Mumbai: French cement company Lafarge SA, which bought the ready-mix concrete business of engineering and construction firm Larsen and Toubro Ltd, said on Thursday it plans to build 10 factories every year in India to keep pace with an industry that is expected to grow at 25% a year.
The company will invest up to $15 million (around Rs63.8 crore) a year.
“We will also look at suitable acquisition targets,” said Mike Glover, managing director of Lafarge Aggregates and Concrete India Pvt. Ltd.
“This acquisition gives Lafarge a pan-India presence in the RCM (ready-mix concrete) business, which is going to be the next big thing in the cement sector in India,” said Ajit Motwani, an analyst withEmkay Share and Stock Brokers Ltd.
“Although RMC has not been accepted in India so far, it has been doing well globally, especially in emerging markets. Typically RMC should have better margins, because it is a value-added product.”
Lafarge, which entered the Indian cement business in 1999, has a capacity of 5.5 million tonnes in the country, with plans to more than double its production capacity in the next five years.
“Lafarge has been really slow, and has failed to expand its cement manufacturing operations in India as much as it would have liked to do,” said an analyst with a domestic brokerage, who did not wish to be identified.
“Lafarge will have to expand its cement manufacturing operations, as the RMC business also requires cement. They will have to look at expansions and acquisition, but at current valuations, it will be difficult for them to find one.”
The buyout gives Lafarge 25% share in the RMC market, with a capacity to produce 4 million cu. m.