Cement industry greets L&T, Grasim alliance

Our Corporate Bureau

Mumbai, Nov 19: The cement industry has welcomed the coming together of Larsen & Toubro (L&T) and Grasim, which they feel will usher in a further round of consolidation in the industry. Though analysts point out that the major impact of the alliance will be felt in Maharashtra, the other major player -- Gujarat Ambuja -- has said that it would not make any change in their position.

According to Gujarat Ambuja Cements Ltd (GACL) executive director Anil Singhvi, "This is a good move for the industry. With L&T’s 16 million tonne capacity, Grasim will emerge as the single biggest player in the market. This will also lead to more stable prices."

Mr Singhvi, however, said that there would not be any change in the market equations in Mumbai as a result of this deal. Mumbai is India’s largest cement market with L&T and Gujarat Ambuja being the major players. On being asked what the nature of the co-operation between the two companies would take, Grasim cement business head Saurabh Misra said, "We can look at an exchange of ideas and best practices between the two companies." Mr Misra did not elaborate on whether Grasim was looking at an ACC-Gujarat Ambuja kind of alliance with L&T.

It seems, however, that Grasim is looking beyond L&T’s cement business to leverage the forward integration effects. Mr Misra said that Grasim could leverage the forward integration effects as cement to construction and EPC was a natural progression up the value chain. Moreover, there was a shift towards human capital as the move was towards the value chain.

Industry officials said that cement demand was primarily based on demand-supply mechanism and the alliance would benefit more in terms of location and distribution. Cement prices in Mumbai are currently around the Rs 132-145 mark in the wholesale market and industry players are looking at discussing the possibility of a price rise, industry sources said.