Ambuja Cements Acquisition of Penna Cement Industries Seen as Value Accretive; Analysts Bullish on Adani Group’s Firm

Ambuja Cements witnessed a surge in its share price, climbing over 3% to a one-year high following its announcement of the acquisition of Penna Cement Industries Ltd (PCIL) at an enterprise value of ₹10,422 crore. This acquisition is expected to be fully funded through internal accruals.

PCIL, a prominent cement manufacturer, currently operates with a 14 MTPA cement capacity, out of which 10 MTPA is operational. The company is in the process of constructing the remaining capacity at its Krishnapatnam and Jodhpur plants, with the goal of completing them within the next 6 to 12 months.

The deal is being viewed as favorable and value-accretive, with analysts like Dharmesh Shah from Emkay Global Financial Services estimating that the acquisition cost per tonne is at $89, which may see a decline to $79 per tonne with additional grinding capacity.

Antique Stock Broking stated that the deal, valued at $85 per tonne for 17 MT clinker-backed capacities, appears to be a good buy for Ambuja Cements, offering potential value and strengthening its market presence. Nuvama Institutional Equities expressed a similar sentiment, seeing the acquisition as an opportunity for a possible turnaround.

Market experts are optimistic about Ambuja Cement’s expansion into the southern market through the acquisition. With the majority of Penna Cement’s capacity located in Andhra Pradesh and Telangana, Ambuja aims to increase its market share and cement its presence in the region.

Furthermore, the acquisition is set to enhance Adani Cement‘s logistics capabilities with the addition of five bulk cement terminals in strategic locations like Kolkata, Gopalpur, Karaikal, Kochi, and Colombo. This move aligns with Adani Cement’s growth strategy to reach a total capacity of 140 MTPA by 2028.

Overall, the acquisition is anticipated to fortify Ambuja Cements’ position in the market, improve its operational efficiency, and open up new growth opportunities. With a clear focus on expansion and cost optimization, Ambuja Cements is poised for continued success in the industry.