Holcim has grabbed the number two slot in the Indian cement industry following the acquisition of 14.8 per cent stake in Gujarat Ambuja.
Market leader, the Aditya Birla group, now has a competitor breathing down its neck. Till now, the Birla group's cement output, at about 38 million tonne per annum, was almost the twice of its nearest competitor, ACC, and more than the combined capacity of ACC and Gujarat Ambuja.
Not anymore. Taking into consideration ACC's cement production capacity of about 18 million tonne, Gujarat Ambuja's 14 million tonne and Ambuja Cement Eastern's 2 million tonne, Holcim will have 34 million tonne per annum capacity, 4 million tonne less than the capacity of the Birla Group.
The ACC and Ambuja combine plan to add about 3.5 million tonne, say market sources. Birla company, Grasim, is expected to add another million tonne to its capacity within a year.
In terms of market share too, the Birla group's comfort level has been considerably reduced. While group companies have an aggregate share of about 23 per cent, that of the Ambuja-ACC combine is just 2 per cent lower at about 21 per cent. Swiss cement major Holcim has a capacity of about 160 million tonne per annum.
Industry analysts have welcomed the move. "It is a positive development for the sector and the consolidation will help companies get better prices," said an analyst with a leading investment firm.
"The deal also augurs well for smaller players," said a cement industry observer. "Their valuation will only increase and in case there are more consolidation moves, these companies will get a good price," said an analyst.
The consolidation in the cement sector has been linked to foreign participation. It started with French major Lafarge buying out Tata Steel's cement business.
This year foreign funds have shown interest in the sector. GE Capital purchased a chunk of debt from existing lenders to Sanghi Industries, a Hyderabad-based cement and clinker manufacturer, for about Rs 725 crore (Rs billion).
A few smaller companies such as Andhra Cement, Saurashtra Cement and Dalmia Cement have also attracted interest from foreign and domestic funds such as JP Morgan, DSP Merrill Lynch and Asian Debt Management fund.
CONCRETE REALITY
