The market share of the top five cement companies has increased sharply to 54 per cent as of last December, against 45 per cent logged in March 2015.

It is expected to further increase to 55 per cent by March 2025, resulting in consolidation in the cement industry, said ICRA in a statement on Thursday. The top five cement companies include UltraTech, ACC, Ambuja, Shree Cement and Dalmia Bharat.

Except the ACC and Ambuja acquisitions by the Adani Group, other mergers and acquisitions were largely owing to the cash flow-starved nature of the acquired entity or the group’s financial stress.

M&A deals

Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA said there were 15 M&As in the last nine years in the cement industry at the average cost of $80 a tonne and it was lower than the cost of setting up an integrated greenfield cement plant at $110-120 a tonne.

The acquisition provides readymade capacity, limestone reserves and prevents companies from the hassle of longer gestation periods for stabilisation of operations in case of a greenfield unit, she said.

With another asset block of 28 tonnes in the pipeline for acquisition, ICRA expects M&A deals to continue on the back of the aggressive growth plans of the large incumbent players who want to maintain their market share, she added.

The consolidation, taking place across India, is primarily led by the eastern and the western regions.

The share of the top five cement companies in the eastern and the western regions is estimated to increase to 79 per cent in FY2025, from 54 per cent in FY2015. The southern region is highly fragmented, with only 40 per cent share held by the top five cement players in FY2015, and this may go up to 50 per cent by FY2025.

The northern and central regions were highly consolidated in the past at 65-75 per cent in FY’15) and are expected to remain in the range of 75-85 per cent by FY25.

Related Topics