Economy & Market
Output soars on statistical base effect
The core sector data should not be taken at face value as they come over unusual circumstances in 2020. A better way would be to compare over March even though there are seasonal influences.
In April 2021, the eight core sectors registered a double-digit output growth of 56.1 per cent compared with 11.4 per cent growth in March 2021. The high growth in output can be attributed to a low base effect (-37.9 per cent in April 2020) as the nation-wide lockdown imposed last year brought production activities to a standstill resulting in huge output losses. The expansion in April has been led by an exponential growth in output of steel and cement. All sectors except crude oil have witnessed positive growth during the month.
However, the core sector output has been lower by 15.1 per cent in April 2021 over the March 2021 level with a broad-based contraction across all segments on a month-on-month basis. For March 2021, the core sector growth has been revised upwards from 6.8 (prov.) to 11.4 per cent (first revision) on account of improved coal production.
Key highlights
Coal production rose to a six-month high of 9.5 per cent in April 2021, higher than 0.3 per cent in March 2021 and -15.5 per cent in April 2020. However, coal production was lower sequentially in April 2021 compared with March 2021. The second wave of Covid-19 pandemic impacted production of coal as large number of employees tested positive for virus in state-run CIL.
Crude oil production witnessed a de-growth of 2.1 per cent in April 2021 compared with -6.4 per cent growth in the corresponding month last year. This fall can be ascribed to the less than planned contribution from workover wells, drilling wells and old wells by government owned oil companies. Production by private/joint venture companies was marginally lower on YoY basis, due to few wells being under maintenance, and some not producing due to possible casing damage, snapped/unscrewed sucker rod string and unavailability of effective demulsifier.
Natural gas production rose by 25 per cent in April 2021 as against a contraction of 19.9 per cent in April 2020 as output from fields operated by the private sector and joint ventures tripled and bulk of this came from eastern offshore fields. However, production by ONGC was flattish during the month.
Refinery production was in the positive territory for the first time in 13 successive months. Output in this segment grew by 30.9 per cent in April 2021 as against negative growth of 24.2 per cent in April 2020. Of these, major products that witnessed a rise in production during the month were LPG, Naptha, petrol, petcoke, bitumen, while products that saw a fall in production were superior kerosene oil and furnace oil.
Fertilisers production in April 2021 grew by 1.7 per cent over -4.5 per cent in the corresponding month last year. This lower output growth is reflective of the limited impact of coronavirus led disruptions on this segment in April 2020. Fertilizers production in April was 5.4 per cent lower when compared to March as the demand for fertilizers did not pick up because Kharif sowing doesn?? start in April.
Steel output saw exponential growth of 400 per cent in April 2021 compared with negative growth of 82.8 per cent in April 2020. However, sequentially steel production fell by 20.6 per cent. The rising coronavirus cases across the country, labour exodus and the diversion of liquid oxygen to hospitals for coronavirus patients impacted steel production during April 2021.
Cement production on a year-on-year basis increased by 548.8 per cent in April 2021 over -85.2 per cent April 2020. Monthly cement production declined by 15.2 per cent in April 2021 compared to March 2021 as the uptick seen in infrastructure and construction activities since H2-FY21 witnessed a slowdown due to recent spike in Covid-19 cases and subsequent imposition of localised restrictions from April 2021. Even the rural demand that had aided growth in demand last year seems to be affected by the second wave of Covid-19.
Electricity production increased by 38.7 per cent in April 2021, higher than 22.5 per cent in the previous month and -22.9 per cent in the corresponding month last year primarily on account of a low base effect as demand for electricity from the commercial sector was dampened by the disruption in economic activities in April last year. The growth in output witnessed in this segment during the month is the highest in the new series with the base year 2011-12.
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As expected the core output for April 2021 has been elevated on the back of a statistical base effect. The trend is likely to continue in the months ahead owing to output disruptions of May 2020 and slow pick-up in production following resumption of economic activities in June and July last year. The index of industrial production for April 2021 is likely to be high given the double-digit contraction of 57.3 per cent witnessed in the corresponding month last year.
Courtesy: CARE Ratings
ABOUT THE AUTHOR:
Akanksha Bhende, Associate Economist with CARE Ratings.
Disclaimer: This report is prepared by CARE Ratings. CARE Ratings has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE Ratings has no financial liability whatsoever to the user of this report.
Concrete
Lohia Corp Expands Global Footprint With Acquisitionof J.j. Jenkins Inc and Strategic Joint Venture With Omgm
Acquisition adds 16.6 MTPA capacity (8.5 MTPA operational, 8.1 MTPA Ready to Execute).
Accelerates Ambuja’s journey to achieve 100+ MTPA operational capacity in FY 25
Provides 6 MTPA potential additional capacity in North India, leveraging OCL’s high quality limestone reserves in Rajasthan
EDITOR’S SYNOPSIS
- Ambuja enters into a binding agreement to acquire 46.8% stake in Orient Cement Ltd (OCL). The acquisition helps to move towards target capacity of 140 MTPA by 2028.
- OCL has an existing 5.6 MTPA clinker and 8.5 MTPA cement operational capacity, 95 MW CPP, 10 MW WHRS, 33 MW Renewable Energy spread across the states of Telangana, Karnataka and Maharashtra. It improves Adani Group’s market share pan-India by 2% in the cement industry.
- OCL has secured a concession from Madhya Pradesh Power Generating Company Ltd (“MPPGCL”) to set up 2.0 MTPA Cement GU within the premises of Satpura Thermal Power Station in Sarni, MP.
- OCL also has a large high quality limestone mining lease in Chittorgarh, Rajasthan, providing the potential to set up additional 6 MTPA capacity in North India.
