After a gap of almost five years, Lafarge India, a subsidiary of the Paris-based Lafarge Group, is once again on the prowl. The company has started talking to a few Indian cement players for possible M&A opportunities. The company says it is on the lookout again. Cement is essentially a high-volume-low-margin business and industry stalwarts point out that a company is often sustained by volume growth.
That’s why Lafarge has started its hunt again. Of course, M&As may just be one of the options to step up the volume growth in cement business. Replying to an news query, Uday Khanna, CEO, Lafarge India, said: "Currently, we
manufacture about 5Mt of cement in three of our plants, located in Chhattisgarh and Jharkhand.
Our vision is to build up a strong presence in an expanding market. There are various ways one can achieve it. Growth through expansion, takeovers or by setting up greenfield projects. We are moving in all directions. We are also in discussion with others, but it will be premature to reveal it at this juncture.
India continues to remain a key growth market for the group. Lafarge commenced operations in India back in 1999 by acquiring Tisco’s cement unit. Later in January 2001, it acquired the cement business of Raymond to expand
Most think that the industry will see a flurry of activities related to M&As this fiscal. "The Indian cement industry has inherent attractions for the majrs. It is the second largest market in Asia after China. It is also the third
largest market in the world. Industry sources said that M&As makes perfect business sense, as any
greenfield mid-sized cement plant of 1Mta capacity, would cost Rs 300-350 crore. And that’s not all. There are associate problems of project completion and a 3-4 year gestation.
However, Mr Khanna said: "India is a competitive market with strong local players. It has been tough getting returns on investment." Lafarge, which enjoys an 18 per cent marketshare in the eastern India alone, is setting up a greenfield venture at Mejia in Bankura district. The 1M ta plant was conceived in 2004, and is expected to commence commercial production by 2008. (abstracted from The Economic Times, India)