Swiss cement producer Holcim has splashed out $477 million (SFr611.6 million) in a major step forward in the fast-growing Indian market.This content was published on January 31, 2006 - 08:49
Holcim on Tuesday announced it had paid 21 billion rupees for a 14.8-per-cent stake of India's Gujarat Ambuja Cements (GACL).
It has also offered to buy up to an additional 20 per cent of the firm for $560 million.
The move is the latest by Holcim in what has become the world's second-largest cement market.
Holcim already controls 34 per cent of Associated Cement Companies, India's number two producer, through its holding in a Gujarat Ambuja group firm it acquired early in 2005.
A statement from Holcim headquarters in Zurich said the alliance with GACL had "proven a considerable success within the short time of its existence".
On the basis of this relationship, Holcim had acquired a 14.8-per-cent stake in GACL from the Sekhsaria and Neotia founder families at a price of 105 rupees per share, corresponding to the $477 million outlay.
In accordance with India's takeover code, Holcim is now required to acquire up to a further 20 per cent of GACL's share capital.
"The deal augurs well for the industry as any consolidation brings about some sort of price stability," commented Satish Kumar, an analyst with BRICS Securities.
"There would be less price undercutting among players."
Holcim said its offer for up to 20 per cent more of the firm would be at about 90 rupees per share.
India's cement industry has an annual production capacity of 152 million tonnes. Expansion work is being carried out to add nearly 25 million tonnes over the next three years, to meet demand that is rising by up to ten per cent annually.
"Holcim would now have control of almost 33 million tonnes. They should now look to further consolidate their holdings," Kumar said.
Speculation had been rife in the past few months that the founders of Gujarat Ambuja would sell part of their stake to Holcim.
swissinfo with agencies
Holcim already holds a stake in two Indian cement companies via a two-thirds majority interest in the holding company Ambuja Cement India.
It says that as an emerging market, India has "substantial potential".
The country's dynamic construction sector is being driven mainly by population growth and the rapid expansion of India's infrastructure.
At 125 kilograms per capita per year, cement consumption in India is currently among the lowest in Asia.
Cement consumption of an estimated 136 million tonnes in 2005 is expected to grow by an average 8%-9% in the coming years.
Holcim is the world's number two cement maker behind Lafarge of France.
It was formerly called Holderbank, taking its name from a village in northern Switzerland where it was founded in 1912.
Industrialist Thomas Schmidheiny is a major shareholder in the company.
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