Lafarge deal to be the ticket to Nirma's cement ambitions

Moneycontrol BureauDomestic detergents major Nirma on Monday pipped larger players like Piramal and JSW Groups in the race to buy Swiss cement giant LafargeHolcim's India assets. The deal was settled at an enterprise value of USD 1.4 billion (roughly Rs 9,400 crore) for Lafarge’s three plants and two grinding stations with a total capacity of around 11 million tonnes per annum.

Ahmedabad-headquartered soda ash and chemicals maker Nirma has been striving to firm up its base in the cement business without much success and the Lafarge deal, though slightly expensive, proves to be a strategic fit in scaling up its capacity significantly from 2 million tonnes currently, experts say.  

Also, the deal brings along the opportunity to build a footprint in the eastern region from an existing larger base in the northern and western regions. The eastern region is widely regarded as most attractive market with better profits margins as supply there has not caught up with demand. It must also be noted that Nirma has expertise in mining of limestone which is a key raw material in soda ash. The access to Lafarge's limestone reserves will also prove fruitful.Besides, it will mean better brand recall for Nirma. As of now, Nirma has a fairly smaller presence through its Nirmax brand of cement manufactured at its Rajasthan plant.

According to Anil Singhvi of Ican Investment Advisors, Lafarge has got itself a sweet deal but for a good reason. Through this deal Nirma has acquired a fine-tuned business and not just cement assets/plants, Singhvi tells CNBC-TV18.

For LafargeHolcim, the deal secures two-thirds of its CHF 3.5 billion divestment program, while staying put in India’s growing cement space through subsidiaries ACC Ltd and Ambuja Cements with combined capacity of 60 million tonne.  

While the deal still awaits approval of the Competition Commission, media reports suggest Nirma is likely to announce a bond issue of Rs 4,000 crore to part-fund the acquisition.