Indian cement firms attracting global majors

Growing confidence in the domestic cement market is expected to encourage multinational players in acquiring Indian companies during the next year, according to industry analysts.

While the domestic companies have no reason to look for exit avenues at a time when cement prices are reaping them rich dividends, the lure of higher offers may make many fall for instant profits, they said.

To cite an example, the reported negotiations between the Andhra Pradesh-based Myhome Cements and a French cement major, which sources confirmed, clearly indicate the enhanced valuation of domestic cement plants by potential overseas buyers.

The reported offer is many times higher when compared with around $60 a tonne that Myhome had received in an abortive bid way back in 2002, the industry sources pointed out.

Confirming the development, Sambasiva Rao, director, finance, Myhome Cements, said, "We have been approached by many companies, including the Vicat group. But, we have not concluded any deal with anyone." While the offer is said to be as high as $200 a tonne, the company is learnt to be unwilling to sell a larger stake as is sought by the multinational company.

"The company is not in need of any immediate cash, as we have already completed the expansion process. We are not in for selling a larger stake in this time of boom, which the cement industry has rarely seen. Though we are open to offloading 10 to 20 per cent stake to meet our future requirements, there are several options, including private placement with financial institutions," Rao said, while refusing to offer any further comments.

While the existing capacity of the Myhome plant is 1.8 million tonne, the present expansion scales up the company's total capacity to 3.4 million tonne, according to Rao.

Meanwhile, several other international players are said to be scouting for cement companies in the country in recent times. "I received similar calls a couple of months ago. However, I told them that my friends in the cement industry and I are in no mood to think of such offers, as the current cement prices have us busy counting cash," a Hyderabad-based company's top executive said.

According to sources, the multinational companies are typically looking at mid-size companies with capacities ranging between 1 million tonne and 5 million tonne.

They said many companies, such as Binani, Shriram, Andhra Cements, Pennar Cements, Panyam Cements, Rain Industries, Dalmiya, Chettinad, Bhagalpur Cements, HMP, Saurashtra Cements, Gujarat Sidhee and Prism, are on the radar of big overseas players.

"Once the mid-segment is tapped, these MNCs may also go for big-size companies with 5-10 million tonne capacities, such as Madras Cements, India Cements, Shree Cements and JK Cements, an industry source said.

Even the Centre is thinking of selling unviable CCI units by taking advantage of high offers, the sources pointed out.