Opinion
Grey to green: Let the UltraTech-Adani rivalry spur a race for clean cement
Summary
- UltraTech’s acquisition of India Cements will boost its capacity lead over Adani, but no less critical are the carbon reduction plans of this hard-to-abate industry’s arch-rivals. Let their competition to go green heat up, not the planet.
Market leader UltraTech’s India Cements deal springs it further ahead in its race with the Adani Group for cement production capacity. As industry consolidation proceeds, however, another race calls for attention—to de- carbonize this hard-to-abate sector. Rivalry over containing carbon emissions is underway, thankfully, as businesses join the battle against climate change.
The 32.7% stake purchase announced by the A.V. Birla group’s cement-maker adds to the 22.8% ownership of India Cements it acquired barely a month ago. With its total stake headed above the halfway mark, UltraTech will make an open offer for another 26%.
If that’s fully subscribed, it would need to either take India Cements private or shed about 6.5% of its equity to comply with a rule that says a quarter of every listed firm’s shares must be publicly held.
Also read: UltraTech Cement shares gain on India Cements acquisition; Check deal contours, industry impact, stock price outlook
That UltraTech is ready to go through all that speaks not just of its need to expand its coverage of south India, as the deal enables, but also to stay ahead of Adani, which has snapped up three companies since entering the field in 2022, including ACC and Ambuja Cement, and is said to be eyeing another target.
While UltraTech still has a big lead, Adani’s quick inorganic expansion has left no doubt that it is aiming for market leadership. Given Adani’s large financial war-chest, which took only a slight hit from the Hindenburg episode, it makes sense for the Kumar Mangalam Birla-led A.V. Birla Group to pre-empt its takeover trail.
The India Cements deal will add 14.45 million tonnes per annum of cement capacity to its existing total of 154.86 million tonnes. In comparison, Adani’s annual capacity is around 90 million tonnes, with its sights set on doubling this number within three years. As India undergoes a phase of rapid construction, demand for cement is projected to grow robustly for years.
The industry’s challenge, however, is to minimize its carbon exhaust even as it keeps us well supplied. As far as industries go, cement emissions are particularly difficult to abate. A key input is limestone, which undergoes a process called calcination that converts it to clinker by releasing carbon dioxide. This accounts for over half the sector’s emissions, globally.
Also read: Billionaire Battle Heats Up as Adani Challenges Birla in Cement
Since the making of clinker requires temperatures as high as 1,450° Celsius, it’s also highly energy-intensive, which adds to the carbon footprint of a cement plant, unless clean sources are used. Like all processes, though, cement production must be decarbonized to the extent possible.
We don’t need to wait for the dust to settle on the capacity race to track rivalry in the arena of climate action. The industry’s arch-rivals both aim for clean-ups by 2050. UltraTech plans to use renewable energy and waste heat recovery systems as it targets a share of 85% green energy in its usage mix by 2030, aided by its partnership with Finland-based Coolbrook for modern tech enablers.
The Adani Group has also been moving on clean fuels, even as it invests heavily in green hydrogen, on which many industrial hopes are pinned. Partial clinker substitutes like fly ash and slag are also being explored by both, although what’s awaited is a chem-tech invention that can act as a clean binding agent.
Innovative carbon-capture methods could open another pathway. Research and development will have to play a major role in any such climate innovation. Should mutual competition hasten their efforts to go green, the better it would be for everyone. Let’s see the UltraTech- Adani rivalry heat up, not the environment.
