Displaying items by tag: Uttar Pradesh
UltraTech Cement seals the deal
05 July 2017Congratulations are due to India’s UltraTech Cement this week for finally completing its US$2.5bn asset purchase from Jaiprakash Associates. The deal has been around in some form or another since at least 2014 when UltraTech arranged to buy two cement plants in Madhya Pradesh for around US$750m. That deal, publicly at least, became a victim of the 2015 amendment to India’s Mines and Minerals (Development and Regulation) (MMDR) Act. The Bombay High Court eventually rejected it in early 2016 after a period of delays. However, the deal bounced back in a much larger form around the same time and since then everything has gone relatively smoothly.
As chairman Kumar Mangalam Birla put it in his letter to shareholders in the company’s 2016 – 2017 annual report the, “move is essentially for geographic market expansion.” He then went on to mention all the usual keywords like ‘synergy’ and ‘economies of scale’ that you expect from an acquisition. Quite rightly he finished with, “It is with great pride that I record, that UltraTech is the largest cement player in India and the fifth largest on the world stage.” On that last point he meant outside of China but UltraTech does have a small number of assets outside of India, notably in the UAE, Bahrain, Oman and Bangladesh, hinting at an international future for the cement producer.
Map 1: UltraTech Cement’s plants in India. Source: UltraTech Cement Corporate Dossier, January 2017.
To give a scale of the deal, UltraTech has increased its number of integrated cement plants in India to 18 from 12 and its cement grinding plants to 21 from 16. Its overall cement production capacity will increase by nearly 40% to 91.4Mt/yr from 66.3Mt/yr. The new assets are in Himachal Pradesh, Uttar Pradesh, Uttarakhand, Madhya Pradesh and Andhra Pradesh. The main regions that will benefit are the North, Central and South zones. In particular the Central Zone will see its capacity jump to 21.1Mt/yr from 6.2Mt/yr. This area also includes a new 3.5Mt/yr plant at Dhar in Madhya Pradesh that is scheduled for commercial production in late 2019.
The completion of the Jaiprakash Associates deal was followed by the introduction at the start of July 2017 of the Goods and Services Tax (GST), a rationalisation of some of the country’s central and state taxes. UltraTech promptly said it had reduced its product prices by 2 – 3% in light of tax reductions under the new regime. Some producers were warning of a rise in cement prices in the run-up to the introduction of the GST and the Cement Manufactures’ Association said that the new tax rate was insufficient. However, UltraTech said that the new tax rate of 28% was better than 30 – 31% previously. Other Indian producers also reduced their prices this week following the introduction of the GST.
UltraTech’s expansion and the start of the new tax scheme auger well for the Indian cement industry in 2017. Demonetisation knocked cement production at the start of the year and it may have lowered UltraTech’s capacity utilisation rate as well as reducing domestic sales by cutting housing demand. However, sector rationalisation and a simpler tax approach should help to remedy this. Not all government interaction has been helpful to the cement industry in recent years as the MMDR amendment and demonetisation show but the signs are promising.
Roll on the next set of financial reports.
India: UltraTech Cement has completed its US$2.5bn acquisition of six integrated cement plants and five grinding plants from Jaiprakash Associates. The transfer was made effective at a meeting of the Scheme Implementation Committee of the board of directors of UltraTech Cement. The purchase includes plants in Himachal Pradesh, Uttar Pradesh, Uttarakhand, Madhya Pradesh and Andhra Pradesh with a total production capacity of 21.2Mt/yr.
“This move is essentially for geographic market expansion, enabling UltraTech’s entry into the high growth markets of India where it needed greater reinforcement,” said Kumar Mangalam Birla, chairman of UltraTech. He added that the acquisition would add synergies in manufacturing, distribution and logistics.
Following the purchase UltraTech holds 18 integrated plants, one standalone clinker production plant, 25 grinding plants and seven bulk terminals, increasing its Ordinary Portland Cement capacity to 93Mt/yr. UltraTech said that the new production units will make it the fourth largest cement producer in the world outside of China and that it confirms its place as the largest producer in India.
