Adani Group Shows Recovery with Acquisition of Sanghi Industries
The Adani Group seems to be bouncing back from the fallout caused by the Hindenburg report, as it makes progress towards its expansion plans. Recently, Ambuja Cement, which is owned by the Adani Group, acquired Sanghi Industries, a cement manufacturer based in Gujarat. This acquisition, worth Rs 5,000 crore, indicates that the group is regaining its momentum after the setback.
Following the release of the short-seller report just days before the Adani Group’s follow-on public offering (FPO) of Rs 20,000 crores, the company’s shares took a hit. Although the group managed to raise funds during the FPO, it decided to return the funds as proceeding with the fundraising after the fiasco would be unfair to investors. As a result, the Adani Group temporarily halted its expansion plans.
There were reports suggesting that the group had put its construction activities on hold and would moderate capital expenditure on new projects. However, recent developments indicate that the group is getting back on track. The Adani Group plans to raise around $4.1 billion through the qualified institutional placement (QIP) route, with entities such as Adani Green, Adani Energy Solutions, and Adani Enterprises involved in the fundraising process. This signals a resurgence in the group’s ambition to raise capital for its expansion plans and gain acceptance among institutional shareholders.
In the midst of these developments, the Adani Group’s acquisition of Sanghi Industries comes at a time when the cement sector is experiencing a lull period. The southern market, in particular, has been hit hard by pricing challenges as capacity has increased while demand has slowed down. Additionally, input costs have risen significantly, making it difficult for companies to pass these costs onto customers. Sanghi Industries, which has been facing financial troubles and recording losses, presents an opportunity for the Adani Group. It boasts a 6.1 million-tonne cement capacity and a captive jetty at Sanghipuram, enabling the company to potentially export to other countries. With bulk terminals at Navlakhi Port in Gujarat and Dharamtar Port in Maharashtra, Sanghi Industries provides strategic advantages for the Adani Group’s plans to improve port capacity and accommodate larger vessels.
Moreover, Sanghi Industries has access to 1 billion tonnes of limestone reserves, which ensures a consistent supply of input materials for cement production. The proximity to ports and major markets, along with the synergies between existing cement businesses, make this acquisition a promising opportunity for the Adani Group.
In addition to the cement sector, the Adani Group continues to make strides in its long-term plans. Recently, it acquired Trainman, a ticket booking platform, as part of its digital expansion efforts. While Adani Labs currently operates on a smaller scale, the group’s extensive consumer outreach through businesses like electricity and gas distribution can help in expanding its digital footprint.
Although the Adani Group appears to have moved on from the Hindenburg report trouble, its stock prices have yet to fully recover. This suggests that investors may still exercise caution when considering investments in the group. However, with the recent acquisition and renewed fundraising efforts, the Adani Group is positioning itself for a promising recovery.
Overall, the Adani Group’s acquisition of Sanghi Industries signifies its determination to overcome the challenges it faced earlier in the year. The strategic advantages presented by Sanghi Industries, coupled with the group’s ambitions for expansion and fundraising, are positive indicators for its recovery. As the group’s stock prices slowly climb back up, it remains to be seen how investors will respond to the Adani Group’s ongoing efforts.
