer as people acting in concert (PAC). “These PACs may raise money even in the local market via NCDs to bankroll the two open offers which may cost an additional $2-$3 billion, depending on their subscription,” said an official in the know on condition of anonymity as the talks are in private domain.
Since the promoter holding will change with Holcim’s exit, an open offer is likely for both listed entities.
The plans, however, are still getting finalised ahead of the bids slated later this month.
The Adani Group has been planning to enter the cement business and formed a separate wholly owned subsidiary of AEL, Adani Cement Industries, in June 2021. Other than Gujarat, where the plans were to use fly ash for cement, the group has been looking at a 5-MTPA cement plant in Maharashtra with an initial investment of up to Rs 1,000 crore, next to the JSW unit in Dolvi. Interestingly, Adani Enterprises Ltd. has another cement arm Adani Cementation Ltd that has been planning to build an integrated facility in Gujarat, according to a report in November. It has also been awarded a captive jetty in Raigarh, Maharashtra.
“We believe that the company may plan to set up an integrated plant in Kutch, Gujarat, and grinding units in Dahej, Gujarat and Raigad, Maharashtra. The group has also won limestone blocks in Andhra Pradesh, Rajasthan and Gujarat through a bidding process,” Motilal Oswal said.
An Ambuja-ACC buyout would catapult the buyer to the number two position in the sector with a combined capacity of 67MTPA.
“Adani is really growing aggressively through acquisitions as it wants to scale really fast. Just weeks after India and UAE signed the Free Trade Agreement (FTA), the IHC announced the multi billion dollar investment. It was a big morale booster,” said a company official, who also did not wish to be named.
