Consolidation picks pace in cement sector; JSW, Adani to buy smaller units

The consolidation in the cement sector has picked up pace with JSW Cement closing in on India Cements' Madhya Pradesh unit and the Adani group all set to buy Jaypee's cement units.

Banking sources said JSW group is also close to acquiring India Cements' Rajasthan unit and had pipped Ultratech by making a better offer.

With this, the Indian cement industry is expected to consolidate, with several small companies being taken over by the top three players. UltraTech had acquired Jaypee's cement business earlier, but few units were still housed with the Jaypee group, which are now being sold to the Adani group.

Jaypee group company - Jaiprakash Associates cleared the sale in a board meeting held earlier on Monday. Jaiprakash Associates shares were up 5 per cent in the morning trades.

The acquisition boosts Adani's plans to become India's leading cement player by 2030. The group aims to increase its capacity from 70 mtpa (million tonnes per annum) to 140 mtpa by 2030. Its rival Ultratech has also announced increasing its capacity from 120 mtpa to 160 mtpa by the same time.

The Jaypee Group, including its subsidiary, JPVL (Jaiprakash Power Ventures Ltd), currently have an installed cement capacity of 10.55 mtpa and 339 MW (megawatt) of captive power.

The implementation of the expansion of Jaypee's Shahbad cement plant by 1.20 million tonnes has been kept in abeyance.

On the other hand, JSW Cement, which had made a $7 billion offer for Ambuja Cements, is acquiring India Cements' units.

India Cements started working on a three mtpa plant in Madhya Pradesh last year with land acquisition. The project also has backward linkages to limestone, a key raw material for making cement.

In May, India Cements indicated that it was open to selling some of its land to reduce debt. As of March 31, 2022, India Cements had net debt of Rs 3,039 crore. This was an increase of 1.43 per cent over the previous year when net debt stood at Rs 2,996 crore.

JSW and Adani group spokespersons did not respond to Business Standard's queries.