India is the world's second largest producer of cement after China with an installed capacity of over 200 million tonnes. [Type the author name]
The government over the recent times has been giving a lot of importance for various infrastructure projects, highways, housing. Naturally the increase in consumption of cement in the coming years is expected. This kind of growing and robust initiatives by government marked an increase in the mergers and acquisition activity by both domestic and global companies.
Since 1999 the big names of global cement industry have started vying for the domestic companies and this trend is bound to increase in the coming years too.
With the GDP expected to grow at a staggering 8-9% as predicted by International Agencies, the infrastructural activity will increase to cater to the needs of this economy. So the global bandwagon is set to reap the benefits from the world's second fastest growing economy
Below is the list of the foreign companies that have made acquisitions since 1999 in India.
S.No
New Entrant
Country
Purchased
1
Holcim Ltd
Switzerland
14.8% of Ambuja Cement
2
Lafarge Cement
France
Raymond Cement TISCO(TATA Steel)
3
Italcementi
Italy
Zuari industries
4
Heidelberg
Germany
Indo-Rama Cement Dimond Cement
Cost per tonne paid by the foreign players for the acquisitions that have happened in India since 1999.
Year
Player
Cost/Tonne
2006
Holcim-GACL
227
2005
Holcim-ACEL-ACC
129
2004
Italicementi-Zuari
91
2000
Lafarge-Raymond
80
1999
Lafarge-TISCO
72
In cement sector, any acquisition is valued as cost paid per tonne of installed capacity. Over the years there were a lot of acquisitions like Grasim- L&T, Lafarge- Raymond, Lafarge - Tisco, etc and this valuation of GACL was the highest till date.
Holcim-GACL-ACC
Holcim has acquired a 14.8 per cent stake in Gujarat Ambuja Cement Ltd (GACL). Only a year before did this company enter into a strategic alliance with GACL.
The acquisition made Holcim the largest player in the Indian cement industry.
The acquisition of a stake in GACL involves Holcim paying $477 million (Rs 21.2 billion) at Rs 105 per share, which includes Rs 15 per share as non-compete fees to the promoters.
The valuation price paid by Holcim to acquire Gujarat Ambuja Cement Ltd was twice the valuation price paid to acquire ACC before this acquisition.
Structure of the equity distribution in Holcim-GACL-ACC Group
GACL has a great track record of low operational costs, high operational efficiency and strong market position. Apart from that Ambuja Cement has very good markets in Middle East.
The technical know-how of Holcim i.e, Waste Heat Recovery, use of alternative fuels, using information technology was used effectively by Gujarat Ambuja Cement.
The symbiotic relation between the two companies is indeed doing well to the cement sector. Gujarat Ambuja has done extremely well before the acquisition and has done even better after the acquisition too.
Holcim-ACC
Holcim picked up huge stakes in ACC Ltd, another company of Indian Cement sector. Ambuja Cement already had a significant stake in this company and with the acquisition of Ambuja by Holcim; the effective stake of Holcim in ACC Ltd has gone up very much.
After the acquisition, ACC steadily increased its capacity and by the end of 2009, the installed capacity rose to 26 million tonnes.
ACC adopted various stringent cost reduction steps which led to increase in cash reserves. Productivity was also improved by improving operating efficiencies. Using the technical know-how from Holcim, it started effectively using alternative fuels. A lot of best practices were implemented in ACC that were being followed at Holcim
ACC itself was very active in the M&A space.
It acquired 14.3% equity stake in Shiva Cement Ltd (SCL), Roukela. SCL has an integrated cement plant and this is poised to add huge capacities to ACC.
The company has also acquired limestone reserves of Lakheri Works for Rs 35 Crore to increase its reserves for increasing its production of cement.
Ultratech - ETA Star Cement
Ultratech Cement is the country's second-largest cement maker and a part of Aditya Birla group. It acquired Dubai-based ETA Star Cement. ETA Star has a market share of 10% and 20% in Abu Dhabi and Bahrain, respectively. To transform Unitech into a larger company, this acquisition was very much needed. Along with this acquisition, some consolidation also was done in the domestic front.
The acquisition deal was valued at Rs 1,700 crore.
First stage: The Cement Business of Grasim Industries Limited was demerged into a separate entity viz. Samruddhi Cement Limited.
Second stage: Samruddhi has been amalgamated with UltraTech.
The company (UltraTech) will become the largest cement company in India, with capacities of 49 million TPA of grey cement across 22 plants, 504 MW captive thermal power plants and 9.5 million cubic metres of Ready Mix Concrete across 73 plants.
Unitech, a pan India player with a market share of around 20%, the products like White Cement and Wallcare Putty would be sold in the market with Unitech name on them.
