With no meeting on price, 25 mt of cement assets unsold

As much as 25 million tonne of cement capacity is up for sale in India — nearly half of UltraTech, the biggest standalone producer, and 7% of the country’s installed capacity of 320 million tonne.

Blame it on mismatch of valuation expectations, said Vaibhav Agarwal, analyst with MF Global.

Seller expectations continue to remain high in the range of  $200 per tonne, against buyer’s comfort zone of $140-160 per tonne. Valuations have been beaten down due to the current weak market conditions, Agarwal wrote in a note after conducting a roadshow for Holtec Consulting, one of the world’s top cement consultants.

Industry experts expect the dry spell in M&A to continue.
“Cement prices are not at a rock bottom. The current industry fundamentals are not worse enough for companies to look for an exit or a distress sale. Assets could have been put on sale for individual reasons - such as a company wishing to reduce its high debt levels or wanting to exit the business to focus on other core areas,” said an analyst from a domestic brokerage firm on the basis of anonymity.

So until there is a distress sale, M&As are unlikely till the proverbial twain-shall-meet on expections.

“We could perhaps foresee just one deal, but nothing major. This is because of the current market situation, where any buyer is unlikely to seek a big scoop,” said another analyst.

At a macro level, demand growth is expected to grow at more than 7% for the next eighteen months, while capacity utilisation should hover at 70-75%.

The scenario is unlikely to change in the next three fiscals, say analysts.

South India is expected to continue to face tough times, Agarwal said, mainly due to huge capacity additions in Andhra Pradesh.
Cement prices are likely to continue by 7% to 8% per annum mainly due to rise in input costs. The current average pan-India cement prices are around Rs260 per bag of 50kg.