Displaying items by tag: Competition Commission of India

Dalmia Cement (Bharat) threw a spanner in the works of the sale of Lafarge India this week. The cement producer, part of Dalmia Group, appealed against the Competition Commission of India’s (CCI) revised approval of the sale in February 2016. Dalmia challenged the CCI’s approval on procedural grounds querying both the revised and original order for the sale. Subsequently the sale has been delayed until a hearing in May 2016.

Dalmia’s objections concern how the CCI’s original approval in March 2015 interacts with the revised approval given in February 2016. Lafarge India was originally asked by the CCI in February 2015 to sell off 5.2Mt/yr of cement production capacity in Chhattisgarh and Jharkhand in eastern India. The request was a condition to allow the merger of Lafarge and Holcim in the country. Lafarge lined up Birla Corporation to buy the two cement plants but an ambiguous amendment to the Mines and Minerals (Development and Regulation) (MMDR) Act killed the deal. Then Lafarge India, a subsidiary of LafargeHolcim, announced that is was selling all of its assets in India. This includes three cement plants and two grinding stations with a total capacity of around 11Mt/yr.

Dalmia’s appeal may be planned to slow down the sale of a rival in the Indian cement business. Dalmia Group is the fifth largest cement producer in India with a capacity of 14.5Mt/yr. Lafarge India is, to an extent, a lame duck rival whilst the legal wranglings drag on.

However, the appeal may have a more serious side. A statement from the lawyers representing Dalmia also mentioned a challenge against the purchase requirements from the original CCI approval in March 2015. Specifically that any purchaser, “shall not have (directly or indirectly) operational capacity exceeding 5% of the total installed capacity in the relevant geographic market.” The confusion here is where that ‘relevant’ area refers to.

Originally the CCI designated this as Chhattisgarh, Odisha, Jharkhand, Bihar and West Bengal. And unsurprisingly, Dalmia holds more than 5% of production capacity in that region. If the CCI expands the relevant geographic area to more regions of the country then Dalmia’s market share is likely to fall. Local media reported that a bid for the Lafarge India assets by private equity firm KKR, which holds equity in a Dalmia subsidiary, was denied by the CCI. Cue the legal challenge.

It seems unlikely that the appeal by Dalmia will slow the sale down too much. If it is accepted then the CCI will have to reissue its approval for a second time and the sale will be delayed by a few months. If it is denied then the sale will proceed after a delay of one month. Either way the affair demonstrates how prized the Lafarge India assets have become. Indian local media reported that at least nine bids were made. It will be fascinating to see the price the winning bid makes when it is released.

India: The Competition Appellate Tribunal has delayed the sale of Lafarge India following an appeal by Dalmia Cement Bharat. The sale has been halted until a hearing on 9 May 2016.

"Operation of order dated 2 February 2016 passed by the Competition Commission of India (CCI)... shall remain stayed," the COMPAT order passed by its chairman GS Singhvi said. LafargeHolcim has been asked to reply to Dalmia's appeal before the hearing in May 2016.

Lafarge India is selling all of its assets in India including a cement production capacity of 11Mt/yr. It received approval from the CCI in February 2016.

India: Dalmia Bharat has received approval from the Competition Commission of India (CCI) to acquire a 15% stake in its subsidiary Dalmia Cement Bharat from private equity firm KKR for over US$181m in a cash and stock deal. After the purchase, Dalmia Cement Bharat will become a wholly-owned subsidiary of Dalmia Bharat.

Dalmia Bharat provides management services to the group companies belonging to the Dalmia Bharat group, owns intellectual property such as trade names for its group companies and holds shares in the group companies, either on its own or through its subsidiaries. Dalmia Cement Bharat produces cement and it also makes refractories.

India: LafargeHolcim has received a revised order from the Competition Commission of India (CCI) for the sale of its stake in Lafarge India. This includes three cement plants and two grinding stations with a total capacity of around 11Mt/yr. The company also markets aggregates and is one of India’s leading ready-mix concrete manufacturers. The proposed transaction is an alternate remedy for the merger of the Group’s legacy companies and now forms part of the company’s Euro3.18bn divestment target in 2016.

