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Nirma's Lafarge

Acquisition:
Pros and Cons
PRESENTED BY-
MILIND GOSWAMI JASWANTH RAHUL MANDA
HEMANTH GANJI CHANDRAKANTH KASARLA
HARISH KESARAPU PARAGJYOTI SAIKIA
NIRMA
Nirma Ltd is a company based in Ahmedabad.
It has a turnover of around Rs. 3550 crores.
The most important products are Soap, detergent, Chemicals, cement.
It has a 2-million-tonne cement plant in Rajasthan.

What's Wrong with their FMCG:


Heavy competition from multinational FMCG brands
Less segmental diversity
Soda ash business is facing problems Volatile prices
because of international fluctuations
INDIA CEMENT INDUSTRY-CURRENT
Indian Cement Industry-Future Scope

Cement companies expected to add 56 MT capacity over


the next three years growing at 9.7% CAGR
India's cement demand is expected to reach 550-600
Million Tonnes Per Annum (MTPA) by 2025
Eastern states of India likely to be newer markets for cement
companies
In the next 10 years, India could become the main exporter
of clinker and gray cement to the Middle East, Africa, and
other developing nations of the world
Lafarge Deal- What and Why
What:
Nirma is acquiring Lafarge India's 11million tonne cement business.
The deal is priced at Rs. 9478cr.
The valuation is around $130 per tonne.
Nirma will sell bonds worth Rs. 4000 crore to fund the acquisition.
Nirma would come in the top 10 cement players with this deal.

Why Lafarge:
Lafarge India which is part of Lafarge Holcim is world's largest cement
company, with great brand value
This would help increase its capacity from 2.5 to 13 mmtpa with a foot print
in east, North and West
Nirma gets access to Lafarge's RMC business that has 71 plants
Advantages for NIRMA
Among top 10 cement players with a footprint in Eastern, Northern and Western
India

This acquisition would increase its combined capacity to 13 mtpa

Has got one of the best distribution system in markets such as Bihar, West Bengal
and Jharkand

Access to Lafarge's RMC (Readymade Concrete) highly successful brands like


Concreto, Lafarge PSC and Duragaurd

Access to limestone reserves in South for which all approvals are available

Nirma's marketing and distribution channels for Soda ash can be integrated with
Lafarge's and can keep costs low
Challenges for NIRMA
Large share of funds for the deal are based on a Leveraged Buy Out

Nirma is struggling to ramp-up its production with its own plants, so handling 11
million tonnes will be a challenge

Valuation is a bit expensive ($130 per tonne) in the current environment i.e, an
oversupply situation in east India with fresh capacities coming in

Its entry into the cement sector have to deal with the risk associated with early
stage operations

Nirma could have invested in assets along the coastal line. In future transportation
may be a big problem from its current location
Thank You

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