Ambuja looks to expand cement capacities with buys in RMCs, aggregates

Topics Ambuja Cement

LafargeHolcim-controlled Ambuja Cement is looking to acquire capacities in ready-mix concrete (RMC) and aggregates businesses to fuel growth. 

The company is also on the look out for adding cement capacities, if the valuations serve right.

“The company continues to look at all growth options in cement and other building materials segments like ready-mix concrete (RMC) and aggregates,” a company official told Business Standard last month. 

The official added, “Inorganic growth in cement business depends on value-accretive options.” Ambuja Cements was one of the companies which had bid for Binani Cement last year, but lost out to UltraTech over a higher valuation.

Analysts see the move as an attempt to move towards being a building materials company and not a pure cement maker.

“Globally, cement giants have looked at developing a building materials image and not just as a cement manufacturer and the focus of Ambuja (Holcim Group) appears to be on similar lines. 

The focus for Ambuja looks to be on similar lines,” said Nitin Bhasin, head of research – institutional equities – at Ambit Capital.
RMC has been a significant revenue and profit generator for ACC, which is now a subsidiary of Ambuja Cement. 

In its 2018 annual report, ACC said, “The RMC business has consistently been performing well. RMC sales volume and earnings before interest taxation depreciation and ammortisation or Ebitda rose 16 per cent in 2018 compared to the previous year.

During the year, the RMC business expanded its footprint by adding 18 plants.”

However, the company may find it difficult to spot acquisition opportunities as RMC is a highly unorganised sector. “However, RMC capacity in India, beyond top 6-7 players is largely unorganised, so it will be difficult for a Holcim entity to make acquisitions in such a market. In addition, the company has so far been behind in term of deploying growth capital as the Rajashtan greenfield expansion is yet to commence,” Bhasin added.

Ambuja Cements has a consolidated cement capacity of 63 million tonnes per annum (MTPA), which includes capacity of its subsidiary ACC. The company has a 50.05 per cent stake in ACC. People in the know said Ambuja Cements is open to looking at acquisitions through ACC, depending on the geographic advantage of the asset.

Both the companies have also entered into a master supply agreement to unlock synergies in the areas of sales, marketing and logistics. 

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel