Adani to buy Jaypee cement units; JSW buys India Cements’ MP unit

The consolidation in the cement sector has picked up pace with the Adani and JSW groups closing in on the smaller rivals. While the Adani group is set to announce its second acquisition in the cement sector of Jaypee group’s cement assets at an enterprise valuation of Rs 5,000 crore, India Cements said it has sold its Madhya Pradesh limestone mine and land for Rs 477 crore to Sajjan Jindal owned JSW Cement.

A larger part of Jaypee’s cement business was earlier acquired by UltraTech and the few units in 2016 and few units retained by the debt hit group are now being sold to the Adani group. Jaiprakash Associates, the flagship company of the Jaypee group, cleared the sale of the cement units in a board meeting on Monday.

Jaiprakash Associates’ stock closed up by 10 percent following the announcement. Jaiprakash Power Ventures closed 4 per cent up at Rs 8.46 a share.

The Jaypee group, including its subsidiary JPVL, have an installed cement capacity of 10.55 mtpa and 339 MW of captive power. However, the group has put on hold expanding its Shahabad cement plant by 1.2 million tonnes due to a liquidity crisis.

Analysts said Jaypee’s acquisition will boost Adani’s plans to become India’s leading cement company by 2030 as it aims to double its capacity from 70 mtpa (million tonnes per annum) to 140 mtpa by 2030. Ultratech, Adani’s rival, has announced increasing its capacity from 120 mtpa to 160 mtpa by 2030. JSW plans to touch 25 mtpa of cement capacity by FY25 from 17 mtpa now.

JSW Cement, which had made a $7 billion offer for Ambuja Cements, is becoming aggressive by acquiring India Cements’ units. But its offer was not accepted by Holcim, Ambuja’s then Swiss owner, over fears of Competition Commission of India’s objections.

Apart from the Madhya Pradesh units, JSW Cement has also made an attractive offer to buy India Cements’ Rajasthan unit, beating UltraTech of the Aditya Birla group, bankers said.

India Cements had started working at a three-million mtpa plant in Madhya Pradesh last year with land acquisition. The project also has backward linkages to limestone, a key raw material to make cement. The acquisition will give JSW Cement to make an entry into the Central Indian market.

JSW Cement has so far raised Rs 2,000 crore in the last 15 months to fund its capacity expansion. It raised a Rs 400-crore sustainability loan last week from MUFG Bank India. It also raised Rs 1,500 crore from investors Apollo Global and Synergy Metals in July and Rs 100 crore from State Bank of India last December.

In May, India Cements indicated that it was open to selling some of its land to reduce debt. As of March 31, 2022, the company had net debt of Rs 3,039 crore. This was an increase of 1.43 per cent over the previous year when net debt stood at Rs 2,996 crore.

According to a recent report by Crisil, cement volume growth in FY23 is likely to be in the region of 8-10 per cent, the highest since FY19. Growth will be aided by infrastructure and construction sectors, prompting key players to seize scale opportunities through acquisitions. Koustav Mazumdar, associate director, CRISIL Research, said, “Cement volume growth this fiscal will be driven by non-housing segments, wherein off take is expected to rise more than 15 per cent. Demand from the infrastructure segment will be aided by government spending, while industrial and commercial demand will be driven by growing investment in data centres and warehousing.”