Adani Cements rules out need to borrow for $5.5-billion capacity expansion.

Adani Cements would rely on operating cash flows and internal accruals to fund its Rs. 46,000- crore ($5.5 billion) expansion capex over the next five years, without taking recourse to external borrowings.

The cement arm of the Adani Group, comprising ACC Ltd. and Ambuja Cements, has set an ambitious target to achieve a production capacity of 140 million tonnes by FY28, from the current 67.5 million tonnes.

“With the funds available from the cement operations, there is no need to resort to external borrowings for the planned expansion,” an official said.

Adani Cements estimates that to set up a 4 million tonne kiln and a 2 million tonne grinding facility, it would cost about $80 a tonne for a modern clinker line and just under $40 a tonne for grinding capacity.

Clinker is produced in the kiln and grinding takes place at the next stage of the process, when clinker is mixed with gypsum to produce various grades of cement.

At the end of the June quarter, ACC and Ambuja Cements had Rs. 11,800 crore in cash reserves. Therefore, it would require another Rs. 33,000-34,000 crore to reach its projected capex figure.

It expects to generate an EBITDA of Rs. 17,500 crore annually till FY28. With the expected EBITDA generation, and accounting for taxes, dividends, and other outgoes, it expects to be left with sufficient cash reserves every year that will add to the capex kitty. When the Adani group had acquired ACC and Ambuja Cements from Holcim and raised $6.3 billion, it had done so without burdening the companies with principal or interest obligations.

HBL