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More consolidation - Lafarge eyeing Madras Cements? - Views on News from Equitymaster
 
 
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  • Jun 1, 2000

    More consolidation - Lafarge eyeing Madras Cements?

    Lafarge, according to reports carried in the Economic Times, has struck again. The company is said to have made a Rs 15 bn bid for the 3.5 million tonne capacity of Madras Cements Limited. This is latest in a rash of deals that have engulfed the sector in last one year.

    Madras Cements Limited is one of India's most efficient producers of cement. The company is predominantly south based and has its capacity spread across four plants.

    As there has been no official announcement as yet, there is little information on this reported bid. It is therefore difficult to give a view on the fallout of such a deal on Madras Cements Limited.

    In recent months a large number of multinational cement companies have made their presence felt in the domestic marketplace by entering into talks for acquisition of cement capacities. The leader in this race has been Lafarge (France), which has so far acquired cement capacities of Tata Steel and Raymond. Among the new entrants is Blue Circle (UK) which is reported to be in talks with the Birlas (excluding Grasim) for acquiring their cement capacities.

    International majors are aggressively trying to set up a base in India. Companies like Lafarge, which have already set up a base for them, are looking at stepping up volumes through the acquisition route. The bid for Madras Cements though unexpected, will not surprise many.

    Cement prices in India are ruling at an average of US$ 85 per tonne. Capacity utilization rates in the sector are as high as 90%. As compared to Southeast Asia, where utilization rates are between 45 60% and prices 50% higher, the India offers a great opportunity for cement companies.

     

     

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