“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. The proceedings from the sale of the Indian branch will be allotted to debt reduction of LafargeHolcim. Meanwhile, the company is awaiting approval from Competition Commission of India (CCI) for the divestment of its interest in Lafarge India.
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LafargeHolcim Ltd will continue to have operations in the country through its arms, ACC Ltd and Ambuja Cements, which have a total cement production capacity of over 60 million tonnes and a distribution network that spreads across India.
Besides Nirma, the final contenders included Piramal Group and JSW Group.
Indian conglomerate Nirma Ltd. plans to sell about 40 billion rupees ($596 million) of bonds to fund the purchase of a local cement business from LafargeHolcim Ltd., according to people familiar with the matter. “Lafarge as a company is a strong brand and if Nirma can’t get to use the brand, then they probably didn’t get the right valuation”, Sreekanth Reddy, Managing Director, Sagar Cements told Express adding, “For Lafarge, the deal happened at a price they were looking for”.
Eric Olsen (pictured), chief executive officer, described the agreement as an important step in LafargeHolcim’s CHF3.5 billion divestment programme. It operates three cement plants and two grinding stations in the country, which give it a capacity of around 11 million tonnes a year.
The sale does not mean LafargeHolcom’s exit from India.
India is the world’s second-largest cement producer after China with a capacity of around 400 mtpa. The combined capacity of the two companies would have resulted in 18.5 million tonne which is nearly 40 percent of the region’s 46 million tonne capacity.
The company also has market leading readymix concrete business with almost 72 sites pan-India. Revival hopes, after years of slow growth, have put India’s cement sector on the fast lane of merger & acquisition play. But industry experts are exercising caution, to see how a relatively new entrant like Nirma will execute and benefit from the deal, which comes at a time when the sector is battling excess supply and weak demand globally, a situation that gripped the commodities market.
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In August 2015, the company agreed to sell its east India cement assets to Birla Corp Ltd for Rs5,000 crore. ‘We are confident that we will meet our target by the end of this year.
