Ambuja Cements Acquires Sanghi Industries At Enterprise Value Of Rs 5,000 Crore
Ambuja Cements has acquired Sanghi Industries in an all-cash deal, valuing the company at an enterprise value of Rs 5,000 crore.
The Adani Group has acquired Gujarat-based Sanghi Industries in an all-cash deal, valuing the company at an enterprise value of Rs 5,000 crore.
Ambuja Cements will acquire 14.66 crore shares of Sanghi Industries Ltd., representing 56.74% of the overall shareholding, from Chairman and Managing Director Ravi Sanghi, members of the Sanghi family and other promoter entities, according to an exchange filing.
The cement major will also make an open offer for 26% stake held by the minority shareholders of Sanghi Industries, or more than 6.71 shares of the company, at Rs 114.22 apiece. This is at a premium of 13.39% from Sanghi's closing price on Wednesday. The acquisition values Sanghi equity at Rs 2,950.6 crore.
The equity value, including the open offer, will be Rs 2,441.37 crore for the overall 82.74% stake, if the open offer is subscribed successfully.
Adani Group Chairman Gautam Adani termed the acquisition a significant step forward for Ambuja Cements’ growth journey.
By joining hands with Sanghi Industries, Ambuja is poised to expand its market presence, strengthen its product portfolio, and reinforce its position as a leader in the construction materials sector. With this acquisition, the Adani Group is well on course to achieve its target of 140 million tonnes per annum of cement manufacturing capacity by 2028 ahead of time. With Sanghi’s limestone reserves of 1 billion tonnes, Ambuja will increase cement capacity at Sanghipuram to 15 MTPA in the next two years. Ambuja will also invest in expanding the captive port at Sanghipuram to handle larger vessels. Our aim is to make Sanghi lowest cost producer of clinker in the country.Gautam Adani, Chairman, Adani Group
Ambuja Cements intends to produce lowest cost clinker in the country at the Sanghipuram facility of Sanghi Industries "and then transport this clinker as well as bulk cement through coastal routes to the markets of Saurashtra, south Gujarat, Mumbai and Mumbai Metropolitan region, Karnataka, and Kerala," said Karan Adani, director, Ambuja Cements.
Synergies with the assets of Adani Ports will help us in implementation of this strategy, he said.
The acquisition of Sanghi Industries will help Ambuja to strengthen its market leadership and increase its cement capacity to 73.6 MTPA from the current capacity of 67.5 MTPA. With the ongoing capex of 14 MTPA and commissioning of 5.5 MTPA of cement capacity at Dahej and Ametha Q2 FY23, the Adani Group's capacity will be 101 MTPA by 2025.Karan Adani, Director, Ambuja Cements
"Ambuja's goal of 140 MTPA capacity by 2028 is well on track, and with this acquisition we are very confident that we will achieve this ahead of time," said Karan Adani.
Sanghi Industries had a market cap of Rs 2,602.12 crore at Wednesday’s close at share price of Rs 100.73 apiece.
Adani Group acquired Ambuja Cements Ltd. and ACC Ltd. for $6.5 billion last year from Holcim Group, becoming country’s second-largest cement maker with 67.5 million tonne per annum capacity. The group plans to double the cement capacity to 140 million tonne in the next five years.
Sanghi Cement, a brand owned by Sanghi Industries, was incorporated in 1985. It has a grinding capacity of 6.1 million metric tonnes per annum and a clinker capacity of 6.6 million metric tonnes per annum. The company has installed closed belt conveyor of 3.2 kilometres for transportation of limestone from mines to the clinker plant.
The company also has 130 MW captive thermal power plant, captive mines, a water de-salination facility, and a captive port in Kutch, Gujarat which can handle 1 MTPA of cargo. Sanghi Cement sells ordinary Portland cement, Portland pozzolana cement and Portland slag cement in Gujarat, Rajasthan, Maharashtra and Kerala and its port ships cement to the Middle East, Africa and the countries in the Indian sub-continent.
Promoter Ravi Sanghi, owns 72.72% stake in the company with 98.88% shares pledged as per the BSE.
The company has been under financial stress and India Ratings and Research Pvt. recently downgraded Sanghi Cement after it rescheduled its interest obligations on the rated NCDs due to liquidity issues. The company did not have any material cash balance on June 30 and its available liquidity buffer in the form of unused fund-based limits (after considering devolved letters of credit) was only around Rs 2 crore, lower than the interest obligations towards the NCDs, the rating agency said.
Sanghi Cement ended the year through March with net sales of Rs 924.5 crore, and loss of Rs 325.7 crore. The cement maker had total assets of Rs 3,502 crore and outstanding borrowings of 1,343.2 crore at the end of March, according to its stock exchange disclosure.
In November 2022, Sanghi Cement had raised Rs 500 crore through the issuance of NCDs to Kotak Special Situations Fund and Rs 50 crore through an equity infusion from the promoters, which was used to reduce its debt, including prepayment of term debt of Rs 210 crore and reduction in working capital debt of Rs 100 crore and to fund the operational requirements.
Ambuja Cements will also make an unsecured inter-corporate deposit of Rs 300 crore to Sanghi Industries. Sanghi Industries' board approved the proposal earlier today, according to an exchange filing. The inter-corporate deposit does not provide for any special rights, such as the right to appoint directors, first right to share subscription in case of issuance of shares, right to restrict any change in capital structure, etc.
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