Companies

Lafarge to quit India, puts entire 11 mtpa on the block

Our Bureau Mumbai | Updated on January 19, 2018

bl04_Lafarge graphics

LafargeHolcim in a statement said the Group is no longer in discussion with Birla Corporation for the sale of the Jojobera and Sonadih cement plants in Eastern India that was announced earlier.

Global cement major submits new sale plan to competition panel

Global cement major LafargeHolcim has put its entire 11 million tonne per annum annual capacity in India on the block after its deal with Birla Corporation (BCL) to sell 5.1-mtpa capacity hit a roadblock.

A LafargeHolcim statement said on Thursday that the group was no longer in talks with BCL for the sale of the Jojobera and Sonadih cement plants in eastern India.

The merger of Holcim’s subsidiaries – ACC and Ambuja Cements – and Lafarge India would have made it the dominant player in the eastern region, with the ability to dictate prices.

The Competition Commission of India, therefore, had instructed Lafarge to sell its units there. Following this, Lafarge signed an agreement with BCL for the sale of the Jojobera and Sonadih plants.

Alternative remedy

LafargeHolcim’s sale of the plants, necessitated after the global merger of French cement maker Lafarge and Swiss building materials company Holcim, ran into trouble as the new Mines and Mineral Development Act does not permit transfer of captive mines along with sale of assets.

Since the transfer of mining rights was critical for the sale, LafargeHolcim was obliged to submit an alternative remedy to CCI, it said. “The alternative remedy (to sell 11 mtpa) is now under CCI consideration. The Group remains in dialogue with the CCI and will communicate any further updates to the divestment process in India,” it added.

Mining rights

Now, with the sale of the entire 11 mtpa capacity, the acquiring company can retain the mining rights under a separate subsidiary till the MMD Act is amended to facilitate transfer of captive mining assets.

Given the slowdown in the cement sector, the complication in holding mines as a separate subsidiary may impact valuation.

Retaining mining rights in the subsidiary company becomes a costly proposition as fungibility of cash flow becomes an issue and the debt needs to be serviced by the subsidiary on its own, said an industry expert.

BCL to move court

Meanwhile, BCL has not accepted Lafarge’s decision to call off the deal, and plans to move court.

In a statement, the company said it is in the process of taking appropriate legal measures in consultation with lawyers, it said.

Published on February 04, 2016

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

null
This article is closed for comments.
Please Email the Editor