Kumar Mangalam Birla, having successfully acquired Larsen & Toubro's 16.5 million tonne per annum cement capacity, has clearly emerged as the largest cement producer in the country with around 31 million tonne capacity under his fold. This gives him a direct control of over 25 per cent of the total domestic cement market.
Other cement majors in a the country are already fearing a monopoly situation if the B K Birla group cement capacities finally come under the A V Birla group fold.
Significantly, what would give Birla an edge in the business is the fact that he would now be in a position to cut freight costs which constitute a major chunk of the total production costs. After the integration of the L&T capacities, Grasim will now be in a position to save close to Rs 90-100 crore (Rs 90 million -1 billion) annually through freight rationalisation.
The L&T-Grasim combine is expected to acquire a price determining position in the central, western and to a great extent in the eastern markets. Around 42 per cent of the combine's capacity will be in its leadership zones, while around 18 per cent of the capacity will be where the combine will enjoy a number two position.
The other major player, the ACC-Ambuja combine currently enjoys an undisputed market leadership position in the northern markets and to some extent in western India.
Consider this: in Maharashtra, the most lucrative market in the country where L&T enjoys a stronger foot-hold compared with Grasim, the combine will now be catapulted into a price determining position. Grasim, currently feeds the Maharashtra market by transporting cement from its Andhra Pradesh and Madhya Pradesh units.
The Maharashtra market accounts for around 30 per cent of the total sales volume of L&T and around 55 per cent of the that of the combine. This is higher compared with the around 45 per cent of the total sales of the Ambuja-ACC combine.
L&T's Awarpur Cement Works, located near Nagpur in Maharashtra houses two cement plants having a capacity of 3 million tonne per annum. This would complement Grasim's grinding unit at Hotgi in Maharashtra.
In central India, Grasim's capacities include Vikram Cement at Jawad and Grasim Cement at Raipur in Madhya Pradesh and Rawan unit at Chattisgarh while L&T's capacities in the region include its Hirmi plant located near Raipur in Chattisgarh.
L&T's Hirmi unit aided by its around 1 million tonne grinding unit at Jharsugda in Orissa enable the company to feed markets in eastern and central India and form the ideal location for cement and clinker exports to Nepal and Bangladesh.
Down south, L&T's 3.6 million tonne Arakonam unit near Hyderabad at Andhra Pradesh combined with Grasim's Reddipalayam unit and Dharni Cement in Tamil Nadu would enable the combine to dominate markets in Andhra Pradesh, Karnataka, Tamil Nadu and Kerala.