- The acquisition of OCL complements Ambuja’s existing cement footprint, reducing overall lead distances and logistics costs for the cement business and improving market share in our core markets.
- Acquisition will be funded through internal accruals, Ambuja remains debt free.
Ahmedabad, 22 October 2024: Ambuja Cements, the cement and building material company of Adani Cement and part of the diversified Adani Group, today announced the signing of a binding agreement for the acquisition of Orient Cement Ltd (OCL) at an equity value of Rs. 8,100 crore. Ambuja will acquire 46.8% shares of OCL from its current promoters and certain public shareholders. The acquisition will be fully funded through internal accruals.
“This timed acquisition marks another significant step forward in Ambuja Cements’ accelerated growth journey, increasing cement capacity by ~30 MTPA within two years of Ambuja’s acquisition,” said Mr Karan Adani, Director of Ambuja Cements. “By acquiring OCL, Ambuja is poised to reach 100 MTPA cement capacity in FY 25. The acquisition will help to expand Adani Cement’s presence in core markets and improve its pan-India market share by 2%. OCL’s assets are highly efficient, equipped with railway sidings and well supported by captive power plants, renewable energy, WHRS and AFR facilities. OCL’s strategic locations, high-quality limestone reserves and requisite statutory approvals present an opportunity to increase cement capacity in the near term to 16.6 MTPA.”
Mr CK Birla, Chairman of Orient Cement and the CK Birla Group, said, “The CK Birla Group is continuously reallocating capital to sharpen its focus on consumer centric, technology driven and service-based businesses. I take pride in Orient Cement’s impressive track record of building premium brands and maintaining a leading market share in the geographies it operates in. We are confident that the Adani Group, with its strong focus on cement and infrastructure, is the ideal new owner to drive continued growth at Orient Cement for our people and stakeholders”.
Ms Amita Birla, Co-Chairman, CK Birla Group, added, “Orient Cement has a strong market presence, with sustainability initiatives, particularly in renewable energy, being a significant part of its DNA. I am convinced that Ambuja Cements is the right home for all our colleagues at Orient Cement, as well as our customers.”
OCL has 5.6 MTPA clinker capacity and 8.5 MTPA cement capacity along with statutory clearance to increase the clinker capacity by another 6.0 MTPA and cement capacity by another 8.1 MTPA. In addition, OCL also has a limestone mining lease in Chittorgarh for setting up an Integrated Unit (IU) with clinker of 4 MTPA and a split Grinding Unit (GU) of 6 MTPA in North India. OCL has also secured a concession from MPPGCL, Madhya Pradesh for setting up a Grinding Unit within the premises of Satpura Thermal Power Plant. Both these complement the Adani Group’s existing cement footprint. (Refer Annexure – 1 for OCL’s location wise cement capacity and other assets and Annexure – 2 for Adani Cement’s footprint post-acquisition of OCL.)
OCL has recently commissioned a WHRS in Chittapur IU and is in the final stage of commissioning 16 MW solar in Chittapur and 3.7 MW solar in Jalgaon. OCL’s efficient plants, highly motivated teams, strong balance sheet and well-distributed dealer network will be excellent additions to the Adani Group’s existing cement business. OCL’s existing dealers will move to Adani Cement’s market network, creating formidable synergies.
Ambuja plans to optimize OCL’s overall capacity utilization to enhance its cost and competitiveness and improve its operating performance while leveraging the synergies inherent in the existing cement business.
About Ambuja Cements Ltd (ACL)
Ambuja Cements Ltd is one of India’s leading cement companies and a member of the diversified Adani Group – the largest and fastest growing portfolio of diversified sustainable businesses. Ambuja, with its subsidiaries ACC Ltd, Penna Cement Industries Ltd and Sanghi Industries Ltd, has taken the Adani Group’s cement capacity to 88.9 MTPA, with 20 integrated cement manufacturing plants, 20 cement grinding units and 12 bulk terminals across the country. Ambuja has been recognized among ‘India’s Most Trusted Cement Brand’ by TRA Research in its Brand Trust Report, 2024 and among ‘Iconic Brands of India’ by The Economic Times. Ambuja has provided hassle-free, home-building solutions with its unique sustainable development projects and environment-friendly practices since it started operations. The company has many firsts to its credit – a captive port with six terminals that facilitates timely, cost-effective and cleaner shipments of bulk cement to its customers. Its innovative products like Ambuja Cement, Ambuja Plus, Ambuja Compocem and Ambuja Kawach are now listed in the GRIHA product catalogue. These products not only fulfil important customer needs but also help in significantly reducing their carbon footprints. Being a frontrunner in sustainable business practices, Ambuja Cements ranks among ‘India’s Top 50 companies contributing to inclusive growth’ by SKOCH and ‘India’s Top 50 Most Sustainable Companies’ Cross-Industry by BW Businessworld.
For further information on this release, please contact: roy.paul@adani.com
Annexure -1 | Existing Cement Assets of Orient Cement Limited
| Plant | Clinker
(MTPA) |
Cement
(MTPA) |
CPP/WHRS/Solar | Railway Siding |
| Devapur IU, Telangana | 3.5 | 3.5 | CPP – 50 MW | Yes |
| Chittapur IU, Karnataka | 2.1 | 3.0 | CPP – 45 MW
WHRS – 10 MW Solar – 16 MW* |
Yes |
| Jalgaon GU, Maharashtra | – | 2.0 | Solar – 13.5 MW+
3.7 MW* |
Yes |
| Operational Capacity | 5.6 | 8.5 |
* capacity is in commissioning stage
Annexure – 2 | Footprint of Adani Group – Cement business post OCL Acquisition
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