Adani Group lays bricks to buy Heidelberg's India cement unit

MUMBAI: The Adani Group has begun talks to acquire the Indian cement operations of Germany's Heidelberg Materials, according to people familiar with the matter. The proposed buyout of Heidelberg's India unit will be led by Adani Group company Ambuja Cements and could be worth around $1.2 billion (Rs 10,000 crore), they said. If successful, it will accelerate the consolidation wave that's sweeping the industry. India's top cement maker UltraTech has also been acquiring companies to maintain its leadership.

The Adani Group, India's second-biggest cement maker, had entered the sector by acquiring Holcim's India operations in 2022. As with Holcim, Adani intends to move fast to close the deal, said the people cited. Ambuja Cements had cash and cash equivalents of Rs 18,299 crore on June 30, 2024. However, the Indian conglomerate may opt out of a deal if it becomes a full sale process involving other contenders, one of the persons said.

The German company operates in the country through listed HeidelbergCement India and unlisted Zuari Cement.

Issue of Production Capacity
The listed entity has a market cap of Rs 4,957 crore and is 69.39% owned by the parent. Heidelberg is one of the world's largest cement producers and is present in 50 countries.

A senior executive from the Heidelberg head office is leading talks with the Indian conglomerate, sources said. Both the groups, though, will have to agree on the possible issue of production capacity - while Heidelberg claims it has a capacity of about 14 million tonne (according to website), this could be lesser and therefore could impact valuations.



Heidelberg entered the country in 2006 with the acquisition of Mysore Cement, Cochin Cement and a JV with Indorama Cement. After the acquisition of Italcementi in 2016, the group doubled its presence in India to a claimed 14 million tonnes, according to its website. Heidelberg and the Adani Group did not respond to queries.

Global presence
The German company is present in nine countries in the Asia-Pacific region, where it has a total 53.5 million tonne capacity. India is second in the region, after Indonesia, which has nearly 31 million tonnes of capacity. Heidelberg has been working on the merger of HeidelbergCement India and Zuari Cement, but has been stuck on the calculation of the stamp duty payment. "We are working on it," chief financial officer Anil Sharma told analysts in May. The merger is likely to be completed only by FY26 or FY27, he had said. ET had reported in 2023 that the JSW Group was in initial discussions to acquire the Indian operations of Heidelberg Materials.

Acquisitions
Adani Group entered the sector in India with the purchase of Ambuja Cements and ACC from the Holcim Group for more than $6 billion, making it one of the largest acquisitions in the materials and infrastructure space. Ambuja Cements and ACC had a combined production capacity of close to 70 million tonnes at the time. Since then, the group has made several acquisitions in the cement space, including Sanghi Industries and My Home Group's grinding unit.

In June, it entered into a definitive agreement to acquire Penna Cement Industries for an enterprise value of Rs 10,422 crore. This acquisition, funded from internal accruals, was completed in August, and will take Adani Cement's capacity to 88.9 million tonnes.Adani Cement has stated that it wants to increase production capacity to 140 million tonnes by 2028, but company insiders have said that the actual target is much higher. "Company at a consolidated level is likely to incur a large capex of nearly Rs 40,000 crore (including inorganic acquisitions) over fiscals 2025 to 2027, towards capacity addition, captive power plants, plant maintenance and other infrastructure development," rating agency Crisil had said in June, affirming its AAA rating for the company's long-term debt.