Mergers and Acquisitions in the Cement Industry

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India today is the second largest producer of cement in the world after China. With the Government of India giving boost to various infrastructure projects, housing facilities and road networks the cement industry is looking at a potential gold mine and thus the growth rate of an enviable pace. The expected increase in India is upto 236.16 MT in FY11 and 262.61 in FY12. The cement industry is dominated by 20 large companies which account for 70% of the total cement production.

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History & Background

In 1889 a Kolkata based company started manufacturing cement from Argillaceous. But an organized shape was given to the industry in the early 1900s. Some important landmarks in the industry’s history are: 1914: India Cement Company Ltd was established in Prbandar with the capacity of 10,000 tonnes. WWI gives a push to the growth rate of cement industry in India. 1927: Concrete Association of India was set up. 1956: Price and distribution control system established. 1977: Govt. authorization for new manufacturing units and capacity enhancement for existing units. 1979: 3 tier pricing system with different pricing on cement produced in high, medium and low cost plants. Cement industry in India was under full control and supervision of the government till the economic reforms happened. Despite being 2nd highest in the world, we have one of the lowest per capita consumption of cement with 125 kg. Cement Production Process Raw material process Clinker burning process Finish grinding process The raw material and the clinker burning process have 2 variations in the production process: Wet process Dry process


The following diagram explains the entire production process of the cement industry (dry processing):


World demand: 2005: 2,283 million Tonnes {China’s demand: 1064 MT (47% of the total)}. World demand: 2010: 2836 MT Demand for cement (MT) 2005 2010 GROWTH RATE North America 170 200 2.9% Western Europe 208 236 2.2% Asia Pacific 1500 1900 5.2% Other Regions 405 500 4.7% World demand




Key growth drivers: Population growth (increasing demand for housing, commercial building and infrastructure) Economic growth (driving up the consumption of cement per capita) A surge of foreign direct investment in the cement sector has been witnessed in the recent past. The major players being: Lafarge (France) Holcim (Switzerland) Italcementi (Italy) Heidelberg Cements (Germany) These 4 companies together hold more than a quarter of the total capacity.

Global players

LAFARGE: Lafarge is the world leader in building material. It operates in 76 countries in four majors sectors: cement, aggregates, roofing and gypsum. HEILDELBERG: Heidelberg Cement is the global market leader in aggregates and a prominent player in the fields of cement, concrete and other downstream activities, making it one of the world’s largest manufacturers of building materials. The company employs some 53,000 people at 2,500 locations in more thanA 40 countries. CEMEX: Cemex is the 3rd largest cement company in the world measured by cement production capacity. Originated from Mexico By 2005 it had achieved an estimated production capacity of 94 million tons per year. It was the number one producer of ready-mix with 76 Million Tons, one of the largest aggregate producer with 175 Million tons and one of the top cement traders in the world, selling more than 17Million tons in 2005. HOLCIM: Holcim is one of the world’s leading suppliers of cement and aggregates (crushed stone, sand and gravel) as well as further activities such as ready-mix concrete and asphalt including services.It has a strong presence in India Country wise Usage/Production China, the largest market for cement in the world, will register the biggest gains in terms of the total amount of cement sold. Other developing parts of the Asia/Pacific region and Eastern Europe, as well as a number of nations in the Africa/Mideast and Latin America regions, will also record above average cement market gains, fueled by a robust construction outlook. Vietnam, Thailand, the Ukraine, Turkey and Indonesia will record some of the strongest increases in percentage terms. Less robust in the developed areas of the US, Japan and Western Europe, with maintenance and repair construction accounting for much of the growth in cement demand through 2010.


