JSW Cement in talks to buy Lafarge India assets
Mumbai: Sajjan Jindal-led JSW Cement Ltd is in talks with Lafarge to buy its business in India, two people with direct knowledge of the deal said.
Lafarge, which is part of LafargeHolcim, is looking to exit its entire 11 million tonne (mt) cement capacity in India, the two people said, requesting anonymity.
In a tweet put out by CNBC-TV18 on Friday, Sajjan Jindal, chairman, JSW Group, was quoted as saying the group is in talks with Lafarge to buy its cement business. A spokesperson for JSW group confirmed the development in an email to Mint. “We are looking at various opportunities to expand our cement business. Lafarge assets are also under consideration. However, nothing has been concluded and there is no finality as of now,” the spokesperson said.
In August, Lafarge agreed to sell two cement assets to Birla Corp. Ltd with a combined production capacity of around 5.15 mt for a total enterprise value of Rs.5,000 crore.
The plants in Chhattisgarh and Jharkhand were put up for sale after Holcim of Switzerland and France-based Lafarge agreed this year to a global merger that required the divestment of the assets to meet local competition rules.
The deal is yet to be completed as it hit a road-block with the new Mines and Minerals (Development and Regulations) Act. The new law does not allow a company to transfer its mining rights to another company if the mine was not won in an auction.
The limestone mines that Lafarge holds were allotted and not auctioned. A complete exit from its India cement business would help Lafarge to sell its 100% stake in the holding company of these mines and cement assets without flouting the new law. Lafarge is said to have made a revised proposal to anti-trust watchdog Competition Commission of India (CCI) to allow sale of its entire India cement portfolio.
“LafargeHolcim is not in a position to comment until we receive the order of the CCI,” a spokesperson for LafargeHolcim said in an email response on Friday.
The deal will help JSW Cement more than double its existing 6 mt capacity to 17 mt a year. JSW Cement has been on the lookout to acquire cement assets. JSW had also expressed initial interest in acquiring Lafarge’s 5.15 mt cement capacity which it later agreed to sell to Birla Corp. JSW Cement was also one of the initial bidders for Reliance’s cement assets.
“For JSW cement to acquire these assets, what would be crucial is the funding. One needs to see how will the group manage to bring in the credit required for such a large capacity,” said an cement industry analyst, who declined to be named.
A full exit out of Lafarge’s India assets will reduce LafargeHolcim’s combined India capacity to around 58 mt, lower than rival UltraTech Cement Ltd, which has capacity of 64.7 mt.