Adani Group's cement businesses are aiming to decrease their dependence on distributors and wholesalers in order to increase their profitability.
A trial project has been initiated, in which Ambuja Cements Ltd and ACC Ltd have reduced the number of distributors from 12 to three in the south Gujarat region, according to a report by Mint.
This area has a significant population of small and medium-sized industries, as well as about 20 per cent of the state's population.
It has been stated that both cement companies are likely to reduce the number of distributors across the country in the upcoming months, according to a company executive who spoke to Mint on the matter.
“The profitability of the distributors is more than some of the cement manufacturers,... this needs to change. Once you have fewer distributors, they can continue making more money on volumes, provided they aggressively seek discounts," said the executive privy to this matter.
“Both Ambuja and ACC are very strong brands and can do even better if we build an even better engagement with retailers," the executive added.
It is noteworthy that the Adani Group had acquired both ACC and Ambuja cements in September 2022. Adani holds 63.15 per cent stake in Ambuja Cements and 56.69 per cent in ACC.
The Adani group is striving to catch up to Ultratech Cement, which is the world's third-largest cement manufacturer (excluding China) with a production capacity of over 135 million tons. Adani is currently increasing its capacity to reach 160 million tons and ultimately 200 million tons.
However, the Adani group is still paying off expensive debt that was obtained as a bridge loan to fund the acquisition of ACC and Ambuja Cements.