After the amalgamation of Samruddhi and the acquisition of ETA Star Cement, Unitech's capacity will stand at 52 Mtpa and this will make it the 9th largest cement company in the world.
UltraTech Cement Limited is the country's largest exporter of cement clinker.
UltraTech manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement.
UltraTech also manufactures ready mix concrete (RMC). The export markets span countries around the Indian Ocean, Africa, Europe and the Middle East.
Dalmia Cement - OCL (Orissa Cement ltd.)
Dalmia Cement (Bharat) Limited (DCBL), one of the leading multi spectrum cement manufacturing companies in India, increased its stake in OCL India from current 21.7% to 45.4% through inter-se transfer.
Dalmia Cement after this expansion of foot print in Eastern region becomes a two region player.
The stake increase aligned well with the Company's overall all India Expansion strategy.
OCL India is a diversified company with interests in cement and refractory business and has a very strong presence in the Eastern region of the country.
DCBL, with total gross income of around Rs 2,500 crore has business interests in two major segments, cement and Sugar. It has cement plants in Southern States of Tamil Nadu (Dalmiapuram & Ariyalur) and Andhra Pradesh (Kadapa), with capacity of 9 million tonnes per annum.
The combined of Dalmia and OCL capacity put together will be 14.3 million tonnes of Cement across the two regions and thus one of the top cement players in the country.
Italcementi - Zuari
The Italcementi Group, the fifth largest cement producer in the world and the biggest in the Mediterranean region. It has net sales over 6 billion Euros in 2008 and a capacity of 70 million tonnes. Italcementi Cement Company with the help of the Ciments Français, a subsidiary for its global activities, has acquired shares of the Indian cement manufacturer - Zuari Cement Limited.
The acquisition was of 50% shareholding and the deal was of about 100 million Euros.
It previously took over the plant of the Zuari Cement Limited in Andhra Pradesh in southern India and earned revenues of around 100 million Euros and an operating profit of 4 million Euros.
The expertise, know-how and culture of a number of companies from more than 22 countries in 4 continents.
An industrial network of 63 cement plants, 15 grinding centers, 5 terminals, 134 aggregates quarries and 613 concrete batching units.
Zuari Cement is in the process of increasing this capacity to 6 million tonne by setting up of a new 5500 tonne per day clinker line at Yerraguntla and a grinding center at Chennai.
Heidelberg - Indorama
The Heidelberg Cement was set up in 1873 and has a long and prosperous history and this company being one of the best in the world has its bases in different countries.
Heidelberg Cement Company entered into an agreement for a 50% joint venture with the Indorama Cement Ltd., situated in Mumbai, originally possessed by the Indorama S P Lohia Group.
The company acquired a majority participation in the cement manufacturer Mysore Cements. Mysore Cements operates two cement plants and a grinding plant in central and southern India. At the end of 2006, Heidelberg acquired the grinding plant Cochin Cements in southern India.
Vicat-BCCL (Bharathi Cement Company Ltd.)
French cement major, Vicat, very recently announced an interest to acquire 51% stake in Bharathi Cement Company Limited (BCCL) promoted Kadapa Y. S. Jagan Mohan Reddy. Bharathi brand of cement is a premium product and has been commercialized within a short span of time in Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, Goa and plans are afoot to penetrate into the Maharashtra market.
BCCL operates a cement plant of two lines that will reach a total annual capacity of 5 million tonnes of cement at the end of 2010.
With a current cement capacity of 2.5 million tonnes, it has been selling under the brand name of Bharathi Cement since 2009.
This is the second investment for Vicat in India as it has already established a joint venture company with Sagar Cements Limited to build a Greenfield cement plant in Gulbarga in the Karnataka, producing 5.5 million tonnes of cement per annum on two clinker production lines, each with a daily capacity of 6,000 tonnes.
The first line of production, with an annual cement capacity of 2.75 million tonnes, will be commissioned in 2012.
Lafarge's Acquisitions in India
Lafarge Cement is famous all over the world for its premium quality and has been used to build many landmark buildings, structures globally. Lafarge India is a subsidiary of the French Building Materials major Lafarge. The company is a leading cement player in Eastern India. Its brands Lafarge Cement and Lafarge Concreto Cement enjoy high brand equity here and are amongst the highest priced brands. Lafarge is committed to the Indian market and has firm plans to expand its capacity in India.
Lafarge entered the Indian market in 1999, with the acquisition of the cement business of Tata Steel.
Raymond Cement facility was acquired in 2001.
Lafarge currently has four cement plants in India: two integrated plants in the state of Chhattisgarh, one grinding station each in Jharkhand & West Bengal.
Total cement production capacity of Lafarge in the India stands at around 6.5 million tonnes.
Lafarge India produces different types of cements like Portland Slag Cement, Portland Pozzolana Cement.
