Home / Industry / Manufacturing /  Wave of consolidation in cement industry restricted to top three spots

Over the past three years, the Indian cement industry has seen 47 million tonnes of capacity change hands for an enterprise value of more than 36,000 crore.

Surely, such large transactions would have led to significant consolidation in the cement sector. The question, therefore, is: Is there room for more?

“Consolidation has happened but consolidation will continue. You will continue to see smaller deals. But surely large-sized deals have all been completed," said Rahul Prithiani, director, Crisil Research.

Currently, the top three cement producers—LafargeHolcim-controlled ACC Ltd and Ambuja Cement Ltd, Aditya Birla Group’s UltraTech Ltd, and Dalmia Cement—hold about 41.66% of the 420 million tonne cement market in India.

Analysts estimate the size of the cement industry in India to be in the range of 410-420 million tonnes. There is no official data available on the latest industry capacity.

Interestingly, the wave of consolidation is restricted to the top three cement producers.

“It is in the top three and top five that you would see the consolidation happening. The top 10 will remain unchanged and this will continue in a market like India which is highly fragmented. What we could say is there has been a reduction in fragmentation," said Nitin Bhasin, head of research at Ambit Capital Pvt. Ltd.

The combined capacity in the hands of the top 10 cement producers in India remains largely unchanged even after the recent mergers and acquisitions.

“In terms of consolidation of capacity in the hands of fewer companies, these deals hardly move the needle," said a cement analyst with a domestic brokerage, who did not wish to be identified.

The total cement capacity in the hands of the top 10 cement producers in India, following the mergers and acquisitions seen in the past three years, stands at 280.93 million tonnes. Had the past cement deals not happened, the cement capacity in the hands of the top 10 producers would have been about 273.1 million tonnes, a small difference of 7.83 million tonnes.

Here is why.

A significant chunk of the 47 million tonnes of cement capacity that changed hands belonged to Lafarge India Pvt. Ltd and Jaypee Group. Both would have been part of the top 10 cement producers if not for the asset sales we saw in the last three years.

“In the top 10 cement producers pecking order, what we are effectively seeing is Jaypee making an exit," said Prithiani.

Post the various deals we saw in the last three years, Nirma Group and Birla Corp. Ltd are the two new entrants in this list, as Lafarge India and Jaypee Group make an exit.

H.M. Bangur, managing director, Shree Cement, expects the top 10 cement companies to add capacity.

“The capacity in the hands of the top 10 producers will increase, but as percentage of the total market this will always be low because the entire cement market size is growing at a faster pace," Bangur said.

Hence, it may not be the end of the wave of consolidation.

“If someone wants to exit their cement assets, they will. It will always remain a good time to sell cement assets in India. The valuations we have seen for assets in the recent deals is a good price," Bangur added.

The cement analyst cited earlier agrees that deals are likely to continue. “Lots of companies are available in the south India market. In addition, a lot of other assets may come into play with increasing perception of attractiveness," he said.

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