“We will operate in India through our subsidiaries ACC and Ambuja Cements with a combined cement capacity of around 63Mt and a distribution network that extends across the entire country. We see opportunities to further build our business in India through our network of over 100,000 dealers and retailers, and by meeting the infrastructure needs of a country that is experiencing significant urbanization,” said Eric Olsen, CEO of LafargeHolcim.

The conditional clearance by the CCI for an earlier divestment proposal was received in April 2015, including the divestment of Jojobera and Sonadih plants in Eastern India with a cement capacity of 5.1Mt. LafargeHolcim subsequently entered into a letter agreement with Birla Corporation Limited, subject to CCI approval, in August 2015. However, due to the current regulatory issues relating to the transfer of captive mining rights and critical to the two plants, LafargeHolcim was obliged to submit an alternate remedy to the CCI to ensure compliance with the order.

As a result, LafargeHolcim will now launch a new divestment process for Lafarge India.

India: Reliance Infrastructure has sold its cement business to Birla Corporation for US$709m to lower its debt. The transaction is subject to approval of the Competition Commission of India and other applicable regulatory approvals," the company said.

"Reliance Infrastructure today announced the signing of share purchase agreement with Birla Corporation Limited, the flagship Company of the M P Birla Group, in relation to 100% sale of its subsidiary RCCPL," the company said in a statement. It added that SBI Capital Markets acted as the financial advisors to Reliance Infrastructure for this transaction.

Reliance Infrastructure has an integrated cement production capacity of 5.08Mt/yr at Maihar, Madhya Pradesh and Kundanganj, Uttar Pradesh and a 0.5Mt/yr cement grinding unit at Butibori, Maharashtra. The deal was valued at US$140/t of cement production capacity.

India: LafargeHolcim has confirmed that it is considering selling its subsidiary Lafarge India. The sale will require the approval of the Competition Commission of India (CCI) as an alternate remedy for the merger of the Group's legacy companies. Lafarge India has a cement production capacity of 11Mt/yr.

The announcement follows a regulatory filing by Birla Corporation stating that is considering taking legal action against LafargeHolcim for stopping a previous deal. However, LafargeHolcim has not said why it terminated the deal with Birla Corporation.

Originally LafargeHolcim was in discussion with Birla Corporation for the sale of the Jojobera and Sonadih cement plants in Eastern India that was previously announced. Both plants had a combined cement production capacity of 5.1Mt/yr. Due to the current regulatory issues relating to the transfer of mining rights captive and critical to the two plants, LafargeHolcim was obliged to submit an alternate remedy to the CCI to ensure compliance with the order.

LafargeHolcim now says that an 'alternate remedy' is under consideration by the CCI.

Last week we promised reasons to be cheerful for the cement industry. We only have one to offer this week but it's a good one. At present three Indian cement companies are on sale: Lafarge India, Reliance Cements and Jaiprakash Associates. If these sales complete then it represents an opportunity for the Indian cement industry to reorganise itself and stride forward when growth recovers.

Lafarge India upped its sales proposal to the Competition Commission of India (CCI) on 6 January 2016 to sell its entire 11Mt/yr portfolio. Originally as part of the LafargeHolcim merger agreements the CCI asked Lafarge to sell 5.2Mt/yr of production capacity in Chhattisgarh and Jharkhand in eastern India. However the deal was reliant on the original buyer, Birla Corporation, securing limestone mining rights. Birla failed to do so. Now Lafarge India has decided to sell everything instead. Naturally, following its Euro8bn spending spree in 2015 CRH has been linked to the sale by Indian media.

Then following press speculation Reliance Infrastructure confirmed to the Bombay Stock Exchange on 11 January 2016 that it was at an 'advanced stage of discussions with potential buyers for divesting the cement business of the company.' Reliance's cement arm, Reliance Cement, holds three cement plants in Maihar in Madhya Pradesh, Kundanganj in Uttar Pradesh and Butibori in Maharashtra with a total production capacity of 5.8Mt/yr. In addition to this, the company is also developing a 5Mt/yr cement plant at Wani in Maharashtra. The Reliance sale has been reported upon since early 2015. The difference this time is that Reliance responded to local press reports that it was about to sell to Birla Corporation or a couple of other private equity firms.

