(Bloomberg) — The battle lines are being drawn in India’s cement sector as Gautam Adani’s expansion spree sets up a race with fellow billionaire Kumar Mangalam Birla’s UltraTech Cement Ltd. to expand capacity and buy assets.

The battle of the titans is likely to intensify as the richest tycoons seek to gain control over the supply of a building material vital to India’s booming infrastructure.

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Adani’s ambitious newcomer and sector leader UltraTech have already struck six deals in less than two years, with Birla’s cement maker announcing a seventh on Sunday to swoop in on a coveted regional player. There are at least half a dozen smaller rivals still to be snapped up.

“Adani’s philosophy when they enter a sector is to dominate and take on competitors on a war footing,” said Aditya Kondawar, Pune-based partner at asset management firm Complete Circle Capital Pvt. Ltd. “When Adani came in, there was a new aggression in the sector which also motivated UltraTech to expand. When competition is at your doorstep, you either step up or step aside.”

Adani Group’s big entry in 2022 changed the local pecking order in a big way, becoming the second-largest cement producer overnight with the acquisition of Ambuja Cements Ltd. and ACC Ltd., but the company has mostly been putting out fires in 2023 following a damning Hindenburg Research report.

The port-to-energy conglomerate has only this year fully re-entered its expansionist policy, stoking a turf war in cement as the Birla establishment continues to hold its ground.

M&A War Chest

Adani, which has made four acquisitions in the sector since entering the market, aims to double annual production capacity to 140 million tonnes by 2028.

The group is looking for more cement assets to expand its reach, acquire key raw materials – limestone reserves – and has a war chest of about $4.5 billion for acquisitions over the next two years, according to people familiar with the discussions who asked not to be named.

Adani Group, which owns India’s largest private port operator, is looking to cut costs significantly even though it cannot match the cost efficiency of Chinese cement makers, a source said.

Sea or inland water transport costs a fraction of trucking and the Adani Ports & Special Economic Zone Ltd. network will help, the person added. Adani Ports is already planning to set up a 2 million tonne cement grinding unit at its transshipment terminal in Kerala. Green energy from group companies can help reduce fuel costs, the person said.

Leadership Moat

To shore up the moat around its leadership, UltraTech acquired a smaller rival last year. In June, it bought a minority stake in a Chennai-based cement maker, before acquiring a majority stake this week. The move is seen as marking its territory to fend off Adani. It is also circling another target.

According to people familiar with Birla’s strategy, the cement giant will continue to expand its operations and buy assets to reach an annual capacity of 200 million tonnes by 2027.

Representatives of the Adani Group declined to comment, while representatives of UltraTech did not respond to an emailed request for comment.

Mission to build

Prime Minister Narendra Modi’s mission to build everything from airports and power plants to roads, bridges and tunnels will boost India’s infrastructure investment to 15 trillion rupees ($179.2 billion) by March 2026, Crisil Ratings said.

This will cause demand for cement to skyrocket, outstripping supply in the coming years, creating expansion opportunities that neither Adani, Asia’s second-richest person, nor Birla can resist.

Adani, which acquired Penna Cement Industries Ltd. last month, has been eyeing Jaypee Group’s and Orient Cement Ltd. in the recent past, according to local media reports. Orient Cement has now also attracted interest from UltraTech.

According to sources, other parties such as Saurashtra Cement Ltd., Mangalam Cement Ltd., Vadraj Cement Ltd. and Bagalkot Cement Industries Ltd. could also be targeted.

Sanjeev Kumar Singh and Mudit Agarwal, analysts at Motilal Oswal Financial Services Ltd., wrote in a July report that the southern parts of India are the most fragmented market for cement in the country, with the highest installed capacity and a large number of companies that have not expanded their capacity over the years.

“It is possible that some of these entities may consider exiting the sector if offered favorable valuations,” Singh and Agarwal wrote.

Hunting ground

This makes the region the perfect hunting ground for billionaires, who have already started making clichéd deals.

Adani’s purchase of Penna Cement in June was intended to expand its footprint in southern India. Days later, UltraTech bought a 23% stake in India Cements Ltd., a Chennai-based company with nearly 14.5 million tonnes of capacity, in a bid to thwart potential overtures from Adani. On Sunday, Birla’s firm bought nearly a third more of India Cements for $472 million, taking its total stake above 55%.

It “enables UltraTech to serve the southern markets more effectively” and accelerates its path to the 200 million tonne target, Birla said in a statement on Sunday.

“The pace of acquisitions in the cement industry was inevitable due to government spending on infrastructure and housing,” said Aveek Mitra, founder of Aveksat Investment Advisory in New Delhi.

According to Mitra, there are about 100 listed and private limited companies (Cement Producers) in India, most of which have only a small market share.

“There is an asset block of 28 million tonnes in the pipeline for acquisition” and M&A deals will continue as the large established players look to retain their market share, Anupama Reddy, co-group head of corporate ratings at ICRA Ltd., wrote in a June 13 note.

Certainly, even with all the aggressive expansion, it would still be difficult for Adani to topple UltraTech. The gap between the two rivals is significant and will remain so, based on announced capacity expansions.

Antitrust investigation

Adani and UltraTech must also take into account the scrutiny of India’s competition authority and avoid acquisitions in areas where they have a large market share.

While demand for cement is strong now, it could slow down in four to five years, said Jyoti Gupta, a research analyst at Nirmal Bang Institutional Equities. Smaller players such as Dalmia Bharat Ltd., Shree Cement Ltd. and JSW Cement Ltd. are also scaling up.

“If infrastructure spending is reduced and there is sufficient supply of housing, will there be enough demand to utilise all this additional capacity?” Gupta said.

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