E-Paper
Nirma to buy Lafarge India biz for $1.4 bn
MUMBAI: Nirma, the Ahmedabad-based, Karsanbhai Patel-led maker of soap sand detergents, on Monday agreed to acquire the Indian assets of LafargeHolcim, the world’s
MUMBAI: Nirma, the Ahmedabad-based, Karsanbhai Patel-led maker of soap sand detergents, on Monday agreed to acquire the Indian assets of LafargeHolcim, the world’s largest cement producer, for $1.4 billion (around ₹9,300 crore).
The surprise deal saw Nirma edging out high-profile bidders like JSW Cement and the Piramal group. It signals a revival of interest in the local cement industry, as well as the entry of a detergents maker like Nirma, an unlisted company, in the pecking league of the Indian cement sector. Nirma has an annual turnover of over ₹7,000 crore.
The deal will be subject to approval from the Competition Commission of India (CCI), and the proceeds will be used by LafargeHolcim to reduce debt.
Lafarge India operates three cement plants and two grinding stations with a total capacity of around 11 million tonnes per annum (mtpa). After the sale, LafargeHolcim will continue to operate in India through its subsidiaries ACC and Ambuja Cements, which has a combined capacity of over 60 mtpa.
“This agreement is an important step in our CHF (Swiss Franc) 3.5 billion divestment programme. With this deal, two third soft he programme has been secured and the remainder is well on track,” LafargeHolcim CEO Eric Olsen said.
France’s Lafarge and Swiss cement major Holcim had announced a merger in 2014 to create the world’ s largest cement player. But the deal ran into competition commission hurdles in many markets, including India. The sale of Lafarge India’ s assets will help the companies complete their global merger.
The Nirma-Lafarge deal is the third such agreement in the cement sector this year.
Earlier in April, UltraTech Cement struck a deal to buy the cement assets of Jaypee Group for ₹16,189 crore. In February, Anil Ambani-led Reliance Infrastructure sold its cement business to B ir la Corp for ₹4,800 crore.
India is the world’s second-largest cement producer after China with a capacity of around 400 mtpa. There are estimated to be over 500 cement units across the country, but the top 20 companies constitute over 70% of India’ s total production.
Analysts therefore see more consolidation ahead.
This is the second attempt by Lafarge to sell its assets in India. The CCI last year directed the company to sell 5 mt pa of capacity in eastern India to comply with competition norms. Lafarge had agreed to sell the assets to the MP Birla Group for around ₹5,000 crore in August last year, but the deal fell through due to regulatory hurdles over the transfer of mining rights along with cement assets. LafargeHolcim then revived plans to sell the entire India business of Lafarge. The Centre, too, has since amended the Mines and Minerals (Development and Regulation) Act to allow such transfer of assets.
Nirma has a cement plant in Rajasthan with a capacity of around 2 million tonnes and the long-term growth potential for the sector may have prompted it to scale up, an analyst at a large domestic brokerage said.
Nirma did not respond to HT’ s requests for comments.
“Many players came into fray in the last few years with small capacities. If companies can’t scale up and the management doesn’ t have the bandwidth, they will look to exit. So, cement as an industry will see some consolidation happening… We have already seen two to three big deals happening this year,” said Dharmesh Kant, head, retail research at Motilal Oswal.
