Adani Group Buys Penna Cement For An Enterprise Value Of About Rs 10,400 Crore | N18V | CNBC TV18
That's right, Adani Group has acquired penis cemented enterprise value upfront 10,400 crores which will be funded via internal accruvals from Bhuja Cement spell. It asks 14,000,000 tonnes of capacity. It takes a total capacity to around 93,000,000 tonnes, including the operational as well as the the to be operational capacity. And what it does is it puts them on course to hit the 140 million tonne target by 2028. It also improves Adani Cements market share. Pan India peklos show around 2% and in South India pelosure around 8%. Now, Pena Cements capacity is located in Andhra Pradesh, Telangana as well as in Rajasthan. The total capacity is around 14,000,000 tonnes, but 4 million tonnes is currently being completed. Additionally, 90% of Pena cement capacity comes with railway sidings and it will also be supported by captive power plants and waste heat recovery systems. Now, moving to the valuations, it is done at roughly around $90.00 per tonne for around 14,000,000 tonnes capacity. But the management says that they have surplus clinker at the Jodhpur plant and this will help them go ahead and increase the capacity by additional 3,000,000 tonnes of grinding unit capacity. For this 3,000,000 tonnes, well, they will have to incur roughly around 800 to around 1000 crores out. So plugging in the numbers then 14 + 3 million tons, you will get a total capacity of around 17,000,000 tons and the enterprise value per tonne comes around $80.00 per ton. So to sum things up well, it is a good deal for Ambuja Cements. They get into use the cash in its books. It will help them improve the return ratios and also they will be moving towards the targeted 140 million tonnes. Additionally, they have laid out some ambitious plans for this acquired asset that's been up. Taking the utilization levels up to around 85%, they beta per ton improving to around that ₹1500 odd and the Roc as well improving to around 15%. We see some bit of a rub off as well on other companies, namely Sagar Cement, NCL Industries, KCP, because all these companies, they have exposure to the region as well and the trade evaluations are a little lower than what the deal was struck at. Finally, could this result in additional competition in South India? Well, if that is the case, then Ramco as well as Dalmia Cements dominance could be under threat in South India. For the time being, a good deal for Ambuja Cements some kind of positive rub off on some of those smaller players and will be interesting to see whether as they ramp up the capacity utilization levels of Pena Cement, will it put pressure on pricing and in turn profitability in South India. Time will tell.