Adani's Heidelberg Deal Signals No Pause in Big Billionaires' Race in Cement Sector

The Gautam Adani-led group is all set to expand its foothold in India's cement industry with another acquisition on the table. After a series of takeovers in recent years, the group is now eyeing the Indian cement arm of Germany's Heidelberg Materials.

The deal comes at a time when the country is witnessing an infrastructure boom and Adani group, quite evidently, seems to be gearing up to make the most of it. The company already owns a majority stake in major cement companies like ACC and Ambuja cement.

The Heidelberg deal is valued at anywhere around $1.2 billion (Rs 10,000 crore) and is expected to be finalised shortly, as per a report by the Economic Times.

In Q1FY25, Heidelberg Cement witnessed a 6 per cent drop in sales volume, which was below expectations. The net profit of the company stood at Rs 40 crore, down 24 per cent from Rs 52 crore recorded in Q1FY24. The share price of the company surged by over 16 per cent after the acquisition reports. However, on a year-to-date basis, the shares of the company have remained in the negative territory.

The Adani group has also set an ambitious target for its cement business. The group is planning to capture 20 per cent (or one-fifth) of India's cement market by FY28. To achieve this target, the cement arm also aims to accelerate its capital investments and reach a production capacity of 140 MTPA (Million tons per annum) by FY2028, all while remaining debt-free. This will eventually result in an annual growth rate of 16 per cent.

Analysts Predict Robust Demand in H2FY25

While the cement industry is currently facing some price pressures alongside cooling demand, analysts are expecting a strong H2FY25 performance. "The outlook for the cement industry remains positive, supported by higher budgetary allocations to infrastructure and construction, the government’s push for affordable housing, the green energy transition, demand-supply dynamics and increased consolidation," Axis Securities stated in its report.

As for some analysts, price pressures might continue to spoil the optimism surrounding the cement industry. However, there might not be any significant price surges in the near term, primarily owing to increased competition from new capacity additions and consolidation from larger players.

"We believe normalisation may come by the end of FY26E in the industry once all the announced capacity comes under stream. However, 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," Yes Securities said in its report.

Adani's new prospective deal signals that the billionaire might be bullish on the cement sector and aims to capitalise on the country’s infrastructure boom. As of now, Adani is the second largest cement producer in the country, only after Ultratech Cement which is owned by the Aditya Birla group.