Financial Daily from THE HINDU group of publications
Friday, Mar 24, 2006
Industry & Economy - Cement
Heidelberg eyeing 5-10 million tonne cement capacity in 3 years
Heidelberg, the third largest cement player in the world, is getting into India with aggressive plans. Member of the Managing Board at Heidelberg Cement, Mr Daniel Gauthier, says it is their first step in Indian markets and it is a learning curve for them.
The company is looking at expanding capacity from 5-10 million tonnes in 3 years' time.
The company would like to make another move in next 12 months and it is prepared to pay different prices for different regional cement companies.
Mr Gauthier says the company has long-term plans to produce clinker in India and it is looking to strike deals in India at $80-100/tonnes. He stressed that it had become difficult to enter India after valuations of the Holcim deal.
Excerpts from CNBC-TV18's exclusive interview with Mr Gauthier:
Are your India plans going to be routed through your association with Indorama or would you be open to striking other deals with other cement companies in India?
For Heidelberg's entry into Indian market, we will be looking for opportunities with long-term advantages and Indorama is very well located to benefit from our long-term contract. We would be in a good position to start and it is a learning curve before we take additional steps.
Have you been having any kind of dialogue with other cement companies for similar joint ventures or any kind of acquisition opportunity?
Yes, and there are a lot of groups in India we are talking to for local partnership, but I cannot give details at the moment, but we are progressing well.
Could you give us more on the contours of those discussion, is it a joint venture for a particular plant or are you looking at a stake in a particular company?
Indorama and we intend to expand the business with source of clinker because it is a nice finish line and we intend to co-operate with other clinker producers or to build plants and we have mining rights with a company in Gujarat. We also have many targets in the South and Central India where we would like to integrate as one group.
Is it possible that this integration might happen through Indorama with which you have now tied up a joint venture?
It could be through Indorama or a separate company but we usually use only one company in a country and that is the way we are working in 55 countries worldwide. We intend to play a significant role in India and we would like to have a size of 5 to 10 million tonnes in three years' time and not to compete with Grasim or Holcim but to be respected players like we are in other countries.
In Asia, we are strong in Indonesia and China. So India will be a nice addition in our portfolio of investment.
What valuations, in terms of dollars per tonne, did you do with your joint ventures with Mr Lohia and what kind of valuations are you broadly looking at to pick up these kinds of capacities (5-10 million in 3 years) in India?
The market has changed dramatically in India after the last move of Holcim and it is now much more difficult to enter at a regional price in India. We base our valuations on the profitability of the business plan of each operation. For Indorama, although I can't disclose clearly the transaction amount, it is a very reasonable amount taking into consideration that it is a grinding unit.
For us normal acquisition should remain in the range of $80-100 per tonne in India for the moment. But depending on the market and long-term advantage of the target we could raise the prices slightly more.
Does Heidelberg have a timeline set up in terms of when you make your second move, whom you tie up with and whether it is going to be marketing and production?
For the second step we would like to go fast. We are going to send a team to India and we want to achieve a critical size soon. Within 3 years' time we would like to grow to 5 million tonnes, minimum. We are really active at the moment. We are interested to give this to message to all the cement players in India.
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