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Cement: S India next war zone

Now that the Holcim-Gujarat Ambuja deal has been consummated, what is the way forward for the various players involved?

india Updated: Feb 02, 2006 01:38 IST

Now that the Holcim-Gujarat Ambuja deal has been consummated, what is the way forward for the various players involved?

For starters, Holcim, which is now the single largest FDI investor in India with a net investment of $2billion over the last one year in three different tranches (ACC, Ambuja Cement and finally Gujarat Ambuja), will now try and consolidate all its assets under one operational umbrella.

To achieve this end, they will be appointing a country head who in all probability will be the present Gujarat Ambuja managing director Anil Singhvi.

Whether the new entity is branded Holcim remains a matter of conjecture. With a capacity of 35 million tonnes under its belt, Swiss major Holcim is now the largest cement player in the country.

Sources close to developments reveal that of the Rs 2,142 crore which have accrued to the Sekhsaria and Neotia families, Rs 1,540 crore have gone to the Sekhsaria wing and the remaining to the Neotias.

It is believed that with Narottam Sekhsaria wanting to exit the cement business, his son Pulkit wants to enter the new age businesses with the resultant pile of cash.

It is understood that Pulkit will announce his plans in the near term. He reportedly has three focus areas — retailing, entertainment and restaurants.

The Neotia faction of Gujarat Ambuja led by son Harsh, meanwhile, wants to concentrate on its core competence of realty and hotels. It has three realty outfits — Ambuja Housing and Infrastructure, Bengal Ambuja Housing Development and Bengal Ambuja Metro — two of which are joint ventures with the West Bengal Housing Board. It also owns a resort property called Radisson Fort in Raichuk.

With Sekhsaria wanting to exit the cement business since his family was keen on doing something else, the swadeshi brigade in Indian cement is increasingly losing out.

The dynamics of Indian cement will undergo a change now what with other global majors eyeing cement assets in India.

The two top entities — Holcim combine and Aditya Birla Group’s Grasim and Ultratech — now control over half of India’s cement capacity.

Lafarge and Italicement will try and scout for assets in southern India to try and emerge as a counterweight to the two bigger players.

The biggest entity now under Holcim’s control has an annual cash flow in the vicinity of $500 million, revenues of $2 billion and a market capitalisation of nearly $5 billion. South India could well be the next battleground for the global heavies. The biggest players and potential targets being India Cements and Madras Cement.

Many analysts argue that the branded cost of the two big acquisitions by Holcim vary between $100 per tonne for ACC and over $190 per tonne for Gujarat Ambuja, but if one averages the cost then the cost per tonne is not so much.

Moreover, it is obvious that both an entry premium and a non-compete premium have been levied for the Gujarat Ambuja deal.

The GACL deal was in the works for close to two years, with Anil Singhvi acting as the pointman for Ambuja.