The Growing List Of Holcim India Suitors

Dalmia Bharat, one of India’s oldest cement makers, is talking to banks to stitch together the financing for its bid for the Swiss building materials maker’s two Indian cement companies—ACC Ltd and Gujarat Ambuja Ltd—with a combined manufacturing capacity of almost 65 million tonnes per annum (mtpa), the people said, requesting anonymity. Dalmia’s current capacity is 35 mtpa.

Meanwhile, Aditya Birla Group’s UltraTech Cement, the country’s largest cement maker with a capacity of 119.95 mtpa, is drawing up a plan to ensure its bid for Ambuja and ACC doesn’t hit the antitrust hurdle, the people cited above said.

UltraTech fears its bid to acquire an additional 65 mtpa of Holcim’s cement assets will be closely scrutinized by the competition regulator.

To ensure it doesn’t fall foul of antitrust laws, UltraTech will likely offer to offload some assets to ensure the combined market share of UltraTech and Holcim businesses does not exceed 40%, one of the two people cited above said.

The strong interest of Indian firms in buying Holcim’s India businesses is because many believe that an opportunity to acquire such a major asset is unlikely to be available anytime soon. The companies expect the purchase to give them economies of scale and pricing power.

Holcim has been divesting some of its non-core assets, including its Brazilian unit for $1 billion in September. It’s also planning to sell its factories in Russia.

Emails to spokespeople for Dalmia Bharat and UltraTech Cement did not elicit a response till press time.

Mint reported previously that the Holcim board is expected to meet this week to decide on the offers for its Indian businesses.

Dalmia Bharat is seeking letters of intent from its banks as soon as 3 May to meet bid conditions, the second person said.

Dalmia Bharat, which set up its first cement plant in 1939, has pursued major acquisitions in the past, although it lost out to rivals in many of the major deals.

In 2018, it lost out on acquiring Binani Cements, which was scooped up by Aditya Birla’s UltraTech Cement. Earlier in 2016, it was also engaged in the race to acquire French cement maker Lafarge’s cement assets in India, which were put on the block as part of Lafarge and Holcim’s global merger.

To be sure, Dalmia Bharat has picked up smaller assets, including Murli Industries and Kalyanpur Cements.

Brokerages have a positive outlook on both Ambuja and ACC stocks even as near-term profitability is expected to be weak.

“Cement profitability has been hit hard due to a sharp rise in coal and pet coke costs since January. We expect most of the impact to be reflected in earnings in 1HFY23. That said, per our channel checks, there is a likelihood of an 8-10% price increase in April. Moreover, historically, as costs have softened, companies have retained part of the benefit leading to margin expansion. Hence, we expect FY23 profitability to be much weaker, but estimate a sharp improvement in FY24 in both volume and profitability,” said CLSA in a report on 7 April.

The brokerage has upgraded Ambuja to ‘buy’ while retaining its buy rating on ACC.