Finally, the third sale concerns Jaiprakash Associates' on-going attempts to sell its remaining cement assets to service its debts. Jaiprakash Associates cement subsidiary, Jaypee Cement, holds eight plants in India with a cement production capacity of 11Mt/yr. In addition it holds six cement grinding plants with a capacity of 10.7Mt/yr. Despite reported attempts to sell the entire division in one Jaypee has actually ended up selling its cement assets in a piecemeal fashion one or two at a time. The most recent sale being announced this week is to sell its Bhilai Jaypee Cement to Shree Cement. This follows other sales to HeidelbergCement and UltraTech in 2015.

None of these sales are new exactly but the combined production capacity of these plants comes to just under 28Mt/yr. This represents 9% of India's total national cement production capacity of 310Mt/yr. Any player somehow able to weasel their way into striking a deal for all of these plants would immediately become one of the country's biggest producers.

It would definitely be a case of buyer beware though. Credit agency ICRA recently reported that it expects that cement demand growth will be a 'modest' 4% in the 2015 - 2016 financial year before picking up in the following year. This follows poor growth in cement demand in the first half of 2015 and even declines in March and April 2015. ICRA also expected the country capacity utilisation to drop to 70% in the 2016 financial year, down from 77% in the 2012 financial year. That 7% drop in the utilisation is awfully close to the 9% of Indian national production capacity that the cement assets currently on sale from Lafarge India, Reliance Cement and Jaypee Cement. Unsurprisingly, the buyers of Indian cement assets have been picking and choosing their plants one-by-one so far.

India: The Competition Appellate Tribunal has set aside a US$945m penalty imposed on 11 cement firms by the Competition Commission of India (CCI) on accusations of cartel behaviour and asked the fair trade regulator to resubmit the case. The Tribunal also allowed the cement manufacturers to withdraw the 10% penalty amount already deposited with the CCI, according to the Press Trust of India.

The judgement follows appeals filed by the cement firms and their industry body, the Cement Manufacturers Association, against the two CCI orders passed in June - July 2012. The cement companies included ACC, Ambuja Cements, Binani Cements, Century Textiles Ltd, India Cements, JK Cements, Lafarge India, Madras Cements, Ultratech, JP Associates and Shree Cements.

The CCI had passed the orders after an investigation into complaints, including from Builders Association of India (BAI), against alleged price collaboration between cement firms.

The orders were later challenged at the Competition Appellate Tribunal, which ordered that 'the impugned order is set aside and the matter is remitted to the CCI for fresh adjudication of the issues relating to alleged violation" of the relevant sections of the Competition Act.'

India: The real estate developers' association Credai has moved the Competition Commission of India (CCI) against cement manufacturers that it claims have unduly increased the cost of cement. Credai has also highlighted the violation of CCI's 'cease and desist' order of 2012 by cement manufacturers, according to a statement from the industry body.

Credai said that the cost of raw materials used in cement manufacturing fell between January 2015 and September 2015, but that cement companies have not passed on the benefit to customers. Hinting at a cartel-like operation, it was also alleged that cement companies seem to be working together to control supply and prices. Housing and other real estate sectors account for nearly half of the cement demand in India. Despite low demand, cement prices have jumped by 20 – 40% in top cities across the country in the past couple of months.

"It is unfair that the cement manufacturers indulge in practices that control the prices of cement. The CCI has warned cement manufacturers in the past as well, but it is unfortunate that they seem to be continuing with their price and market manipulation," said Credai national president Getamber Anand.

At its annual general meeting in September 2015, Credai's board took the decision to stop procurement of cement from companies like UltraTech, Lafarge and others that unilaterally increased cement prices in the past month.

India: LafargeHolcim has entered into a letter agreement with Birla Corporation Limited, subject to approval by the Competition Commission of India (CCI), for the divestment of certain assets in India as part of the merger for US$768m. The proceeds from the sale of the divestment business will be used to further reduce debt.

The assets include Lafarge's Sonadih cement plant and Jojobera grinding plant in Eastern India, which have 5.15Mt/yr of cement production capacity. The transaction with Birla Corporation will be submitted to the CCI for approval and is subject to other regulatory approvals and customary conditions. Following the divestment, LafargeHolcim will have around 68Mt/yr of cement capacity in India.