Cement mergers and acquisitions to get a PE boost

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Updated: January 18, 2016 2:24:29 AM

The cement sector is set to witness significant M&A (mergers and acquisitions) activity with the participation of private equity players in the next two quarters, reports Deborshi Chaki in Mumbai.

cementConsidered to be a performance indicator of the economy, cement demand in the country is expected to grow at a steady pace in the coming years, which in turn would lead to higher capacity utilisation of existing assets and translate into better margins and higher valuations for cement manufacturers. (Photo: Reuters image for representation only)

The cement sector is set to witness significant M&A (mergers and acquisitions) activity with the participation of private equity players in the next two quarters, reports Deborshi Chaki in Mumbai. Assets worth R47,000 crore could be up for sale. While most of these transactions qualify as distressed asset sales and special situations industry, analysts believe that they will still fetch good premiums given the rising interest of potential buyers in the cement sector. Considered to be a performance indicator of the economy, cement demand in the country is expected to grow at a steady pace in the coming years, which in turn would lead to higher capacity utilisation of existing assets and translate into better margins and higher valuations for cement manufacturers. Potential buyers scouting for cement assets in India include marquee private equity names like Blackstone, Baring Asia and several large sovereign wealth funds.

cement

The highest bid for Reliance Cement’s assets with 5.6 million tonne per annum capacity is close to $150 per tonne enterprise value that Reliance Infra is asking for. “There is a lot of interest among private equity players to enter the cement sector since it is directly pegged to GDP growth,” says Ajay Garg, managing director of Equirus Capital. “There is no dearth of cement assets right now and PE players may choose their right opportunity with a wait and watch approach says Sumit Banerjee, former vice-chairman of Reliance Cements.

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