The Adani Group’s cement businesses are planning to reduce their dependence on distributors or wholesalers in a bid to enhance profitability. In a pilot project, Ambuja Cements Ltd and ACC Ltd have decreased the number of distributors from 12 to three in South Gujarat, a region home to a significant portion of the state’s industries and population. Both cement companies intend to replicate this distributor reduction strategy across the country in the coming months.
An executive familiar with the development noted, “The profitability of the distributors exceeds that of some cement manufacturers, which needs to change. With fewer distributors, they can potentially increase their earnings through higher volumes, provided they actively seek discounts.”
Adani aims to establish stronger relationships with retailers, similar to Asian Paints’ direct-to-dealer strategy, which eliminated wholesalers and distributors. Furthermore, all institutional sales will be handled directly by ACC or Ambuja, streamlining the process for large-scale projects like flyovers.
Adani’s pursuit of improved profitability complements existing measures, such as reducing energy and transportation expenses, as well as integrating management for Ambuja and ACC under a single team, as previously outlined by Ajay Kapur, CEO of Adani’s cement business.
Notably, Adani’s efforts to challenge distributor monopolies may have faced hurdles if the company remained part of the Cement Manufacturers’ Association. In June, Adani Cements withdrew from this group, which comprises 40 of the largest cement manufacturers in the country.
The Adani Group became India’s second-largest cement manufacturer in May of the previous year following its $10.5 billion acquisition of Ambuja Cements and ACC from Holcim. In August, Ambuja Cements agreed to acquire a significant stake in Sanghi Industries, with the group implementing cost-saving measures such as a conveyor system for transporting cement and reducing reliance on trucks. These efforts have contributed to an improvement in the Ebitda margin, from 15.5% in the June quarter of the previous year to 22.2% by the end of June this year.
