Sanghi Industries Deal Valuation Allows For Quick Expansion, Says Karan Adani
The acquisition of Sanghi Industries Ltd. for an enterprise value of Rs 5,000 crore comes with the advantage of quick capacity expansion and market share gains, according to Karan Adani, director of Ambuja Cements Ltd.
The Adani group company announced that it had acquired Sanghi Industries in an all-cash deal on Thursday.
The valuation is markedly lower than brownfield or greenfield projects happening in the country, he said.
If you see from the valuation perspective, we are acquiring the asset at $66 per tonne. When you look at any greenfield or brownfield projects being done in India, they are roughly at $70-80 per tonne. So we do believe that this is a very attractive deal for us, where we are able to expand our capacity, increase our market share in a very quick succession.Karan Adani, Director, Ambuja Cements Ltd.
Ambuja Cements will acquire 14.66 crore shares of Sanghi Industries, 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 a 26% stake held by the minority shareholders of Sanghi Industries, or more than 6.71 crore 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's equity at Rs 2,950.6 crore.
The equity value, including the open offer, will be Rs 2,441.3 crore for the overall 82.74% stake, if the open offer is subscribed successfully.
Deal To Be Closed Within Four Months
The deal is awaiting approval from the Competition Commission of India, "which can take anything from 60 to 90 days". The acquisition can take between three and four months to close, Adani said.
The focus as of now is on acquiring the available 56.74% stake in Sanghi and completing the open offer for buying the 26% stake from minority shareholders, the Ambuja Cements director said. "... post open offer, we would see if the existing shares of the current promoters are available or not."
Ambuja Cements' capacities in the implementation stage are expected to come online by 2025, and the work on the next stage is underway, Adani said.
"We are working on the next stage—that is phase two—which is taking us from 101 million tonne per annum to 140 MTPA, which we will be announcing in a matter of another 12 months. We are already working on getting the approvals in place, mainly the environmental clearance," he said.
We would be looking to run at least Ambuja and ACC independently. We would be investing heavily on both these brands. Sanghi [Cement] brand right now we are planning to keep but we will evaluate in a matter of six to 12 months time.Karan Adani, Director, Ambuja Cements Ltd.
Sanghi Cement, a brand owned by Sanghi Industries, was incorporated in 1985. It has a grinding capacity of 6.1 million metric tonne per annum and a clinker capacity of 6.6 million metric tonne per annum.
Watch the full conversation here:
Disclaimer: AMG Media Networks Ltd., a subsidiary of Adani Enterprises Ltd., holds 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.
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