The Hindu Business Line : Lafarge emerges front-runner to acquire L&T’s concrete biz

Mumbai, May 14 Though leading cement makers are in the race to acquire engineering major Larsen and Toubro’s ready-mix-concrete business, French cement major Lafarge is said to be ahead with Holcim running a close second. The deal is estimated at around Rs 1,200 crore.

If Lafarge is successful, the company will acquire a pan India presence.

L&T has 66 RMC plants and commands a 25 per cent market share with revenues from this division at about Rs 1,000 crore. Total capacity of the units is pegged at 30-40 lakh cubic metres a year.

In 2001, L&T sold its cement business to the Aditya Birla Group, but held back the RMC unit, which it later spun off into a separate entity – L&T Concrete.

Growth expectations

The ACC Chairman, Mr N.S. Seksheria, had said the potential and scope for future growth of this industry was enormous. In the developed world, RMC formed 70 per cent of the cement consumed by the construction industry. The overall usage in India was quite low at about 2.5 per cent, but it was increasing rapidly. In many large cities, more than 20 per cent of the cement consumption was being consumed in the form of RMC.

Grasim’s RMC volume in the Q4 of fiscal 2008 increased 62 per cent to 5.9 lakh cubic metres due to rapid expansion. It proposes to ramp up the number of units to 94 from 22 with a Rs 560-crore investment.

UltraTech commissioned 15 plants in the last fiscal and proposes to add 17 more at a cost of Rs 142 crore.

However, for the quarter-ended March 2008, ACC Concrete (its RMC division) posted net sales of Rs 124 crore and loss of Rs 19 crore. While the outlook for demand and supply was positive, the industry faced challenges of meeting steep cost of escalations, the company said.