Adani’s cement unit will rely on operating cash flow and internal accruals to fund its 460 billion rupiah ($5.5 billion) expansion capital expenditure over the next five years without resorting to external borrowing.
Adani Group’s cement unit, comprising ACC Ltd and Ambuja Cements, has set an ambitious target to increase its production capacity to 140 million tonnes by FY2028 from the current 67.5 million tonnes.
“With the funds available for the cement business, there is no need to rely on external borrowing for the planned expansion,” an official said.
generate cash flow
Adani Cement estimates that to build a 4-million-ton kiln and a 2-million-ton grinding facility, the cost of a modern clinker line would be around $80 per ton, and grinding capacity would cost just under $40 per ton.
The clinker is produced in the kiln and grinding takes place in the next stage of the process when the clinker is mixed with gypsum to produce various grades of cement.
ACC and Ambuja Cement had cash reserves of Rs 11,800 crore as at the end of the June quarter. Hence, another Rs 33,000-34,000 crore is needed to reach the projected capex figure.
EBITDA is expected to reach Rs 17,500 crore per annum by FY2028. Based on projected EBITDA generation, and taking into account taxes, dividends and other expenses, it is expected to leave sufficient cash reserves each year, which will increase capital expenditures. When the Adani Group acquired ACC and Ambuja Cements from Holcim and raised $6.3 billion, it did not burden the companies with principal or interest obligations.
In the next six months, the company plans to increase cement production capacity to 83.6 million tons, of which more than 6 million tons will come from Sanghi Industries, which was acquired by Ambuja Cements. The company will buy 56.74% stake in the promoters for Rs 16.75 crore and open bid for another 26% stake at Rs 7.67 crore for a total payout of more than Rs 240 crore.
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The acquisition of Sanghi Industries will give it 6.6m tonnes of clinker capacity. It has been given permission to build kilns at four approved sites, two of which are already in place, with the potential to build two more. Adani Cement is planning several brownfield expansions this year and in the coming years. Sanghi Industries has limestone reserves of 1 billion tons, which will help the expansion.
The company has submitted an application for approval and started the land acquisition process while modernizing and expanding the existing plant is underway.