Twitter
Advertisement

Nirma bags Lafarge's India biz for Rs 9,400 crore

Gains three cement plants and two grinding stations with a total capacity of around 11 million tonne as well as the ready-mix concrete biz

Latest News
article-main
Karsanbhai Patel
FacebookTwitterWhatsappLinkedin

For years, Karsanbhai Patel has been planning to make a mark in the cement business, probably to give a solid foundation to his legacy otherwise build on the success of his FMCG business, Nirma.

After an initial jolt when environmental approval for a cement plant at Mahuva in his home state Gujarat was cancelled, Patel relocated the plant to Pali in Rajasthan. The plant started with a cement manufacturing capacity of 2.28 million tonne (mt). The capacity was raised to 3.43 mt in January, according to a research report by Emkay Global. Available in states like Rajasthan, MP and Gujarat, brand Nirmax is yet to make a mark, says the report.

All that is set to change with Patel bagging the India operations of global cement major LafargeHolcim's assets under Lafarge India. With this buy, Nirma has gained access to three cement plants and two grinding stations with a total capacity of around 11 million tonne. In addition, Nirma would get the business of India's leading ready-mix concrete, all for a price of $1.4 billion or Rs 9,400 crore.

The 30 billion Swiss franc cement major, which operates in 90 countries, disclosed the deal on Monday.

"LafargeHolcim announces it has entered into a letter agreement with Nirma Ltd subject to approval by the Competition Commission of India for the divestment of its interest in Lafarge India for an enterprise value of approximately $1.4 billion," it said in a statement.

LafargeHolcim added that the proceeds from the sale will be utilised to reduce its debt and that it would continue with its planned disinvestment of global assets after a similar deal executed in South Korea while an agreement has been signed to divest its minority shareholding in Saudi Arabia.

"LafargeHolcim will continue to have its India presence through its subsidiaries ACC Ltd and Ambuja Cements Ltd, which have a combined cement capacity of over 60 million tonne," it said.

While the analyst community was surprised by Nirma beating other contenders like JSW and Piramal, whether the home-grown FMCG major bid aggressively for the asset wasn't clear.

Dharmesh Kant, head – retail research, Motilal Oswal Securities, told dna, "The pricing appears reasonable. But pricing in cement deals is a factor of the assets being purchased, whether there are opportunities for brownfield expansions, at what phase of the business cycle the assets are changing hand and where the plants are located as the commodity is a regional play."

The Swiss cement giant had earlier agreed to sell about 5 mt of its eastern capacity to Kolkata-based Birla Corp at a valuation of Rs 5,000 crore in order to get CCI's approval for the merger between Lafarge and Holcim that was announced last year.

The CCI approval of April 2015 directed divestment of Jojobera and Sonadih plants in eastern India, following which Lafarge entered into a pact with Birla Corp in August. But in February, Lafarge received a revised order from CCI for the divestment of its interest.

Due to regulatory issues relating to the transfer of mining rights, LafargeHolcim was asked to submit an alternate strategy to ensure compliance with the order.

The current deal with Nirma is expected to conform to that revised CCI approval.

"The transaction with Nirma as a purchaser will be submitted to the CCI for approval," LafargeHolcim said on Monday.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement