Moving away

Calcutta, May 13: The KK Birla Group today exited the cement business by selling its stake in Zuari Cements to French joint venture partner Ciments Francais SA, a group company of Italcementi, the fifth largest cement producer in the world.

Ciments Francais SA paid Rs 600 crore to pick up a 50 per cent stake in Zuari Cements, which has an installed capacity of 3 million tonnes in the south. Zuari Cement was a 50:50 joint venture between Zuari Industries and Ciments Francais. The development marks another addition to the recent consolidation in the Indian cement industry.

In January this year, Holcim, the world’s second largest cement maker, bought into Gujarat Ambuja Cement (GACL). In 2005, it had picked up a controlling stake in ACC too. The Zuari Industries board met today to take the sale decision.

“The decision of Zuari to sell its stake in the cement business is based on the company’s business strategy to focus on its core competence in fertilisers and agri-related businesses in India and overseas,” the company said in a statement.

Zuari Industries’ investment in Zuari Cements, formed in 2000, was to the tune of Rs 214 crore. The valuation, based on the company's results as on March 31, captures the firm trend in the cement industry and the EBIDTA multiple for transaction is among the best in recent transactions in the industry, the company claimed.

Zuari Industries hoped that the strategic move would result in enhancing shareholders’ value by availing of domestic and global opportunities in its core businesses.

While Zuari Cement has a 1.8-mt capacity, its wholly owned subsidiary Shri Vishnu Cement has 1.2-mt capacity. The plants are located in Yerraguntala and Sitapuram in Andhra Pradesh.

Analysts feel that a fresh wave of consolidation would be witnessed in the highly fragmented cement industry in the country.

Even though two big blocks have been created ? one led by Holcim through ACC and GACL and the other by the AV Birla Group through Ultratech and Grasim ? there are a number of small and medium-sized companies that could be prey to foreign cement majors eager to make a toehold in the country.