Adani group’s Ambuja-ACC has reached an agreement to acquire Sanghi Cements after deal negotiations moved forward over the course of the past one week and the Adani group companies proposed better acquisition terms and speedy deal closure, according to people aware of the matter.
ET had first reported on 25 July, that Ambuja-ACC and JK Lakshmi Cement are leading the race to acquire Ahmedabad-based Sanghi Cement.
In a stock exchange disclosure on Thursday morning, Ambuja Cements said it would acquire 56.74% shares of Sanghi Industries Limited at an enterprise value of Rs. 5000 crore.
“This landmark acquisition is a significant step forward in Ambuja Cements’ accelerating growth journey”, Gautam Adani, Chairman of the Adani group said in the release.
“By joining hands with Sanghi Industries Limited, Ambuja is poised to expand its market presence, strengthen its product portfolio and reinforce its position as a leader in the construction materials sector”, said Adani.
Sanghi Cement is controlled by the family of Ravi Sanghi who are the promoters of the listed Sanghi Industries. Sanghi Industries’s shares hit a 52 week high of Rs. 100.40 on Wednesday giving the company a market capitalization of nearly Rs. 2600 crore. The Sanghi family owns around 72% stake in the company.
Ambuja-ACC, JK Laksmi Cement and UltraTech are the top 3 cement players in Gujarat from where Sanghi Cement also derives a bulk of its revenues.
Delhi-based JK Lakshmi Cement was also in the running but was unable to match the enterprise value demanded. Moreover, it sought nearly three months time to complete due diligence on Sanghi Cements, which became a deal breaker.
The company had also arranged credit facilities from European banks to finance the Sanghi Cements takeover. JK Lakshmi Cement and JK Cement are both listed companies promoted by distant cousins and have no overlapping operations or shareholders. The former is helmed by Bharat Hari Singhania and the latter by Madhav Krishna Singhania.
ET had first reported about talks involving the sale of Sanghi Cement to Shree Cement on 29 April and subsequently reported about JK Organization and Nirma’s interest in the company on 6 June.
Shree Cement, Nirma Group and Dalmia Bharat had all submitted proposals to acquire Sanghi Cement but are no longer in the running, according to sources in the know.
Ambuja Cements delivered consolidated earnings before interest, tax, depreciation and amortization of Rs. 1930 crore for the quarter ended 30 June of the current financial year registering a year-on-year increase of 55%. The consolidated sales for the quarter were Rs. 8713 crore, also rising by 9% year-on-year.
Ambuja Cement owns over 50% stake in ACC Limited. Both companies are listed.
The two companies are together the second largest cement players in India after Aditya Birla Group-owned UltraTech.
In a note released on 28 April, CRISIL assigned a AAA rating to Ambuja Cement’s bank facilities.
“The strong presence of the Adani group in coal, power and logistics verticals will result in structural reduction in cost of production of cement owing to synergy benefits strengthening the business risk profile over the medium term. The financial risk profile of the company will remain strong over the medium term supported by a debt-free balance sheet and robust liquidity”, CRISIL said in the note.
Sanghi Industries integrated manufacturing unit at Sanghipuram in Gujarat’s Kutch district is India’s largest single-location cement and clinker unit by capacity. With 2700 hectares of land, the integrated unit has two kilns with a clinker production capacity of 6.6 million tonnes per annum and a cement grinding unit with a capacity of 6.1 million tonnes per annum. The unit has a captive power plant and a captive jetty at Sanghipuram.
Adani has outlined plans to take the group’s cement production capacity to 140 million tonnes per annum by 2028.
JM Financial and Khaitan & Co were the financial and legal advisors to Sanghi Cements on the deal.
