As tension mounts and speculations continue being made, the Indian cement industry has been closely watching the progress of Holcim Group’s exit from the country. The Swiss giant set off a whirlwind by putting its two listed cement arms – ACC and Ambuja – out in the market to evaluate options for their stake sale. Holcim holds a 63.19 per cent share in Ambuja and 4.48 per cent in ACC, which is an Ambuja subsidiary. Ambuja additionally holds its own stake of 50.05 per cent in ACC. Holcim Group’s global cement capacity as of the current financial year is 293 mtpa with around 24 per cent of its total capacities housed in India. Ambuja’s current reported grinding capacity is 31.4 mtpa with plans to expand capacity to 39.9 mtpa by 2024, while ACC’s has been calculated at 34.9 mtpa to be increased to 39.7 mtpa by the first half of the next year. These numbers mean that any player who manages to take over both ACC and Ambuja will be adding a combined pan-India capacity of 66 mtpa, promptly shooting any global player to a second position. The contenders The world’s largest cement maker reportedly has been believed to have held early-stage negotiations with JSW Cement and Adani Group to gauge their interests in this acquisition, with news reports indicating UltraTech as another formidable contender in this race. Apart from these, a few regional players such as Shree Cement have been approached as well. JSW Cement has a grinding capacity of approximately 15 mtpa. It primarily depends on imported clinkers since its present clinker capacity is 3.2 mtpa only. Shiva Cement, a JSW subsidiary, will increase its clinker capacity by 1.36 mtpa and cement capacity by 1 mtpa. UltraTech has a consolidated capacity of 119.95 mtpa while Adani does not have a presence in the cement market as of date, but has been planning its foray into the cement industry under its subsidiary Adani Cement Industries formed in July 2021. Shree Cement’s grinding capacity is 46.4 mtpa and has been consistent in its capacity additions, however, it has done only one acquisition in the domestic market and may reportedly face regulatory hurdles if it shows its interest in this deal. The investment Ambuja’s market capitalisation is Rs 764.77 billion and that of ACC’s is Rs 433.89 billion, together making the companies’ total market cap at Rs 1.20 trillion. If signed, this deal stands to reportedly be one of the largest in the country. The bids for the two assets are expected to be upwards of $10 billion. As Motilal Oswal’s recent cement sector update report mentions, “Holcim will prefer a cash deal and not a share swap if it has plans to exit the Indian operations. This acquisition will require a huge investment by the acquirer and will make the complete exit a tall task.” The report adds that the acquirer will have to give an open offer in both the companies. The huge investments may lead to leveraging of the acquirer’s balance sheet, which generally is not favoured for a cyclical business. Recent developments point out that JSW Cement has a couple of US private equity funds keen on this opportunity backing its funding, while Adani has reportedly tied up with multiple foreign banks such as Deutsche Bank and Barclays and domestic banks such as ICICI Bank and Axis Bank for funding the deal. Benefits to the sector This deal, if it goes through, should be positive for the sector in the near-to-medium term as the acquirer might not chase growth CAPEX immediately, the Motilal Oswal report observes. “Acquisition by the Adani group, if it happens, may also alleviate concerns of an entry of a new aggressive player in the sector as the group’s immediate focus will be on streamlining the operations in the near term. In the long run, however, sector dynamics would depend on the growth plans and aggressiveness of the acquirer.” ACC has undertaken expansion plans in the Central markets, whereas Ambuja has recently announced its expansion plans in the East. Holcim will obtain 1 per cent of the turnover of ACC and Ambuja as technology and know-how fees. Everyone involved in the divestment, however, continues to be tightlipped. With a portfolio as impressive as Holcim’s, the industry awaits the results of perhaps the most anticipated and aggressive bidding the Indian cement industry has seen in recent times.