Chennai: Amidst reports of Adani Group exploring more acquisitions in the cement sector, ICRA foresees further consolidation in the sector with top five companies cornering 55 per cent share by next year.
According to ICRA, the market share of the top five cement companies witnessed a steep rise to 54 per cent as of December 2023 from 45 per cent as of March 2015 and expects it to further increase to 55 per cent by March 2025, resulting in consolidation in the cement industry.
As per media reports, the Adani Group has earmarked $3 billion for inorganic growth and it is exploring several potential acquisitions, including Hyderabad-based Penna Cement, Gujarat’s Saurashtra Cement, the cement business of Jaiprakash Associates, and Vadraj Cement of ABG Shipyard. This would make the group the largest cement manufacturer in India. Adani Cement, which includes Ambuja Cements and its subsidiary ACC Ltd, is the second-largest cement producer in India after UltraTech Cement of the Aditya Birla Group. It has an annual production capacity of 77.4 million tonnes and aims to capture one-fifth or 20 per cent of the Indian cement market by FY28.
“There were 15 M&As in the last nine years and the average cost of the M&A was $80/MT, lower than the cost of setting up an integrated greenfield cement plant of $110–120/MT. Apart from capex cost savings, this entails access to readymade capacity, and limestone reserves and prevents companies from the hassle of longer gestation periods for stabilisation of operations in case of a greenfield unit,” said Anupama Reddy, Vice President, and Co-Group Head, of Corporate Ratings, ICRA. Asset block of 28 MT is in the pipeline for acquisition and ICRA expects M&A deals to continue, given the aggressive growth plans of the large incumbent players who want to maintain their market share.
The share of the top five cement companies in the eastern and the western regions is estimated to increase to 76–79 per cent in FY2025 from 54 per cent in FY2015. The southern region is highly fragmented with only 40 per cent share held by the top five cement players in FY15. This may go up to 50 per cent by FY2025. In the northern and central regions, their share was 65-75 per cent in FY2015 and is expected to remain in the range of 75-85 per cent by FY2025.