With 153 cement plants and a total installed capacity of around 225 million tonnes per annum (MTPA) as of April 30,2010, the Indian cement industry is the second largest in the world In January 2010, credit rating agency Fitch predicted that the country will add about 50 million tonnes of cement capacity this fiscal, taking the total to around 300 million tonnes. According to India’s largest cement company ACC, the government’s continued efforts on infrastructure development is helping the key building material to maintain an annual growth of 9-10 per cent in 2010. The cement industry occupies an integral place in the national economy because of its strong linkages to other sectors such as construction, transportation, coal and power. Due to its bulk nature and low value, Cement is a highly freight-sensitive product and Indian cement market is largely a regional one. Consequently, the demand-supply dynamics may be different for the various regions and the country as a whole. As depicted in graph above, there has been a strong demand growth between 2002-03 and 2006-07 on a contrary to very slow capacity addition due to weak position cement companies have got into 2003-04. Over the last few years, the Indian cement industry has seen a strong growth with demand compounded annual growth rate (CAGR) of 9.3%. The main factors causing this growth include the boom in real estate during 2004-08, increased infrastructural investments by the private sector and Government, and higher Governmental spending under various social programmes. With buoyant demand growth and limited capacity addition, the industry witnessed capacity utilization levels of around 91-93% during the last five years along with shortfalls in supply, thereby increasing the pricing power available to the cement industry. Improved prices in association with growth in volume led to the domestic cement industry reporting a robust growth in sales and profitability during 2005-09. Growth in Cement Demand (All India) In Million Tonnes 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Apr-Nov 09 Domestic Consumption 99 108 114 123 136 149 164 178 100 Year-On-Year Growth (%) 9.7 8.7 5.8 8.1 10.1 9.9 10.1 8.4 12.5 *Excluding ACC and Ambuja Cement The top five States in terms of cement consumption, viz. Andhra Pradesh (AP), Maharashtra, Uttar Pradesh (UP), Tamil Nadu (TN) and Gujarat, accounted for almost 50% of the total domestic consumption in 2008-09. This is due to population levels in these states which influenced the frequency of infrastructure activities. Capacity utilization levels in the cement industry showed a historic high and touched almost 100% in 2006-07. Almost half of indigenous cement capacity is localized to Southern region of India. Eastern part having minimum share of 12% The western and Northern region had share of 17% and 29% respectively.

Region-wise Capacity Distribution

Capacity addition starting March 09.

Since the demand and hence dispatched declined due to low economic activity, thereby increasing the inventory levels. March, 09 witnessed lowest inventory levels in cement, demand and capacity being at almost par with each other at 15 MT.

Monthly Capacity Utilization Trend

Inventory levels as % of Monthly Dispatch

Following are the few major players of cement industry in the country. S. No. Name of the Company Installed Capacity (Million Tonnes) Portfolio Other Details 1. Grasim Ultratech 31 MT Viscose staple fiber (VSF),grey cement, white cement, textiles etc. After the acquisition of Ultratech, it became world’s 7thlargest cement producer. 2. Associated Cement Company Ltd. 22.4 MT Portland cement, composite cement and special cement. It has twelve manufacturing plants located in the country. 3. Gujarat Ambuja Cement Ltd. 18.5 MT Portland Cement, Pozulona Cement, Silicate Cement It is India’s largest cement exporter and one of the most Cost efficient firms. 4. Jaypee Cements 14.7 MT OPC grades 33, 4, 53, IRST-40 and special blends of pozulona cement. Diversification into cement and construction sectors is key to the business growth. 5. India Cement Ltd. 9 MT Ordinary Portland cement and blended cement India cement is the largest cement producer in southern India

Mergers & Acquisitions: Global Cement Industry

Since 2000, takeovers and agreed deals of around $90 billion have taken place in the construction-materials industry as companies intend to increase revenue, build inventory stockpiles and reduce on the costs. After consolidation, Hanson is the major British player. HeidelbergCement, No. 4 in the world, is trying to catch-up with larger rivals Holcim Ltd., Lafarge SA and Cemex SA after they expanded through major mergers and acquisitions. Paris-based Lafarge began the trend in 2001 with its £4.2 billion takeover of Britain’s biggest cement maker. Blue Circle Industries Plc. Mexico-based Cemex followed with the £3 billion acquisition in 2004 of U.K. concrete maker RMC Group Plc. Holcim of Switzerland added Aggregate Industries Plc. to its stable for £2.2 billion in 2005. Cemex bought Rinker Group Ltd. of Australia for $14.2 billion.

HieldelbergCement AG – Hansen Plc.

HeidelbergCement AG, Germany’s largest cement manufacturer, bought Hanson Plc of the U.K. for £7.85 billion ($16 billion) in the global cement industry’s biggest-ever takeover. It was a major step towards vertical integration in the business. HeidelbergCement paid £11 a share in cash for Hanson, the largest supplier of sand and gravel. Hanson had fully committed financing from Deutsche Bank and Royal Bank of Scotland. While this deal was an eye candy for Hanson investors, Heidelberg paid a huge premium and its management worked really hard to make it worthwhile. The revenues of Heidelberg Cement owned by German billionaire Adolf Merkle increased by two-thirds due to expansion in Unites States increasing output of aggregates, pipes and bricks. Heidelberg employs more than 45,000 people in more than 50 nations and gets almost half its revenues from Europe, with cement accounting for 50 percent of production. Hanson has over 25,000 workers in 14 nations and gets half its sales revenues from North America, with 70 percent of the share from aggregates. As per experts, the fit is strategically good and Heidelberg will gain from Hanson’s integration in their business. The companies were a perfect fit and there were minimal overlaps. Hanson strengthened Heidelberg’s business in the U.S., Europe and England and added Australia to their business geography. Hanson’s takeover afforded Heidelberg a greater presence in North America which contributed a major share in their sales figures. Operations in North American accounted for about 27% of the $12.5 billion worldwide sales in 2006. The addition of Aggregates businesses and Building Products businesses in North America, whose 2006 sales totaled $4.0 billion, brought Heidelberg’s U.S. portfolio n same grounds as other giants like Cemex, CRH, Holcim and Lafarge. Each of Heidelberg’s competitors derived 23% to 32% of their total revenue from U.S., Canada and Mexican operations.

