Thread by @myfinology

World's largest Cement Company, Holcim plans to quit the Indian market?

A detailed 🧵 on

- The reasons
- It's impact on Indian Cement Industry
- Who are the potential buyers?

#stocks #investing

Holcim is a Switzerland-based building materials conglomerate & world leader in cement manufacturing.

The company holds 63% in Ambuja Cement which in turn holds 55% in ACC. It also has an individual stake of 5% in ACC.

The company has been dominating Indian market for 17 years but now it's planning to exit India which means it will sell it's stake in Ambuja Cement and ACC Ltd!

But why it's doing so? Is profitability a concern?

Of course not! India forms 23% of its total global cement capacity and 27% of its total sales volume.

Also, compared to other market Holcim operates in, India has huge potential in terms of growth!

Then Why is Holcim leaving India? ⤵️

As per reports, Holcim has identified specialty building solutions and high-end energy-efficient renovations as it's core focus area.

Currently the cement segment contributes 55% to the topline, but as a part of this strategy, Holcim expects it to drop to 35% by 2025.

Another reason to move away from cement business is that the sector responsible for significant pollution while Holcim is in the mission to "go green".

That's the reason the company is divesting its cement business across globe.

Between 2019 and 2021, Holcim had already divested 3.1 billion worth of assets across the globe.

It has divested its stake in Brazil, Sri Lanka, Indonesia, Vietnam, Malaysia, Philippines, and Russia in the past few years.

India remains the only emerging market that is left.

Another major reason why India has been chosen as a part of its Cement disinvestment strategy is the slow growth in ACC & Ambuja!

As a result both of these companies are losing market share over the years and that made the decision easier for Holcim.

What it means for Indian cement Market?

The combine capacity of Ambuja & ACC is 66 million tonnes per annum which means buying these stakes will catapult any player to the second position,

With a capacity of 117 MTPA, UltraTech is the largest cement company in India.

With Ultratech and Shree Cement sweeping away Ambuja and ACC's market share, this can be an opportunity for the new buyer to revamp the company’s market share.

But the deal value is something where there is still lack of clarity.

Holcim holds 63% stake in Ambuja. As per experts a potential buying deal will also trigger an open offer for an additional 26% in Ambuja Cement.

In case this gets fully subscribed to, the new owner will have 89% stake of the company.

Source : livemint

As per reports, the Holcim stake sale is likely to happen between $10-12 bn.

JSW, the Adani Group are in talks to make a deal with Holcim.

How it will affect the Cement Market?

Some experts believe that this deal might result in supply-demand mist-match and could lead to pricing pressure for existing cement players.

The reason being the possible capacity addition by the potential buyer post this deal.

While other analysts believe that this deal should be positive for the sector in the near term as the acquirer might not chase growth capex immediately because heavy investment would already be locked in acquisition!

Do let us know What do you think about this deal?