Displaying items by tag: Lafarge India

India: Prism Johnson has appointed Raakesh Jain as Executive Director & CEO (Cement) with effect from 17 August 2024. His appointment will last for three years until mid-2027. He will succeed Vivek K Agnihotri, who has resigned.

Jain holds 30 years of experience in the building material industry working as the CEO of the cement division of Prism Johnson from late 2021. Before this he was the Chief Sales Officer for Nuvoco Vistas. Earlier in his career he spent nearly a decade with Lafarge India in sales roles. Before this he held sales positions for the white cement division of UltraTech Cement from the late 1990s onwards. He is a commerce graduate from Devi Ahilya University and holds a master of business administration in Marketing from Vikram University.

India: The National Council for Cement and Building Materials (NCCBM) has appointed Neeraj Akhoury as its chair following a meeting of the board of governors. Akhoury is also the president of the Cement Manufacturers’ Association and the managing director Shree Cement, according to the Press Trust of India. He holds over 30 years experience in the cement and steel sectors with positions held at Tata Steel, Lafarge India, LafargeHolcim, ACC, Ambuja Cements and Shree Cement in countries including India, France, Nigeria and Bangladesh.

The NCCBM is a research and development organisation under the administrative control of the Department for Promotion of Industry and Internal Trade that is in turn run by the Ministry of Commerce & Industry.

South Africa: Lafarge South Africa has appointed Rossen Papazov as its country chief executive officer (CEO). Papazov will join the company with effect from 1 October 2017, according to Business Report. He has been the country head for Holcim in Azerbaijan for the last four years. Prior to this he originally joined Holcim in 2000 as its Business Development Manager for Bulgaria. He has also held roles in Belgium and Romania.

Another week and another massive Indian cement industry deal. This week Nirma has won the bidding for the assets of Lafarge India that LafargeHolcim is selling. Before we get too carried away though, the diversified conglomerate entered into a letter agreement with LafargeHolcim on 7 July 2016 to pay US$1.4bn for three cement plants and two grinding plants with a total cement production capacity of 11Mt/yr.

It is worth noting that this is only a letter agreement. LafargeHolcim signed one previously with Birla Corporation for some of the same assets in August 2015. Unfortunately, an ambiguous amendment to the Mines and Minerals (Development and Regulation) (MMDR) Act struck in January 2015 made it unclear how easily mineral rights could be transferred with an industrial plant sale. After much likely internal squabbling Lafarge India said it was selling all of its assets in January 2016 followed by threats of legal action by Birla.

Some commentators in the Indian media have flagged the new deal as expensive for Nirma. It will be paying US$127/t for the new capacity compared to the US$118/t that UltraTech Cement is offering Jaiprakash Associates for its laboured deal. The Nirma deal comprises integrated cement plants at Sonadih in Chattisgarh, Arasmeta in Chattisgarh and Chittorgarh in Rajasthan, and cement grinding plants at Jojobera in Jharkhand and Mejia, West Bengal. Other assets include 63 ready mix concrete plants, two aggregate plants and a blending unit.

However, unlike UltraTech, Nirma is a relatively new entrant in the cement industry. Its main industries are in detergents and soda ash manufacture. It invested US$194m in a 2.28Mt/yr cement plant in Rajasthan that was commissioned in November 2014. It also ran into environmental issues over a proposal to build a new cement plant at Mahuva in Gujarat. One report compiled under request by the Indian Supreme Court in 2011 cited the presence of Asiatic lions as a reason for concern!

Lions aside, Nirma may be paying over the odds for its new cement business but it will gain a bigger presence in the industry quickly and diversify from its other existing industries in which it faces fierce competition. The Lafarge India plants are mostly in eastern Indian states compared to Nirma’s plant in Rajasthan in the west, giving it a reasonable geographic spread.

Nirma reportedly plans to finance the purchase through a leveraged buyout and the Mint business newspaper has described this as the largest transaction of its kind in India to date. The risk here will be how the Indian cement market plays out in the short term. LafargeHolcim reported that its cement volumes fell in 2015, although this has since picked up in the first half of 2016. UltraTech did better in its 2015 – 2016 financial year but it reported a slow construction market. Longer-term demographic trends suggest that the cement industry will grow, especially in the east of the country. With this in mind it may be a while before Nirma’s cement business roars.

Dalmia Cement (Bharat) threw a spanner in the works of the sale of Lafarge India this week. The cement producer, part of Dalmia Group, appealed against the Competition Commission of India’s (CCI) revised approval of the sale in February 2016. Dalmia challenged the CCI’s approval on procedural grounds querying both the revised and original order for the sale. Subsequently the sale has been delayed until a hearing in May 2016.

