Ambuja Cements Makes Strategic Acquisition of Penna Cement, Analysts Bullish on Adani Firm

Ambuja Cements witnessed a surge in its share price by over 3% following the announcement of its acquisition of Penna Cement Industries Ltd at an enterprise value of ₹10,422 crore. The acquisition marks a strategic move by the Adani Group-owned cement manufacturer to expand its footprint in the southern market.

The deal entails Ambuja Cements to acquire 100% shares of PCIL from its existing promoter group, Pratap Reddy and family. The acquisition will be entirely funded through internal accruals, signaling the financial health and robust growth strategy of the Adani Group firm.

PCIL, with a total cement capacity of 14 MTPA, has 10 MTPA operational and the remaining under construction in Krishnapatnam and Jodhpur. Additional clinker resources at the Jodhpur plant are set to support an extra 3 MTPA of cement grinding capacity, further enhancing Ambuja Cements’ market presence.

Financial analysts and investment firms are bullish on Ambuja Cements post this acquisition. Dharmesh Shah from Emkay Global Financial Services views the deal as favorable, pegged at $89 per tonne, and anticipates a significant market share increase for Ambuja Cements.

Antique Stock Broking believes the implied valuation of the acquisition to be value-accretive, considering the surplus clinker resources that can support additional grinding capacity. Nuvama Institutional Equities sees the potential turnaround of PCIL as a key factor in enhancing Ambuja Cements’ value.

The acquisition aligns with Ambuja Cements’ growth targets and geographical expansion plans. With a strong focus on market dominance in the southern region, Ambuja Cements eyes a significant uptick in its overall capacity and operational efficiency.

The strategic acquisition also bolsters Adani Cement’s logistics, with the addition of five bulk cement terminals in key locations such as Kolkata, Gopalpur, Karaikal, Kochi, and Colombo. This move by Ambuja Cements is poised to solidify its position in the Indian cement sector.

As Ambuja Cements sets its sights on reaching 140 MTPA by 2028, the acquisition of PCIL plays a crucial role in achieving this ambitious target. The successful integration of PCIL’s capacities and resources is expected to bring about a new phase of growth and expansion for Ambuja Cements.