Is the cement sector consolidation at its fag end?

Subscribe to enjoy similar stories. After the Adani Group’s entry into the cement sector in 2022, the industry has been undergoing a phase of consolidation. Big cement companies want to get bigger amid the intense battle for market share gains.

For large listed cement makers Aditya Birla-led Ultratech Cement Ltd and the Adani Group-led Ambuja Cements Ltd expansions via the inorganic route has been a key mantra. Inorganic growth alternatives such as acquisitions tend to be relatively more cost-effective than organic routes. They aid in faster scale-up of operations, in certain cases the acquirer gets access to captive limestone mines more economically.

Plus, expansions into newer geographies helps in lowering the lead distance. Together these factors typically help cement makers to get a tighter grip on operating costs and boost volumes. A Crisil Ratings Ltd note dated 24 March points out that the consolidation that began in FY24, has seen 51 million tonnes of capacity acquired to date, excluding capacities that changed hands due to the entry of a new firm (Adani) in the sector, and an additional 14 million tonnes worth of buyouts announced, which are likely to be completed by the first half of FY26.

Is there more juice left in the consolidation theme then? A key trigger for increased merger and acquisition (M&A) activities in the cement sector this time and even in the past has been balance sheet stress among mid/smaller companies that then become potential acquisition candidates. Acquiring assets of a distressed company usually means reasonable valuations for the acquirer. But from here on, the consolidation pipeline is expected to have shrunk with very few companies witnessing balance sheet constraints.