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HeidelbergCement, a global cement giant, is exploring a potential exit from its Indian cement business. The company's move has sparked interest from several prominent Indian conglomerates, including the Adani Group, Aditya Birla Group's UltraTech Cement, JSW Group's cement arm, and the Dalmia Bharat Group. These groups are reportedly in talks to acquire a controlling stake in HeidelbergCement India Limited.
HeidelbergCement currently holds a 69.39 percent stake in the listed Indian entity, valued at approximately Rs 3,437 crore at the current market price. A sale of a controlling stake would trigger a mandatory open offer under the Securities and Exchange Board of India's (SEBI) takeover regulations, requiring the acquiring entity to make an offer to purchase a 26 percent stake from public shareholders.
The news of HeidelbergCement's potential sale comes amid a surge in consolidation activity within the Indian cement sector. The trend was set in motion by the Adani Group's $6.6 billion acquisition of Ambuja Cements and ACC Limited from Lafarge-Holcim in 2022. More recently, UltraTech Cement, India's largest cement manufacturer, acquired a controlling stake in India Cements by purchasing a 32.7 percent stake for Rs 3,954 crore in July, following an earlier purchase of 22.77 percent in June. This rapid consolidation reflects the industry's preference for inorganic growth strategies, as acquiring existing assets is often seen as a quicker and more efficient way to expand market presence and capacity compared to organic expansion through new plant construction.
JSW Cement, which is currently preparing for an initial public offering (IPO), highlighted in its draft IPO papers that the cement sector has witnessed a dramatic increase in mergers and acquisitions over the past five years, with a transfer of 106-108 mtpa of capacity. The majority of this capacity, 95-97 mtpa, has been acquired by large players. This is largely due to the lengthy gestation period required for establishing new plants, which can take three to four years. Acquiring existing assets allows companies to enter established markets quickly, expanding their geographic reach and eliminating the complexities associated with site selection, land acquisition, and regulatory approvals. The top five players in the sector have been steadily gaining market share through these acquisitions.
Heidelberg Cement's presence in India began in early 2006 with the acquisition of a controlling stake in Mysore Cements Limited. The company subsequently formed a joint venture with Indorama Cement Limited, eventually acquiring full ownership in 2008. The merger of Indorama Cement with Mysore Cements in 2009 led to the company's rebranding as HeidelbergCement India Ltd. In the same year, the company expanded its manufacturing capacity in Central India from 2.1 million tonnes per annum to 5.4 mtpa.
Currently, HeidelbergCements' listed entity has a total cement grinding capacity of 6.26 MTPA. The company also holds another 7.1 mtpa capacity in India under Zuari Cement. For FY24, HeidelbergCement India recorded a revenue of Rs 2,420.3 crore, marking a 6 percent increase from the previous fiscal. The company's net profit for FY24 reached Rs 167.7 crore, representing a significant 69 percent jump compared to the previous year.
Source: Heidelberg exploring sale of India business; taps Adani, UltraTech and JSW Cement