French co eyes Rs 800cr stake in MyHome Cem

MUMBAI: After Lafarge, HeidelbergCement and Holcim, it’s the turn of yet another major international cement company to enter India. It has been reliably learnt that French cement major, the Vicat Group, is close to acquiring a large stake in the Hyderabad-based unlisted company, MyHome Cement Industries, for about Rs 800 crore.

MyHome, which has an annual capacity of about 3m tonne (mt), is one of the leading cement makers of Andhra Pradesh. The company could be an entry point for the 17-mt French major to access India, considered the world’s second-largest cement market after China.

Repeated efforts to contact MyHome promoter Rameshwar Rao proved futile. An email query to Vicat also elicited no response.

Sources close to the development said the promoters of MyHome were likely to sell less than 51% of the total equity to Vicat. The price negotiations are hovering at $120-125 per tonne, pegging the cost of the acquisition at about Rs 800 crore, the sources said.

If inked, the deal could become one of the high-cost transactions in the Indian cement industry, which had earlier seen acquisitions in the $90-$110 per tonne range.

The move would benefit Vicat as it already has presence in the US, Turkey, Senegal, Switzerland, Egypt and Italy.
The 150-year-old company, with strengths in ready-mix concrete and aggregates, will get access to a market that is growing by more than 8% annually, a rate second only to China.

“The cement market in the south is considered to be strong and what better way (for a foreign company) to enter India,” said a source close to the development. “Moreover, Andhra Pradesh has large reserves of limestone which is vital for cement making,” he added.

The southern region is the largest cement market in India, with a total production at 39mt, while demand last year was pegged at 33.2mt.

“Although there is oversupply in the southern market at the moment, rising construction activity and the government’s various infrastructure projects could boost cement consumption in the years to come,” said an analyst with a Mumbai-based brokerage.

MyHome has its manufacturing unit in Mellacheruvu, in Nalagonda district. It recently announced plans to expand its clinker capacity to 2.4mt and cement production from 1.90mt to 3.30mt.

Cement produced in Andhra Pradesh is transported to Maharashtra and other nearby states. Freight accounts for almost 35% of the total cost of producing cement. Andhra Pradesh’s proximity to large-consuming centres such as Maharashtra makes it competitive to have a manufacturing unit in the South.

Rising demand for cement in India has already attracted large foreign companies such as Lafarge, Holcim and HeidelbergCement. All these MNCs have found it easier to buy existing units rather than build new plants.

Lafarge entered India by buying out Tata Steel’s cement business. Similarly, Swiss major Holcim last year bought a controlling stake in a Gujarat Ambuja unit while buying indirect control in ACC, India’s largest cement maker. HeidelbergCement, early this year, bought south-based Mysore Cement.