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With the world's two largest cement makers - France's Lafarge and Switzerland's Holcim - agreeing to merge, UltraTech's leadership in India, the world's largest cement market after China, is under threat. The Aditya Birla Group company recently dethroned Holcim to become the country's largest manufacturer of the construction material after buying Jaypee's Gujarat factory last year.
Holcim, which entered India in the middle of the past decade, controls the country's two large cement companies, Ambuja Cements and ACC. Put together, the Swiss giant has a manufacturing capacity of 57 million tonnes a year (mtpa), about 17 per cent of India's capacity.
Lafarge, present in India since 1999, though has managed only eight mtpa. Besides, unlike Holcim, the French manufacturer is still a regional player, focused in central and eastern parts of the country.
Following the Jaypee deal, UltraTech's capacity had risen to 59 mtpa against Holcim's 57 mtpa. However, together Lafarge and Holcim will again rule the roost with an overall capacity of 65 mtpa. Moreover, Holcim plans to increase capacity in India to 65 mtpa by next year, which would take the duo's total to 73 mtpa. In contrast, UltraTech plans to increase capcity to 70 mtpa only by 2016.
Apart from that, Lafarge's acquisition of L&T Concrete in 2008 made it one of the largest in the ready-mix concrete market, where ACC and UltraTech are also strong.
With about 40 companies making cement in the country, UltraTech's leadership has local challengers, too. Already, smaller players such as India Cements, Shree Cement, Madras Cement and Dalmia Cement are gaining market share in their regions.
According to sector analysts, Lafarge's dominance in eastern India will give the merged entity an advantage over UltraTech.
In the west, where UltraTech strengthen its position, Ambuja is already an established brand. In the south, Ambuja's sister concern, ACC, is on the heels of UltraTech, while in the north, both the Holcim brands are equally strong.
The Indian cement market hasn't done well in the past few years. Capacity use remains poor at less than 75 per cent, dipping to 58 per cent in the south. Against a capacity of 350 mtpa, India consumes only about 260 mt.