Dalmia’s objections concern how the CCI’s original approval in March 2015 interacts with the revised approval given in February 2016. Lafarge India was originally asked by the CCI in February 2015 to sell off 5.2Mt/yr of cement production capacity in Chhattisgarh and Jharkhand in eastern India. The request was a condition to allow the merger of Lafarge and Holcim in the country. Lafarge lined up Birla Corporation to buy the two cement plants but an ambiguous amendment to the Mines and Minerals (Development and Regulation) (MMDR) Act killed the deal. Then Lafarge India, a subsidiary of LafargeHolcim, announced that is was selling all of its assets in India. This includes three cement plants and two grinding stations with a total capacity of around 11Mt/yr.

Dalmia’s appeal may be planned to slow down the sale of a rival in the Indian cement business. Dalmia Group is the fifth largest cement producer in India with a capacity of 14.5Mt/yr. Lafarge India is, to an extent, a lame duck rival whilst the legal wranglings drag on.

However, the appeal may have a more serious side. A statement from the lawyers representing Dalmia also mentioned a challenge against the purchase requirements from the original CCI approval in March 2015. Specifically that any purchaser, “shall not have (directly or indirectly) operational capacity exceeding 5% of the total installed capacity in the relevant geographic market.” The confusion here is where that ‘relevant’ area refers to.

Originally the CCI designated this as Chhattisgarh, Odisha, Jharkhand, Bihar and West Bengal. And unsurprisingly, Dalmia holds more than 5% of production capacity in that region. If the CCI expands the relevant geographic area to more regions of the country then Dalmia’s market share is likely to fall. Local media reported that a bid for the Lafarge India assets by private equity firm KKR, which holds equity in a Dalmia subsidiary, was denied by the CCI. Cue the legal challenge.

It seems unlikely that the appeal by Dalmia will slow the sale down too much. If it is accepted then the CCI will have to reissue its approval for a second time and the sale will be delayed by a few months. If it is denied then the sale will proceed after a delay of one month. Either way the affair demonstrates how prized the Lafarge India assets have become. Indian local media reported that at least nine bids were made. It will be fascinating to see the price the winning bid makes when it is released.

Small print can cause large consequences. Billion US Dollar consequences. Take the 2015 amendment to India’s Mines and Minerals (Development and Regulation) (MMDR) Act from 1957. Ambiguous wording in the legislation may have held up two prominent cement industry acquisitions in 2015. It also hangs over the recently announced purchase by UltraTech Cement of Jaiprakash Associates’ cement plants.

The MMDR was amended in January 2015. As the Times of India explained in mid-2015, a clause in the amendment said, “The transfer of mineral concessions shall be allowed only for concessions which are granted through auction.” However, it was unclear whether this meant historically allocated mines given via nominations or only newly allocated ones. Given the reliance of clinker plants on reliable mineral reserves this caused havoc. Cue confusion and large legal budgets.

LafargeHolcim’s divestment of two cement plants to Birla Corporation was one casualty. As a condition of the merger between Lafarge and Holcim the Competition Commission of India (CCI) required that the Jojobera and Sonadih cement plants in Eastern India be sold in 2015. Together the plants have a combined cement production capacity of 5.1Mt/yr. However the ambiguity over the 2015 MMDR Act clause on transfer of mining rights held the deal up. By February 2016 Birla Corporation had endured enough. It publicly complained about Lafarge India’s ‘inability’ to complete the deal and threatened legal action. LafargeHolcim retorted by asking the CCI if it could sell all of Lafarge India instead. It received the revised clearance and a new buyer is yet to be announced.

Another victim was UltraTech Cement in a previous attempt to buy Jaiprakash Associates’ cement assets. That time it was down to buy two integrated cement plants in Madhya Pradesh with a combined clinker production capacity of 5.2Mt/yr with associated mineral rights. The deal was agreed in December 2014 and then reported delayed in mid-2015. Finally, on 28 February 2016 the Bombay High Court rejected the deal, citing the MMDR Act as the prime cause.

Luckily for UltraTech Cement the story has a happy ending (so far) as it then announced that it was purchasing the majority of Jaiprakash Associates’ 22.4Mt/yr cement portfolio instead for US$2.4bn. It is hoped that the deal will be finalised by June 2017 but this partly depends on the MMDR Act being amended. Although UltraTech Cement have said they are looking at alternative routes to the deal in case the act isn’t amended.

Poor legal wording kiboshed at least two cement industry deals for over 10Mt/yr production capacity. Roughly, at the price UltraTech Cement is paying for its latest deal, that’s over US$1bn worth of Indian cement assets. Given the hard time the Indian cement industry had in 2015 the question should be asked regarding how much damage the MMDR Act amendment has done. One option for the beleaguered industry is to consolidate and cut its costs. This was massively delayed in 2015.

