How Adani-owned Ambuja Cements wants to bring down its logistics cost with its new acquisition

Adani Cements is strategically positioning itself to significantly reduce its logistics costs through the increased use of sea routes following its acquisition of Penna Cement. During a recent call with analysts, Chief Financial Officer Vinod Bahety highlighted the potential benefits this acquisition brings, particularly through enhanced access to maritime transportation.

Currently, Adani Cements, which includes Ambuja Cements, transports less than 2% of its cargo via sea routes. However, the acquisition of Penna Cement provides access to five bulk cement terminals located in Kolkata, Gopalpur, Karaikal, Kochi, and Colombo. This infrastructure is expected to boost the company’s sea transport utilization to 10% by 2027-28 (April-March).

“A key highlight of this transaction is that it gives me complete strength for the servicing of peninsular India. A lot of companies have cement, but this company has been much more visionary in terms of sea logistics infrastructure,” Bahety stated. This strategic move is set to enhance the efficiency and cost-effectiveness of the company’s logistics operations.

The financial benefits are substantial. For cargo transported via sea, costs could be reduced by as much as ₹300-400 per tonne. Overall, this shift is anticipated to result in savings of ₹50-70 per tonne across the board.

Adani Cements already utilizes sea routes for some transportation needs at Sanghi Industries and Ambuja Cements. “The plan for sea logistics will mature now, after this acquisition. You will see a much more impactful progression on sea logistics in 6-12 months’ time,” Bahety noted, indicating a swift implementation of these new logistical strategies.

The acquisition of Hyderabad-based Penna Cement, valued at an enterprise worth ₹10,422 crore, is a strategic maneuver to bolster Adani Cements’ production and distribution capabilities. This acquisition propels the company’s production capacity, which includes Ambuja Cements, ACC, and Sanghi Industries, to nearly 79 million tonnes. They aim to increase this capacity to 96 million tonnes by the end of the current fiscal year and 110 million tonnes by the end of FY26.

Penna Cement’s existing 10 million tonne capacity, coupled with additional ongoing projects (2 million tonnes each at Jodhpur and Krishnapatnam), enhances the company’s production capabilities. Additionally, Penna Cement’s surplus clinker in Rajasthan can support a 3-million tonne grinding capacity.

“We are straight away adding 17 million tonnes of capacity, which is close to 20% of my existing capacity,” Bahety emphasized. This significant increase aligns with Adani Cements’ broader goal of achieving a 140 million tonne capacity by FY28.

The integration of Penna Cement’s sea logistics infrastructure is a forward-thinking step that underscores Adani Cements’ commitment to operational efficiency and cost reduction, setting a new benchmark in the logistics strategy of India’s cement industry.

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