India’s ports-to-energy conglomerate Adani group has clinched a deal to acquire Holcim’s businesses in India for US$10.5 billion, as the world’s largest cement maker looks to exit the country.
This will mark Adani group’s first foray into the cement sector and is their biggest acquisition to date. The Swiss multinational holds a majority stake in two cement companies.
It owns a 63.19% stake in Ambuja Cements and 54.53% in ACC (of which 50.05% is held through Ambuja Cements). According to the regulatory filing, the open offer price per share for Ambuja Cements is 385 rupees, while ACC will be 2,300 rupees.
The combined capacity of these two entities is 66 million tonnes per annum. Adani group will now become the second-biggest cement manufacturer in the country after UltraTech Cement, whose annual capacity is 120 million tonnes.
ACC has 17 cement manufacturing units and nine captive power plants, while Ambuja Cements has six integrated cement manufacturing plants and eight cement grinding units across the country.
“The Adani family, through an offshore special purpose vehicle, announced that it had entered into definitive agreements for the acquisition of Switzerland-based Holcim Ltd’s entire stake in two of India’s leading cement companies – Ambuja Cements Ltd and ACC Ltd,” the Adani group said in a statement.
Holcim entered the Indian market in 2005, but had struggled and last month announced its intention to exit the country. The Swiss major has been trying to diversify away from its core business of cement to focus more on building technology amid an increased emphasis on sustainability.
It plans to focus more on low-carbon cement and other eco-friendly building materials. The Swiss major has already sold its cement businesses in Indonesia, Malaysia, Singapore and Brazil.
Holcim was in talks with several Indian business houses including Aditya Birla Group, which owns UltraTech, and steel-to-energy conglomerate JSW Group. Adani group came into the picture later and both Adani and JSW emerged as frontrunners for this acquisition.
JSW Group’s chief Sajjan Jindal recently said it would make a $7 billion bid for Holcim’s India assets.
Holcim’s exit will be the largest one by an MNC from India. Over the last decade, many MNCs have either quit or drastically scaled down their operations in the country across various sectors.
The notable ones include auto majors such as Ford, General Motors, Harley Davidson and Fiat, telecom firms like Telenor and Hutchison, banking and finance firms such as Royal Bank of Scotland, Fidelity Mutual Fund, Barclays Plc and Citibank.
High taxes, labor issues, the low purchasing capacity of Indian customers and an unpredictable regulatory environment are some of the reasons for their exits.
In the last couple of years, Adani group has diversified beyond its core business of operating ports, power plants and coal mines into airports, data centers and clean energy.
“Our move into the cement business is yet another validation of our belief in our nation’s growth story,” said Gautam Adani, Chairman of the Adani Group.
While the world was battling the Covid-19 pandemic-induced slowdown, Gautam Adani’s fortunes rose at a very fast clip. According to the Hurun Global Rich List released in March this year, Gautam Adani added $49 billion to his wealth last year, more than the net addition of wealth by the top three global billionaires Elon Musk, Jeff Bezos and Bernard Arnault.
According to Forbes magazine’s April report, Gautam Adani is now the fifth richest in the world and the 59-year-old businessman has overtaken Warren Buffet.
However, critics and political opposition parties point out that Gautam Adani and Mukesh Ambani have flourished because of their proximity to the Narendra Modi government.
While Mukesh Ambani was the top businessman even before Narendra Modi became prime minister, Gautam Adani’s rise has been synchronous with Modi’s rising political fortunes. Opposition parties, including the Congress party, have accused the Narendra Modi government of pandering to crony capitalists and oligarchs.