Birla eyes Lafarge, Holcim India asset

Tags: News

Global biggies will need to shed capacity to comply with norms

Ultratech Cement, India’s biggest maker of the material, is looking to buy the local assets of Holcim and Lafarge, according to a person with direct knowledge of the matter.

Billionaire Kumar Mangalam Birla, who controls Ultratech, is waiting to see what will be on sale as the two European companies prepare to dispose of plants, the person said, asking not to be named because the matter is private. Holcim and Lafarge, which agreed to a merger last month, may divest in Brazil, India, China, Canada and the US, Lafarge chief executive officer Bruno Lafont told investors on April 7.

The ready availability of assets may help the Indian firm gain market share without having to build greenfield factories, said Rashesh Shah, an analyst at ICICI Securities in Mumbai.

“Holcim-Lafarge’s asset shedding is a big opportunity for Ultratech to bolster its market share,” said Shah. “Being the largest player in the sector with a healthy balance sheet, it is a natural buyer of good assets on the block.”

The Jona, Switzerland-based Holcim and Paris-based Lafarge are preparing to sell assets with ¤5 billion ($6.9 billion) in revenue to win regulatory approval after announcing plans to form the world’s largest cement maker with combined annual sales of $40 billion. The total cement capacity in India held by the two and units is about 62 million tonnes.

Mumbai-based Ultratech plans to add 20 million tonnes to its current 58 million tonnes capacity in three years, for which a few buyouts will be necessary, the person said. The company is also scouting for assets and sites to build plants in Indonesia, Thailand, Myanmar, Oman, the Philippines and Malaysia. It is already present in the United Arab Emirates, Sri Lanka, Bangladesh and Bahrain.

Pragnya Ram, group spokeswoman, didn’t respond to an email seeking comments.

“There’s a huge market interest and we are working on the filing and divestment packages,” Eike Christian Meuter, Holcim’s Zurich-based spokesman wrote in an email on Monday, without elaborating. Elodie Woillez, Lafarge’s spokeswoman in Paris, declined to comment.

Birla, whose net worth is $8.8 billion according to the Bloomberg Billionaires Index, took over as chairman of the $40 billion Aditya Birla group in 1995. He is seeking to boost revenue of the conglomerate by 63 per cent to $65 billion by 2015.

In September, Ultratech bought the 4.8 million tonnes Gujarat unit of Jaiprakash Associates for an enterprise value of Rs 3,800 crore ($631 million) in Birla’s biggest acquisition in more than two years.

The company was in talks to buy a second cement unit in Himachal Pradesh from India’s only Formula One track builder, the person said. The negotiations are on hold as Jaiprakash’s plant is awaiting some approvals.

Ultratech’s net income increased 61 per cent over the past three years and sector analysts expect it to rise by 51 per cent in the next two years, data compiled by Bloomberg show. Shares have advanced 15 per cent this year to Rs 2,025.65, compared with a 6 per cent gain in the benchmark S&P BSE Sensex.

“We have the balance sheet, the wherewithal, the cash flows and knowhow of running a cement unit,” Birla had said in a September interview, signaling his intent to expand through acquisitions. “Therefore, it is extremely attractive for us to expand in this market.”

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