Holcim deal encourages Italcementi to expand in India

Holcim deal encourages Italcementi to expand in India
Published: 15 February 2005

The proposed Holcim acquisition of ACC has increased the appetite of other global majors in the Indian cement sector. Italcementi, world’s fifth largest cement producer is on the prowl in India.  The Italian majorwhich entered India five years back by striking an equal equity joint venture with KK Birla Group and followed it up by acquiring Sri Vishnu Cement a year later- is looking to expand both organically and inorganically through its existing JV in the country. 

In an exclusive interview with ET Carlo Pesenti, chief executive officer of Italcementi SpA, said the Holcim deal has sparked other opportunities which will affect not just the top global players like Lafarge and Cemex but also other large cement makers.  Talking about Italcementi’s acquisition strategy, Mr Pesenti said, "We have a few projects in mind and we may develop some opportunity. The southern region in India where our factories are located is a priority area where we want to create a strong presence. But at the same time we want to cover the whole country." 

Sharing his views about the Holcim deal and its impact on the Indian market he said, "Having such a big global player investing so heavily in a country is good news for us as it says that our strategy of coming to India was appropriate."  The Italian cement major, which derives more than half of its 70 million tonne cement sales from the developed world is looking to balance the equation with growth in emerging markets including India, Egypt and Turkey among others. 

A committed supporter of Italian soccer club Inter Milan, Mr Pesenti, who is in a short visit to India in a business delegation accompanying the Italian president, also shared his views about the cement sector.  "Globally cement prices are doing well in all markets where we are present but in India, unfortunately, it is too low. This is because of competition and oversupply and even though demand is growing pricing opportunity is a bit low here," he said. 

Talking about the challenges facing business in India as he saw it, he said, "India is not the most difficult country to work given our experience in some other markets. But if we look at the cost structure, electricity is an issue and our Indian operation has the highest electricity cost within the group."  Italcementi, which has invested a total of $130m in India till date, is further looking at driving efficiency in its Indian operations and is also planning organic growth. 

Mr Pesenti elaborated, "We are studying the possibilities with our local partner to see where and how to go about doing it. Talking about other businesses we can look at entering the ready mix concrete market at a certain stage. We would like to go for vertical integration in the cement space with both upstream and downstream activities."