Lafarge may exit India as plan to sell part capacity to Birla Corp fails

Lafarge India is reported to have submitted a revised proposal to the Competition Commission of India (CCI) to sell its entire 11-million tonne cement business in India after its plan to sell 5.15 million cement capacity to facilitate its global merger with Holcim failed to materialise.

France-based Lafarge and Swiss cement giant Holcim announced a global merger in April 2014 to create the world's largest cement company. This, however, faced anti-trust scrutiny in India and several other countries.

India's anti-trust watchdog CCI wanted Lafarge to offload nearly half of its cement capacity in the country as part of the approval for merger. The company's plan to sell its 5.15-mt cement capacity in Chhattisgarh and Jharkhand to Birla Corporation for Rs5,000 crore, however, ran into trouble as the M P Birla group failed to secure limestone mining rights for the two units.

Lafarge has 7.8 million tonnes (70 per cent) of its capacity in Chhattisgarh, Jharkhand and West Bengal while Holcim's ACC and Ambuja have capacities of 6.1 million tonnes and 4.6 million tones, respectively, in the country's eastern region.

Holcim, through its control of Ambuja Cement and ACC, has 60 million tonnes of cement capacity in India.

A merger would have led to a capacity of 18.5 million tonnes in the eastern states for Holcim-Lafarge, which would have been more than 40 per cent of the estimated 46 million tonnes of total capacity in the region. Hence the CCI directive to offload the excess capacity,

CCI had asked Lafarge India to sell its 5.15 mt capacity in eastern India by December 31 to complete its global merger.

Subsequently, in August 2015, it had agreed to sell the proposed 5.15 million capacity along with brands Concreto and PSC and mineral rights over adequate reserves of limestone to Birla Corp. The deal, however, was conditional on Birla Corp being able to get mining rights transferred from Lafarge.

''Lafarge India has sought an extension of its deadline from the CCI to complete its divestment,'' said an investment banker familiar with the development. ''Lafarge India has now put the entire company on the block, as the sale of the entire company will include transfer of mining rights."

Lafarge, which entered India in 1999 with acquisition of Tata Steel's cement unit, had since acquired Raymond Cement facility in 2001. With a total capacity of 11 million tones, it has now plants in Chhattisgarh, Jharkhand, Rajasthan, Haryana and West Bengal.

Birla Corp, however, is in the race to acquire Reliance Infrastructure's 5.6 million tonne capacity, which is also valued around Rs 5,000 crore.