India: Dalmia Bharat's income has risen by 14% year-on-year to US$577m in the first half of its financial year, which ended on 30 September 2016, from US$505m in the same period of the previous financial year. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 28% to US$135m from US$105m. Its sales volumes rose by 21% to 7.18Mt from 5.95Mt. The cement producer explained that it had focused on building up existing capacity and entering new markets in Uttar Pradesh and Madhya Pradesh during the period.
India: The shareholders of Jaiprakash Associates approved the sale of the group’s cement business to UltraTech Cement. According to the deal, arranged earlier in 2016, UltraTech Cement will buy Jaiprakash Associates' cement plants in Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh, which have a total production capacity of 21.1Mt/yr, at an enterprise value of US$2.4bn. In addition, it will acquire a 4Mt/yr grinding plant being built in Uttar Pradesh.
Approval has been obtained from the Competition Commission of India, according to the Press Trust of India. The next step involves seeking approval from the concerned High Court and the final approval from capital markets regulator.
Mangalam Cement starts production at Aligarh grinding plant
20 September 2016India: Mangalam Cement has started commercial production at its 0.75Mt/yr grinding plant in Aligarh, Uttar Pradesh following trials in August 2016. The cement producer has increased its overall cement production capacity to 4Mt/yr. Part of the BK Birla Group, the company produces 43 grade cement, 53 grade cement and Portland Pozzolana Cement (PPC) and markets it under the brand name of 'Birla Uttam.'
India: Kanodia Group has launched its new cement brand ‘Bigcem’ at Ghaziabad, Uttar Pradesh. The product will be targeted at markets in Uttarakhand and Western Uttar Pradesh to start with followed by expansion in Delhi and the National Capital Region, according to the Hans India newspaper. Gautam Kanodia, director of Kanodia Group, said that the product is expected to give 40% more strength than the general Bureau of Indian Standards standard.
India: UltraTech Cement has signed a Memorandum of Understanding to buy Jaiprakash Associates’ cement plants, which have a total cement production capacity of 22.4Mt/yr. The deal includes both integrated cement plants and cement grinding plants. The plants are situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka.
The acquisition also includes a 4Mt/yr cement grinding plant being built in Uttar Pradesh. UltraTech will pay an additional US$68.7m for this plant once it is completed. The deal will increase UltraTech’s total cement production capacity to 90.7Mt/yr from 68.3Mt/yr. The transaction is subject to regulatory approval.
Indian cement consumption down for first time in 20 years
19 August 2011India: Cement consumption in India fell for the first time in nearly 20 years in the three months to 30 June 2011, with a political impasse in large consumer states holding up infrastructure and realty projects. Demand fell by 0.68% during the period compared with the corresponding period in 2010 but demand changes were different depending on location. In Andhra Pradesh, demand contracted by 21% and in Karnataka it was down by 8.04%, according to data from Cement Manufacturers' Association (CMA).
Elsewhere, demand was down by 2% in June 2011 in Kerala and in Tamil Nadu, it was down by 1.9%. In comparison Gujarat saw cement demand grow by 4.9%, but growth was less strong than the same period of 2010, when 15% cement demand growth was seen.
The demand for cement is not assisted by problems that are expected to hinder government's proposed USD107bn investment in state road development during the 12th Plan period. The government has cited a lack of capacity in the private sector to make large investments, political sensitivity surrounding road-tolling, land acquisition disputes (which have caused a slow-down and resentment from locals at the site of the Formula 1 circuit site in Greater Noida, Uttar Pradesh) and a shortage of trained manpower as key problem-areas that may hamper the execution of the programme, due to start in 2012.
It is estimated that because of these problems, around 80% of the cost of the proposed investment will have to be met by public funds. The plan includes the construction of over 30,000km of new dual-carriageways, 5000km of four-lane highways and another 41,500km of single-track roads that are due for restructuring. The plan stipulates that the roads will be finished with either cement-based finishes or asphalt.