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Paul Noronho

Concrete plan: Mr Bradley Mulroney (left), Regional President Asia and Middle East, Lafarge, with Mr Mike Glover, Managing Director, Lafarge Aggregates and Concrete India Pvt Ltd, at a press conference in Mumbai on Thursday. —

Our Bureau

Mumbai, May 15 French cement maker Lafarge justifies the price it has agreed to pay for acquiring L&T Concrete (Rs 1,480 crore) on the ground that Ready Mix Concrete (RMC) market in India is in an early stage of its development and that it offered strong growth and value creation potential.

The RMC concept is still at its nascent stage in India, with a penetration level of hardly 4 per cent in the construction sector, against 50 per cent in other Asian markets like Malaysia and Thailand and 15 per cent in China. “We believe that the penetration level (of RMC) in India will reach 15 per cent fairly quickly. And this is why we believe that the timing (of the acquisition) is right,” Mr Bradley Mulroney, Regional President Asia and Middle East of Lafarge Aggregates and Concrete, said.

RMC is a ready-to-use material, with pre-determined mixture of cement, sand, aggregates and water. RMC is a type of concrete manufactured in a factory according to a set mix or as per specifications of the customer. Globally, RMC is becoming a preferred on-site concrete mixing because of the precision of the mixture and reduced worksite problems and confusion.

Lafarge’s focus will be on bringing out value-added concrete products in the Indian market. With the acquisition, Lafarge will get all L&T Concrete’s 66 plants located across India, with total estimated volumes of 4.1 million cu.m. in 2008. The buy-out will be accretive to Lafarge’s EPS from 2009.

For L&T, the selling of its RMC business is in line with its strategy of focusing on core businesses and exiting others. It had earlier exited its cement business through a de-merger and sale to Grasim in 2004. “The customer profile and service requirement of RMC business are very different from L&T’s engineering and construction business,” the company said in a statement.

Although the French company made an early entry into India, its expansion in the domestic market was slow as compared to that of Swiss cement major Holcim. Now, with the acquisition, the company intends to further consolidate its operations in the cement and gypsum sectors.

Lafarge had entered the Indian market in 1999 with the acquisition of the cement business of Tata Steel and followed it up with the buying of the Raymond Cement facility in 2001.

At present, the French major’s cement production capacity in India is about 5.5 million tonnes, operating two plants in Chhattisgarh and one grinding unit in Jharkhand. In 2006, it launched a project to double the capacity of its Sonadih plant in Chhattisgarh, where it is currently building a new production line.

The company now is in the process of doubling its cement production capacity in the next five years through greenfield projects in several regions. Last year, it announced a greenfield project in Himachal Pradesh with a capacity of 2.6 million tonnes. In the gypsum sector, the company operates through a trading activity, with an estimated market share of about 15 per cent.

The company is at present building a new plasterboard factory in Rajasthan with an annual capacity of 10 million sq mt, as part of its plans to expand its operation in the gypsum sector.

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