The proposed 2016 amendment to the MMDR Act reads as follows:

“Provided that where a mining lease has been granted otherwise than through auction and where mineral from such mining lease is being used for captive purpose, such mining lease will be permitted to be transferred subject to compliance with the terms and conditions as prescribed by the Central Government in this behalf.”

Let’s hope it does the trick this time.

Last week we promised reasons to be cheerful for the cement industry. We only have one to offer this week but it's a good one. At present three Indian cement companies are on sale: Lafarge India, Reliance Cements and Jaiprakash Associates. If these sales complete then it represents an opportunity for the Indian cement industry to reorganise itself and stride forward when growth recovers.

Lafarge India upped its sales proposal to the Competition Commission of India (CCI) on 6 January 2016 to sell its entire 11Mt/yr portfolio. Originally as part of the LafargeHolcim merger agreements the CCI asked Lafarge to sell 5.2Mt/yr of production capacity in Chhattisgarh and Jharkhand in eastern India. However the deal was reliant on the original buyer, Birla Corporation, securing limestone mining rights. Birla failed to do so. Now Lafarge India has decided to sell everything instead. Naturally, following its Euro8bn spending spree in 2015 CRH has been linked to the sale by Indian media.

Then following press speculation Reliance Infrastructure confirmed to the Bombay Stock Exchange on 11 January 2016 that it was at an 'advanced stage of discussions with potential buyers for divesting the cement business of the company.' Reliance's cement arm, Reliance Cement, holds three cement plants in Maihar in Madhya Pradesh, Kundanganj in Uttar Pradesh and Butibori in Maharashtra with a total production capacity of 5.8Mt/yr. In addition to this, the company is also developing a 5Mt/yr cement plant at Wani in Maharashtra. The Reliance sale has been reported upon since early 2015. The difference this time is that Reliance responded to local press reports that it was about to sell to Birla Corporation or a couple of other private equity firms.

Finally, the third sale concerns Jaiprakash Associates' on-going attempts to sell its remaining cement assets to service its debts. Jaiprakash Associates cement subsidiary, Jaypee Cement, holds eight plants in India with a cement production capacity of 11Mt/yr. In addition it holds six cement grinding plants with a capacity of 10.7Mt/yr. Despite reported attempts to sell the entire division in one Jaypee has actually ended up selling its cement assets in a piecemeal fashion one or two at a time. The most recent sale being announced this week is to sell its Bhilai Jaypee Cement to Shree Cement. This follows other sales to HeidelbergCement and UltraTech in 2015.

None of these sales are new exactly but the combined production capacity of these plants comes to just under 28Mt/yr. This represents 9% of India's total national cement production capacity of 310Mt/yr. Any player somehow able to weasel their way into striking a deal for all of these plants would immediately become one of the country's biggest producers.

It would definitely be a case of buyer beware though. Credit agency ICRA recently reported that it expects that cement demand growth will be a 'modest' 4% in the 2015 - 2016 financial year before picking up in the following year. This follows poor growth in cement demand in the first half of 2015 and even declines in March and April 2015. ICRA also expected the country capacity utilisation to drop to 70% in the 2016 financial year, down from 77% in the 2012 financial year. That 7% drop in the utilisation is awfully close to the 9% of Indian national production capacity that the cement assets currently on sale from Lafarge India, Reliance Cement and Jaypee Cement. Unsurprisingly, the buyers of Indian cement assets have been picking and choosing their plants one-by-one so far.

India: Lafarge India has appointed Ujjwal Batria as CEO of the company effective from 22 June 2015. Batria will take over the responsibility from Martin Kriegner, who has been named as area manager for Central Europe of LafargeHolcim.

The development comes shortly before the expected completion of the LafargeHolcim merger. The Indian Competition Commission of India (CCI) has already approved the Indian leg of the proposed merger, with certain provisions, including divestment of two cement plants; Lafarge's plants at Jojobera, Jharkhand and Sonadih, Chhattisgarh. The two plants have a combined capacity of 5.15Mt/yr. Holcim's business in India is run through ACC and Ambuja Cements. It is not clear what Batria's role will be in the merged LafargeHolcim entity. Since ACC and Ambuja Cements are public listed firms, Lafarge's Indian unit may continue to operate separately, at least to begin with.

Prior to his appointment as CEO of Lafarge India, Batria was managing director of the company and was managing its cement business. He has been with Lafarge for 16 years. He had joined the company in 1999 and has served on different position across functions since then.