A diverse set of domestic cement majors like Dalmia Bharat, Shree Cements along with South-based Ramco are in hot pursuit of LafargeHolcim’s Sri Lankan operations that the global cement major is divesting as part of a global portfolio realignment.
These players have been shortlisted after an initial round of screening and are competing with local Sri Lankan, Chinese and Thai cementmakers and private equity players like Baring Asia as the race to acquire the largest and sole integrated cement operations in the island nation gathers momentum, said multiple source aware of the development.
Holcim makes cement straight from domestic limestone, a grinding plant that uses imported clinker, and a bagging plant that uses foreign-made cement. The Swiss group first took over a state-run cement factory in Puttalam in the West Coast of Sri Lanka from a Pakistani firm, which bought it during a privatisation drive over two decades ago.
With an estimated 2.3 million tonnes per annum (MTPA) grinding capacity and a 1.8 MTPA clinker capacity, it currently controls 40% of the 6 MTPA Lankan market, said analysts tracking the sector. To put it in perspective, the cement capacity in the city of Mumbai alone is 8.5 MTPA.
The group sold 1.7 million tonnes of cement in 2015 worth about Rs 1,073 crore (Sri Lankan rupee Rs 23.4 billion) according to published data. Sources said the Lafarge-Holcim assets may get valued up to $300 million (Rs 2,010 crore).
This implies a per tonne valuation of Rs 700-Rs 750 crore, which according to analysts is comparable with Indian peers. At present, Sri Lanka’s per capita cement use is 200 kilos per person, also similar to that of India.
“LafargeHolcim announced a CHF 3.5 billion (about $3.6 billion) divestment target for 2016 at the end of last year. As part of this intention and the Group’s ongoing portfolio management, LafargeHolcim is reviewing its portfolio,” said LafargeHolcim spokesperson.
“The group already announced transactions in Morocco, South Korea, and Saudi Arabia on March 17. As part of this divestment programme, we are currently exploring a range of options including the divestment of Holcim Lanka. LafargeHolcim will provide regular status updates during the global divestment process.”
Standard Chartered Bank is advising LafargeHolcim to sell the Lankan assets. When contacted Dalmia and Baring Asia spokespersons declined to comment on market speculation. “We have been shortlisted but we are in the process of evaluating the opportunity. In a week’s time we will take a final call,” HM Bangur, managing director, Shree Cements told ET.
However, AV Dharmakrishnan CEO of Ramco Cements, denied that they are in the fray.
- The Economic Times