Cement gets a reality check from private equity investors

Cement gets a reality check from private equity investors
Published: 07 August 2006

One of the biggest beneficiaries of the present real estate boom in India seems to be the cement sector. This has led to a huge interest from private equity players in the sector. 
The sector, in the last six months, attracted private equity investments to the tune of $801m. Compare this to automotive, FMCG and chemical and fertilisers, which together had investments of $840m during the same period. "The cement industry is clearly witnessing a strong revival on the back of rising infrastructure and real estate spending. 
By attracting such investments, companies in this sector are able to restructure their old, high-cost debt and expand operations to capitalise on this boom effectively," said Venture Intelligence Founder & CEO Arun Natarajan. Typically, companies in the cement sector were debt-ridden. 
While the biggest deal during this period is the US$470m paid by Holcim to acquire a 14 per cent stake in Gujarat Ambuja Cements, there have been about six major deals in the last six months. Some of the prominent deals in the cement sector include the $25-m investment made by Actis in Dalmia Cements in March. Then, there was the $133.33m invested by Ciments Francais in Zuari Cements to pick up the remaining 50 per cent stake. 
Sectors like chemical and fertilisers and automotive have a limited demand compared to cement where the real estate boom has lead to enormous demand. With over 500 malls coming up in the next two years and many infrastructure projects the demand is going to increase further, said an analyst.