Birla ramps up cement plans.

The word going around in investment banking circles is that if there is a cement plant up for sale anywhere in the country, Kumar Mangalam Birla is interested in buying it. Like in any commodity business, scale is of utmost importance in cement. Last year, when he acquired Jaypee Cement's 4.8 million-tonne plant in Gujarat, Birla took the capacity of his UltraTech Cement to 56 million tonne per annum - close to market leader Holcim's 57 million tonne. (The Swiss cement maker controls Ambuja Cements and ACC.) Birla wants to raise his capacity to 70 million tonne by 2015, by when Holcim is projected to reach 65 million tonne.

An opportunity to grow inorganically showed up last month when Holcim and Lafarge of France announced they will merge by the middle of next year. LafargeHolcim, the new company, will have the capacity to make 427 million tonnes of cement, this is way ahead of its nearest rival and current leader, Anhui Conch of China (227 million tonnes). As cement markets are highly localised (the commodity doesn't lend itself to be shipped over long distances), this deal is likely to face the scrutiny of anti-trust watchdogs in several markets. Analysts say if the merger has to happen, the two cement makers will need to shed some capacity.


BS