Adani's Ambuja buys rival in $1.25 billion deal to boost southern hold

By Hritam Mukherjee

BENGALURU (Reuters) -Adani-backed Ambuja Cements bought out smaller rival Penna Cement Industries [PENC.NS] on Thursday for an enterprise value of 104.22 billion rupees ($1.25 billion), dialling up its presence in India's southern region.

The deal comes nearly a year after the conglomerate, through Ambuja, bought a majority stake in debt-ridden Sanghi Industries, to boost its cement presence in the country and compete with market leader UltraTech Cement.

Ambuja said the buyout of Penna Cement will help improve Adani's share in India's southern cement market by roughly 8%, with the deal coming a few months after UltraTech bolstered its own hold in the region by buying Kesoram's cement assets.

"The acquisition of Penna is very favourable for Ambuja, as Adani's plants in the southern region were unmatched to UltraTech before. This region is key to Adani to boost its pan-India market share and narrow the lead UltraTech has across the country," said Ashutosh Murarka, research analyst at Choice Broking.

Indian cement makers are looking for ways, including dealmaking, to ramp up production and meet demand for the construction material amid upbeat housing momentum and strong government spending on infrastructure.

Adani Group, the ports-to-power conglomerate, had said in December it plans to spend $84 billion over the next decade towards infrastructure projects.

Ambuja will fund the buyout of Penna through internal accruals. The deal will give Ambuja access to Penna's operational facilities in Andhra Pradesh and Telangana, and under-construction facilities in Rajasthan.

Penna's cement assets, which total to 14 million tons per annum (MTPA), will help the conglomerate beef up its capacity as it aims to reach 140 MTPA by 2028. The latter's capacity, as of March-end, stood at 79 MTPA.

($1 = 83.5406 Indian rupees)

(Reporting by Hritam Mukherjee in Bengaluru; Editing by Mrigank Dhaniwala, Varun H K and Krishna Chandra Eluri)