Thai firm looks at Mangalam cement plant in India

Thai firm looks at Mangalam cement plant in India
Published: 16 February 2004

Ailing Indian firm Mangalam Cement Ltd says a Bangkok-based merchant bank has visited its plant last week, boosting its shares by 10 per cent on talk of a looming buyout in a sector ripe for consolidation.

Dealers in Bangkok said Siam City Cement had been linked with an acquisition in India, though a source at the Thai company declined to comment specifically on the Mangalam plant.

"We have a policy that if a deal is not done, we can’t give any information," said the source, asking not to be identified.

"We’ve talked to a lot of people," he added, when asked whether Siam City was interested in the Indian plant.

Mangalam, which saw its entire net worth wiped out in 2000, was declared sick and put through a restructuring in 2002.

A Mangalam official said representatives of the Bangkok bank visited their plant in the western state of Rajasthan, though he declined to reveal their identity. The plant has the capacity to produce 1.5Mta of cement.

Robust growth in India, Asia’s third-biggest economy, is expected to drive up demand for building materials. But the cement industry is battling over-capacity, which keeps prices under pressure and weighs on earnings.

Analysts say pricing power will only be restored if there are more mergers and buyouts among the more than 150 cement producers in India, the world’s second-biggest cement producer after China.

"The long-term outlook is positive since there are strong demand drivers such as a housing boom and higher infrastructure spending," said Novonil Guha, an industry analyst with SBI Capital Markets in Bombay.