French cement maker Vicat Group is likely to buyout its Indian partner Sagar Cements’ 49% stake in JV, Vicat Sagar for a consideration of R4100 Cr. The deal marking consolidation in the cement industry would see Vicat paying $120 per tonne of capacity.
The buyout would put Vicat’s name in the top 10 cement companies in the country making it the second largest in southern India. The group has has 7.75m tons of capacity in India and commenced production at its Gulbarga JV plant in January last year.
The company was planning to increase its capacity by 5.5m tons of the plant on two phases first by 2016-17 and later in 2018-19. The company had said that the expansion at Gulbarga, involving two phases with each phase costing around R1,800 Cr, will add 2.75m tons of capacity by 2016-17 and another 2.75m tons two years from then.
The Vicat Group, with 21 million tonnes of capacity reported a growth of 12.7% in India sales at 155 million euros in 2013. With operations spread across 11 countries the group gets a chunck of its EUR 2.3 bn revenues from outside France.
In 2010, it had acquired a controlling stake in Andhra businessman turned politician YS Jagan Mohan Reddy's Bharathi Cement. Vicat was also planning to buy contolling stake in Sree Jayajothi Cements, however in August, the Indian unit of Irish building materials company CRH bought Sree Jayajothi Cements from Shriram Group for R1,400 Cr.
Sagar Cement Limited, which commenced operations in 1985, manufactures cement. Currently, the company has clinker manufacturing capacity of 2.00 mtpa and cement manufacturing/grinding capacity of 2.69 mtpa. It manufactures ordinary portland cement, portland pozzolana cement, and sulphate-resistant cement.
Experts expect the industry to see some consolidation after the competiton commission fined the top cement companies for operating as a cartel in 2012.
Recent deals in this space, Chettinad Cement Limited was acquiring Hyderabad based Anjani Portland for an enterprise value of R360-380 C; Jaiprakash Associates was in talks to divest 74% stake in two cement JV’s with SAIL to Holcim owned ACC for R2900 Cr; UltraTech bought Jaypee’s Gujarat unit for R3800 Cr.
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