Mergers & Acquistions: Indian Cement Industry

India is the world’s second largest producer of cement after China with an installed capacity of over 200 million tonnes 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 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 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.A 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 andA 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 LimitedA (BCCL)A 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.A Lafarge currently hasA four cement plants in India: two integrated plants in the state of Chhattisgarh,A oneA 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 likeA Portland Slag Cement, Portland Pozzolana Cement.


India is currently second largest producer of cement in the world after China. Huge infrastructure savvy projects in pipeline and growing demand for housing would fuel the Indian cement industry. During May 2010, the cement production touched 14.5 MT as compared to 13 MT in May 2009 at annual growth of 9-10 per cent in 2010.


Only 5-6% use of Ready Mix Concrete (RMC) in India is done compared to developed countries like Japan and U.S. where RMC is being used in almost 70-75% of construction. Since setting up a RMC plant is not huge capital intensive proposition, a large number of small business entrepreneurs are setting up their own private RMCs here in country. Currently, they are facing a lot of difficulties in running them due to high shortage of cement. Hence future in India seems to be of branded Ready Mix Concrete business, where cement manufacturers would be setting up their own RMC plants. They will not have shortage of raw material since companies can create reserves for their own RMCs, which will give them more realization than selling just cement bags. Companies including Ultratech Cement, Lafarge Cement have moved into the RMC segment as well. Time is a big constraint for Infrastructure companies to finish off their projects; hence they would also prefer buying RMC instead of following the traditional method. Therefore, future of the cement industry is more likely to shift towards Ready Mix Concrete.


The government of India has decided to spend more than US$ 500 billion on infrastructure in its 11th Five Year Plan. This plan includes: Building road infrastructure power infrastructure Railways Urban infrastructure Ports Airports IT & ITES sector Organized retailing Shopping malls Besides this, the housing sector sharing more than 40% of total cement demand is also one of the key drivers for the cement industry. Many government banks have reduced their interest rates on housing loans to boost the housing demand in the country. As a result, the number of houses constructed is expected to increase to 6 million units by 2011 from 3.6 million in 2007.


In this FY10 budget, the Government will be spending Rs. 1.75 trillions on infrastructure. With many international events like Commonwealth games 2010, Hockey World Cup 2010, Cricket World Cup 2011 etc, the need to develop world class infrastructure was felt in early 2000’s. As a result, many new multi billion dollars project were sanctioned to develop roads, metros, airports, railway stations etc all across the country, thus boosting the demand for cement.


As per NCAER study, the India’s demand for cement (including exports) is expected to increase to 244 million tonnes by 2010-11. As per the study if the optimistic projections of the road and the housing sectors are met, the demand is expected to be much higher at 311.4 million tonnes.


Upcoming SEZs in areas such as Bangalore, Bhubaneswar, Indore, Nasik and Pune would further boost the demand for cement.


Indian population growing at the rate of 1.5% would also act as a benefit for the cement industry as it would boost the overall demand for housing and in turn cement.


The cement sector is going through a consolidation phase and is thus improving operational efficiencies through several mergers, acquisitions and joint ventures. Efficiencies in terms of technology, raw materials, geographies, distribution channels and markets are key factors in the cement industry. Some observations in the entire analysis were: Consolidation is happening in the global and Indian industry with large and small players both realizing synergies and improving bottomlines. India is one of the fastest growing markets. With the government’s continuous focus on infrastructure, the cement industry has a huge scope for growth. Since the per capita cement consumption is low, the scope for domestic retail consumption is high too. Global players are increasing their presence in India realizing the true potential that it holds for them. Ready Mix Concentrate is the future of cement industry with all players realizing its economies and production advantages.

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Mergers and Acquisitions in the Cement Industry. (2017, Jun 26). Retrieved February 7, 2023 , from

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