LafargeHolcim to sell India assets to Nirma in a Rs 9,300-crore deal

Apart from local players like JSW and Piramal Group, binding bids were placed by Brazil’s CEMEX and China’s Anhui Conch. Sources said Nirma bidding highest did not come as a surprise as the group has been trying to scale up its cement business for quite some time but with little success.

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The deal does not entail the transfer of the brand so Nirma will have to brand the product in its own name. But analysts don’t a problem as it is a household name due to its detergent products.

With this acquisition, Nirma’s cement capacity, which is currently at 2 million tonnes per annum (mtpa), will go up to 13 mtpa, apart from enabling it to branch out of Rajasthan, where its current capacity is located, to the eastern region, which is seen as the best growing market for cement.

Lafarge got a very good price for its assets if compared with what Jaypee Associates got recently by selling its 21.2 mtpa assets to the Aditya Birla Group’s UltraTech Cement. For perspective, Jaypee’s assets were valued at Rs 16,189 crore. This means that in the case of Lafarge the assets have been valued at $127 per tonne against $112 per tonne for Jaypee’s. While plants in eastern India command a higher value compared with southern and northern India where Jaypee’s assets are located, analysts like investment banker Anil Singhvi said that Lafarge’s plants are very old, so means it has got a very high price compared to what Jaypee got for its assets.

In fact, Reliance Infrastructure, which offloaded its 5.6 mtpa cement plants located in Madhya Pradesh and Uttar Pradesh to Birla Corp in February for Rs 4,800 crore, got the best price at $140 per tonne. This was due to the region where they were located as well as because they were very new plants. This is the reason some analysts said that had Lafarge’s plants been newer they would have commanded an even higher price.

Nirma will have to pay a transfer charge for the limestone mines to the government as per the provisions of the Mines and Minerals (Development and Regulation) Act. In the Jaypee-UltraTech deal, a sum of Rs 289 crore was paid to the government as transfer charges.

The deal does not entail the transfer of the brand so Nirma will have to brand the product in its own name. However, analysts don’t see this as any kind of disadvantage for the company as it is a household name due to its detergent products. FE