Holcim’s decision to exit marks another cement multinational struggling in India 

While the race to acquire Holcim India’s assets heats up, the interested bidders have a lot to gain from the 66 million tonnes per annum (mtpa) capacity. This is spread across Ambuja Cement and ACC whose plants are strategically located and also well-run. The ticket value for the transaction is expected to be around $10 billion (over Rs 75,000 crore).  

The deal also throws up a few interesting points, with the limited progress made by the multinational cement companies in India being one of them. In late 2020, the ACC-Ambuja combine, owned by Holcim, had a capacity of a little over 63 mtpa, not a significant difference from where it is today.

India is considered one of the most attractive cement markets globally and that is justified by the presence of names such as HeidelbergCement (formed through its acquisition of Italcementi in 2015) but with a capacity of 12.6 mtpa. 

That is a small number given they have been in India for over two decades now with the total national installed capacity being around 500 mtpa – that translates to a share of just over two per cent. The largest player is UltraTech at 120 mtpa, with Shree Cement and Dalmia being the other prominent domestic players. The way the Holcim bid is progressing, it appears to be clear that the buyer will be an Indian company – Adani and JSW are both at advanced stages of discussion – and that will only reduce the foreign play for cement here. 

A former Holcim executive points out that the MNCs have been slow to react in India. 

“When the eastern part of India was looking attractive, only the domestic players moved. Lafarge picked up a few assets there but nothing that gave them scale,” he says. In 2014, Holcim and Lafarge merged their operations globally to form LafargeHolcim. In line with the regulations in India, Lafarge puts its 11 mtpa on the block (it entered India in the late 1990s) to be picked up by the Nirma Group. “Today, the east is a high-growth market and companies that acquired assets in the early phase struck deals at $50 per tonne,” says the executive. To put it in context, good cement assets in India have been picked up for around $125 per tonne in the recent past.  

The other issue is how little India mattered in the larger picture with these companies not willing on to take that big bet. That with prolonged decision-making process only made it trickier. A case in point was when DLF puts its cement business on the block in 1999, with the then Lafarge agreeing to buy it. In a quick turn of events over one weekend, Ambuja closed the transaction leaving Lafarge red-faced. This was the Indian entrepreneur displaying his nimble-footed nature to rush ahead and when it came to running the business it was no different. The strategy of having split grinding units is one example.  

In terms of just buyouts, many assets such as what was owned by the Jaypee Group or the Binani Group and the Nagpur-based Murli Industries had the domestic companies making the move. None of the MNCs was in the fray and the common belief is that their home markets were preferred or for that matter, it was better to be in China. The instance of Holcim deciding to exit is not the first one. In late 2019, Dublin-based CRH sold its 50 per cent stake in My Home Industries, a company headquartered in Hyderabad. Industry experts say the common mistake has been to get an expatriate to run the India business, who inevitably spends a couple of years before moving to a more developed market. “Besides, enough time is not spent in understanding the key issue of policy. This is an industry with limited entry barriers and an India-specific approach is necessary,” they point out.