Dalmia Bharat To Buy Part Cement Assets From JP Associates Move Positive For Co: HDFC Securities

Hinzugefügt: 2026-05-25

[00:00:00]Let's uh talk about the big deal in the cement space. So, Dalmia Bharat has signed an agreement to acquire part cement assets from Jaiprakash Associates from the Adani Group. The deal is valued at 2,850 crore, which were acquired by the Adani Group uh under the Insolvency and Bankruptcy Code. So, how does this change the competitive dynamics for the cement industry? What it means for Dalmia Bharat? Rajesh Ravi, Institutional Research Analyst at HDFC Securities is now joining in. Rajesh, morning. Thank you for joining in. Uh so, strategically for Dalmia Bharat, this is a positive. It fills uh the white space of Central India because they've predominantly been heavy in South and East Asia. What's your assessment for Dalmia Bharat in terms of valuation? What it brings to the table?

[00:00:42]Hi, good morning. Uh yes, uh this was a much uh you know, Dalmia needed this asset and they were on the verge of closing the deal earlier when uh the assets and the whole of the JP assets went through the NCLT. And then there was a cloud of uncertainty whether Dalmia would get these assets. Finally, they were able to negotiate the same and get it from uh Adani Enterprises. So, it is indeed a positive from Dalmia perspective uh in terms of their footprint expansion and uh their aspiration to become a pan-India player.

[00:01:13]Given that these assets were already operational pre-COVID and even during the uh you know, preceding past 2 years, there was some amount of tolling arrangement which Dalmia was doing. So, they have a fair amount of distribution, both trade and non-trade in the market and hence they can ramp up uh ramp up these assets fairly fast.

[00:01:33]Yeah, so from that perspective, it is uh sentimentally positive for Dalmia.

[00:01:38]Sentimentally positive. And your view on valuations? $67 per ton all-in?

[00:01:43]And Dalmia Bharat also has this aspiration to get to 75 million tons by FY28.

[00:01:50]What is the road map to get the balance?

[00:01:52]Would you buy a Dalmia Bharat based on this development?

[00:01:55]Yeah, so uh well, so Adani perspective our understanding is we know factoring in all the refurbishment and the WHR capex to bring this asset at a you know decent margin profile will work out to be around 70 75 dollars per ton which is itself is a decent you know in terms of acquisition cost. And in terms of you know the central market is obviously a decent market where players Adani can deliver good numbers. Overall what we understand is that there will be a you know intensification of the regional competition because of these assets getting operational from Q2 or maybe Q3 itself. So there is some amount of competition which will further build up in the central market and weigh down margins for all the players in the region.

[00:02:51]Okay, got that. What's the Adani angle?

[00:02:54]Why are they selling part of the cement assets? They could have used it to bulk up their own capacity for Ambuja.

[00:03:01]Yeah, this is a key question because we were almost you know we had taken it for granted that ultimately it will land into Ambuja's portfolio because Ambuja has a lower share of the capacities in the central market and we were expecting that this will be for Ambuja's portfolio in the central market. However, we believe that given that Mr. Karan Adani also recently in the fall caution that given that the cost built up which they have seen in the past two quarters they would look to uh tighten their cost metrics immediately rather than chasing behind capacity first. And second, we would also believe that you know at the acquisition at the promoter level for Ambuja given that large amount of borrowing is already there on books they would not want to further you know add pressure in terms of adding capacities.

[00:03:49]They can do brownfield later on and their current capacities are good enough to deliver volume growth. So, from that perspective, Adani Enterprises would have let go of these assets and generate better liquidity.

[00:04:02]From Dalmia, which you had asked earlier from valuation, what we believe that this could largely be valuation target neutral, EV neutral from given that the uh initial EBITDA increase, additional EBITDA which will come through the target valuation would get knocked out because of similar increase in net debt because of the acquisition cost.

[00:04:25]So, for Adani in the near term, it's prudent, financially prudent. You don't want to increase your uh you know, stress the balance sheet at a time when operational costs are already uh ballooning. Uh but over the longer term, I mean, it's always a tug-of-war between near term and longer term.

[00:04:42]So, do you think they did the right thing, Adani?

[00:04:45]So, from Adani, given that they have very strong Adani Group has very strong project execution skill set and the current capacities of ACC and Ambuja have a lot of brownfield opportunities across market. We believe there are even if the Adani Group has let go of these assets, it would not be significantly negative for them. They already they have one of the assets which is already under their fold, the you know, a JP Super the JP Super assets in UP clinker which was under arbitration between Ultratech and Dalmia. So, they may look to develop that at some later point in time and in the near term, they all should focus more on sweating up the existing assets with better margin profile.

[00:05:28]Right. Rajesh, you know, just before we let you go, beyond this deal as well, over the last you know, month or so, we've gotten commentary from either Shree Cement or even the Adanis, they're focusing a lot more on profitability rather than capacity expansion. And in light of the fact that raw raw costs, input costs, and freight cost, etc. have increased.

[00:05:49]Do you believe that there is more headroom for cement companies to now go ahead and take price hikes? And how do you view the stocks now?

[00:05:58]Ideally, that should be the condition given the amount of consolidation which has happened in the past 3 years. We were factoring in that when the acquired assets acquired some decent level of utilization, companies would focus more on better pricing. And that has not played out materially so far.

[00:06:16]And given now that the industry is looking at almost 300 rupees per ton of cost inflation, I take this between Q1 and Q2, there has to be a significant realization uptick. We have seen significant price increase happening across other building materials including you know, consumer durables, building material space, and even in steel prices. However, cement is only building material product which hasn't seen any uh any uh con- uh uh relevant price increase to put it in that perspective. So, yes, given that even logistics cost will go up by 20 to 25 rupees per ton, this is an incremental pressure. The industry need to look through and do uh more price you know, absorb more cement price hike rather than just chasing volumes. Mhm.

[00:07:06]All right, Rajesh, we'll leave it there.

[00:07:08]Thank you very much for joining us this morning.