Adani Group is targeting a bigger slice of the cement market as it enters talks to acquire Heidelberg's Indian operations for $1.2 billion
Gautam Adani-led group is reportedly in discussions to acquire the Indian cement business of Germany's Heidelberg Materials. The acquisition, which is valued at anywhere around $1.2 billion (or Rs 10,000 crore), would be spearheaded by Ambuja Cements. If the deal comes to fruition, it could further fuel the consolidation trend in the cement industry.
The Adani group which is also the second-largest cement producer in the domestic region, entered the industry in 2022 by acquiring Holcim's Indian operations. According to sources cited in a report by the Economic Times, Adani is planning to finalise the Heidelberg deal without any delay.
Heidelberg operates in India through its publicly listed arm, HeidelbergCement India and the unlisted company Zuari Cement. The market capitalization of the listed entity stands at Rs 4,957 crore, with a 69.39 per cent ownership stake held by the parent company. As one of the largest cement producers worldwide, Heidelberg has a presence in 50 countries. The company entered the Indian market in 2006 through the acquisition of Mysore Cement, Cochin Cement and a joint venture with Indorama Cement.
But, there is a chance, that Adani might back out if the acquisition turns into a full-sale process with other competitors involved, sources mentioned.
According to a report by Yes Securities, the cement market in India is currently witnessing challenges in growth owing to weak demand and price pressures. In September 2024, the average price of trade cement increased by only about Rs 4 per bag compared to the previous month.
"Pricing pressure is likely to continue, therefore we don’t see any meaningful price hike in the near term on account of the increase in competitive intensity due to new capacity additions and consolidation from larger players. Also, the pre-general election demand has ended, and we don’t expect any high mid or teen-digit volume growth for FY25E/ FY26E. We believe normalization may come by the end of FY26E in the industry once all the announced capacity comes under stream," the brokerage firm said.
However, there is a chance that regional players with higher market share, pricing power and cost savings may see margin expansion. The industry may witness some respite from the cost front considering stable diesel prices, higher usage of green energy and other cost initiatives, the brokerage firm added.