Cement is a versatile and essential building material used in the construction industry and is a durable binder for structures that holds coarse aggregates like sand, gravel, and steel. While other building materials have been invented, cement remains an irreplaceable and critical part of construction due to its high strength and durability.
India is the second largest producer of cement in the world accounting for more than 8% of the global installed capacity. The tremendous development in the infrastructure and construction sector in the country is expected to largely benefit the cement sector.
The Indian Government has also approved investment schemes and initiatives in the previous Union Budget by approving an outlay of Rs 2.7 lakh crores for the Ministry of Road Transport and Highways. Similarly, under the housing for all segments, the budget estimate for Pradhan Mantri Awas Yojana is Rs 79,590 crores. Other government initiatives are the expansion of projects in the National Infrastructure Pipeline, the Gati Shakti National Master Plan for multimodal transport network, and the Urban Rejuvenation Mission: AMRUT and Smart Cities Mission and Swachh Bharat Mission.
All these are going to benefit the cement sector in a big way in the country. Many foreign-owned cement companies have been selling their companies to Indian corporates in the recent past. For example, Holcim Ltd which is the world’s largest manufacturer of cement has sold its business in the country including its stake in Ambuja Cements and ACC Ltd. The company decided to quit the country after 17 years of operations and the Adani Group bought the Swiss giant’s India assets—two publicly listed cement companies Ambuja Cements and ACC in a $10.5 billion deal through an offshore special purpose acquisition vehicle.
Besides being the largest-ever acquisition by the Adani family, this deal is also the largest merger and acquisition transaction ever in the construction material domain in the country. Even the recent purchase of the Kesoram cement division by Ultratech is a sign of consolidation. Many rumours are floating in industry circles about Jaypee Cement, Star Cement, etc. Analysts expect the bigger cement players to buy smaller players in a bid to consolidate the sector and thus gain market share on expectation of robust demand. Therefore the recent consolidation happening in the cement manufacturing space is perhaps good for the Indian consumer. Heidelberg Cement is one foreign-owned cement company in the country with an impeccable pedigree of 150 years. The brand name of Heidelberg Cement stands for quality and competence and has a presence in more than 50 countries around the world has grown from a single-plant cement manufacturer in Heidelberg to become the world’s leading building materials company.
The core activities of Heidelberg encompass the production and distribution of cement and aggregates which are the two essential raw materials for the production of concrete and asphalt. Heidelberg Cement has business interests in five geographical group areas which are divided such as Western and Southern Europe, Northern and Eastern Europe-Central Asia, North America, AsiaPacific, and the Africa-Eastern Mediterranean Basin. Heidelberg Cement India is quoting at Rs 224 on the stock exchanges and analysts and fund managers are bullish on the scrip projecting a price target of around Rs 300 in the medium term on the back of decent financial results and stock accumulation by portfolio investors.