<p>The $10.5 billion deal by Asia’s richest man Gautam Adani to buy Holcim AG's cement businesses in India could trigger a potential wave of consolidation in the country’s highly fragmented cement industry, according to industry experts.</p>.<p>The deal, which covers key brands such as Ambuja Cements and ACC, will help Adani Group become India’s No. 2 cement maker, a significant change from the past when it had a negligible presence in the sector. That’s precisely why analysts expect the smaller firms to tie up with one another or a larger partner to take on the new industry goliath.</p>.<p>“We foresee a high probability of industry consolidation driven by the chances of Adani taking the inorganic expansion route and/or sector incumbents, mainly small and mid-sized leveraged companies, partnering together or with strong companies, to take on potential competition,” said Aditya Narain, Head - Research, Edelweiss Financial Services.</p>.<p>ACC and Ambuja together account for 65 million tonnes of annual cement making capacity, making them second only to Aditya Birla Group’s UltraTech. And so far, these three companies have led the consolidation in the industry.</p>.<p>The Adani-Holcim deal, which followed a fierce bidding war with the JSW Group and Ultratech Cement Ltd, is the second largest deal in India this year, according to Reuters. And most experts said this was just the beginning of a dealmaking wave in the sector which includes companies such as Shree Cement, Dalmia Bharat, Nuvoco Vistas, Ramco Cements, JK Cement, India Cements and JK Lakshmi Cement.</p>.<p>“The consolidation of industry in mid-term is a real possibility,” Alvarez & Marsal Managing Director Sudeep Mehrotra said, highlighting how conglomerate Adani’s presence and expertise in ports, rail, road and storage logistics would bring in innovation in the industry. </p>.<p>He also pointed to new thrust on infrastructure by the government, which could brighten prospects for the cement industry and help it perform better in the next decade.<br />“Larger cement companies with access to cash will find buying low utilisation smaller companies with additional brownfield capacities more attractive than adding greenfield projects,” Mehrotra told DH.</p>.<p>India’s overall cement production capacity was nearly 545 million tonnes in the last financial year, 98% of which lies with the private sector. This shows the immense potential that private players can leverage, according to India Brand Equity Foundation.</p>.<p>Some see the Adani-Holcim deal as a transformational one for the sector.</p>.<p>“The deal has the potential to completely transform the cement industry given the efficiency-related benefits that the deal could bring in,” said Professor Kiran Pedada, Assistant Professor of Marketing at the Indian School of Business. “Adani might look for other acquisition opportunities that would help in consolidation” and in the long run, Adani might “give UltraTech a run for its money”.</p>
<p>The $10.5 billion deal by Asia’s richest man Gautam Adani to buy Holcim AG's cement businesses in India could trigger a potential wave of consolidation in the country’s highly fragmented cement industry, according to industry experts.</p>.<p>The deal, which covers key brands such as Ambuja Cements and ACC, will help Adani Group become India’s No. 2 cement maker, a significant change from the past when it had a negligible presence in the sector. That’s precisely why analysts expect the smaller firms to tie up with one another or a larger partner to take on the new industry goliath.</p>.<p>“We foresee a high probability of industry consolidation driven by the chances of Adani taking the inorganic expansion route and/or sector incumbents, mainly small and mid-sized leveraged companies, partnering together or with strong companies, to take on potential competition,” said Aditya Narain, Head - Research, Edelweiss Financial Services.</p>.<p>ACC and Ambuja together account for 65 million tonnes of annual cement making capacity, making them second only to Aditya Birla Group’s UltraTech. And so far, these three companies have led the consolidation in the industry.</p>.<p>The Adani-Holcim deal, which followed a fierce bidding war with the JSW Group and Ultratech Cement Ltd, is the second largest deal in India this year, according to Reuters. And most experts said this was just the beginning of a dealmaking wave in the sector which includes companies such as Shree Cement, Dalmia Bharat, Nuvoco Vistas, Ramco Cements, JK Cement, India Cements and JK Lakshmi Cement.</p>.<p>“The consolidation of industry in mid-term is a real possibility,” Alvarez & Marsal Managing Director Sudeep Mehrotra said, highlighting how conglomerate Adani’s presence and expertise in ports, rail, road and storage logistics would bring in innovation in the industry. </p>.<p>He also pointed to new thrust on infrastructure by the government, which could brighten prospects for the cement industry and help it perform better in the next decade.<br />“Larger cement companies with access to cash will find buying low utilisation smaller companies with additional brownfield capacities more attractive than adding greenfield projects,” Mehrotra told DH.</p>.<p>India’s overall cement production capacity was nearly 545 million tonnes in the last financial year, 98% of which lies with the private sector. This shows the immense potential that private players can leverage, according to India Brand Equity Foundation.</p>.<p>Some see the Adani-Holcim deal as a transformational one for the sector.</p>.<p>“The deal has the potential to completely transform the cement industry given the efficiency-related benefits that the deal could bring in,” said Professor Kiran Pedada, Assistant Professor of Marketing at the Indian School of Business. “Adani might look for other acquisition opportunities that would help in consolidation” and in the long run, Adani might “give UltraTech a run for its money”.</p>
