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Adani Cement set to improve profitability by 45-50% in 5 years

The Adani group - through its buyout of ACC and Ambuja Cements - is the second largest manufacturer of cement in the country.

Adani Cement’s profitability is set to improve by as much as 45-50% over the next five years as it builds new capacities with a substantial cost advantage, while strategic initiatives boost the profitability of its existing plants, chief executive officer Ajay Kapur said.

“The Ebitda (earnings before interest, tax, depreciation and amortisation) (per tonne) we are looking at is from ₹1,000 to ₹1,450-1,500 over the next five-year cycle. Our current Ebitda margin is 20%, and this should improve to 25%,” .

The Adani group – through its buyout of ACC and Ambuja Cements – is the second largest manufacturer of cement in the country. It plans to double its existing capacity to 140 million tonnes in five years with an estimated capital expenditure of ₹47,000 crore.

“We will be addressing two essential levers of value creation and one of them is costs. We are ensuring that as we build our company from 70 MT to 140 MT, we are one of the lowest cost producers of cement, not just in India, but around the world,” Kapur said.

Adani Cement had an operating profit of around ₹1,000 per tonne at the time of the acquisition of these plants, and it expects about ₹300-400 of savings per tonne over the next 36 months, helped by various initiatives. Its additional capacities of around 70 MT are likely to be “substantially” lower in terms of costs, and once the entire 140-MT capacity is in place, additional savings are seen flowing in from logistics costs, Kapur said.

Apart from its profitability targets, Adani Cement plans to have a sales volume of 120 MT, revenue of ₹70,000 crore, and operating profit of ₹17,500 crore by March 2028.

Of the ₹47,000 crore capital expenditure planned by the company, around ₹12,000 crore will come in from its cash and cash equivalents, while the rest will be funded from the operating profit generated from existing operations, through the course of the capacity expansion. With its recent buyout of Sanghi Industries and existing brownfield expansions, the company is set to have a capacity of over 100 MT by the end of 2025.

While the buyout of Sanghi has accelerated the pace of the company’s capacity expansion plans, Kapur said that the 140-MT target has been “very clearly” laid out on brownfield expansions.

He, though, said that the company would be open to looking at cement assets. “Should a good target come in at a good valuation and in a value-accretive format, we will be very happy to look at it,” Kapur said.

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