Nirma to buy Lafarge's Indian assets for around Rs9,300 cr

Soap maker Nirma has agreed to buy Lafarge India's 11-million tonne cement capacity plant from LafargeHolcim for a little over Rs9,300 crore ($1.4 million), Nirma stated in a release issued today.

LafargeHolcim has entered into an ''agreement with Nirma Limited subject to approval by the Competition Commission of India (CCI) for the divestment of its interest in Lafarge India for an enterprise value of approximately $1.4 billion,'' the company said in a statement on Monday.

The valuation is higher than market expectations. Lafarge will use proceeds from divestment to reduce debt further.

Lafarge India owns the Concreto brand which commands a premium in certain markets of India - a fact that added to the attractiveness of the assets.

The deal to acquire 11-million tonnes of cement capacity will make Nirma a significant producer of cement.

Ahmedabad-based Nirma, promoted by Karsanbhai Patel, has an annual turnover of more than Rs7,000 crore and employs about 18,000 employees, according to the company's website.

Besides Nirma, the final contenders included Piramal Group and JSW Group.

Lafarge India operates three cement plants and two grinding stations with a total capacity of around 11 million tonnes per annum.

LafargeHolcim will continue to operate in India through its subsidiaries ACC and Ambuja Cements.

CCI had, in April 2015, directed LafargeHolcim to sell around 5 million tonnes of cement capacity in eastern India in order to comply with competition rules in India. This was needed for erstwhile Holcim and Lafarge SA to conclude their global merger and start operating as a single entity in India.

In August 2015, the company agreed to sell its east India cement assets to Birla Corp Ltd for Rs5,000 crore. However, the deal was called off in February this year due to regulatory hurdles over the transfer of mining rights with these assets, which was not permitted at the time under the provisions of the Mines and Minerals (Development and Regulation) Act. The act was amended to allow such transfers in March.

LafargeHolcim had, however, restarted the process to sell its entire 100-per cent stake in Lafarge India even before the amendment. The sale had evinced interest from a number of bidders as it was seen as the largest big chunk of cement capacity likely to come up for sale. JSW Cement Ltd and Piramal Group were two of the other Indian bidders who had expressed interest in these assets along with a couple of foreign cement companies and private equity funds.

''Nirma already has 2-million tonne cement capacity in Rajasthan and they are putting up a new capacity in Gujarat. Thus they were very keen to buy this asset,'' said a person familiar with the transaction.

''Nirma is a cash-rich company and has an Ebitda (earnings before interest, tax, depreciation and amortization) of nearly Rs.1,400 crore and they are doing the transaction on their own. Once the CCI approval comes the payout will happen,'' this person said on condition of anonymity.

Arpwood Capital and Citibank advised LafargeHolcim on the transaction.

At $1.4 billion, the deal will be close to Lafarge Holcim's initial price expectation for the deal.