Acquisition of Heidelberg Cement by JSW Group

Acquisition of Heidelberg Cement by JSW Group

1. Background

JSW Steel Limited acquired manufacturing unit of Heidelberg Cement situated at Dolvi, district Raigad. JSW Steel is a listed company incorporated in India and is part of the diversified JSW group with presence in the steel, energy, infrastructure, cement, aluminium and information technology sectors. JSW Steel also owns and operates a cement grinding unit having an installed capacity of 0.3 million ton per annum (mtpa), situated at district Bellary (Karnataka). However, as stated in the notice, the entire quantity of cement manufactured at this grinding unit is stated to be captively consumed.

JSW Cement Limited (“JSW Cement”), which is also part of the JSW group, is engaged in manufacturing and selling different varieties of cement like portland slag cement (“PSC”), ordinary portland cement (“OPC”) and Ground Granulated Blast Furnace Slag (“GGBS”) at two of its plants situated at Bellary (Karnataka) (“Vijayanagar plant”), having an installed capacity of 0.7 mtpa and at Kurnool (Andhra Pradesh) (“Nandyal plant”) having an installed capacity of 4.5 mtpa. Further, as per the notice, JSW Cement has also recently acquired a grinding unit of the capacity of 0.1 mtpa at Dolvi, Raigad (Maharashtra).

HCIL, formerly known as Mysore Cements Limited, is engaged in the manufacture of different varieties of cement, like PSC, OPC and GGBS with a total installed capacity of 6 mtpa. HCIL also produces ancillary products comprising blast furnace slag (“BF slag”) and clinker. It operates its cement plants and grinding units at Tumkur (Karnataka), Jhansi (Uttar Pradesh), Damoh (Madhya Pradesh) and at Dolvi, Raigad (Maharashtra) (Raigad Undertaking). The Raigad Undertaking which is proposed to be acquired is stated to have an installed capacity of 0.6 mtpa. 

2. Market Analysis

2.1 Market Share of Top Companies in cement Sector in India

Source: Data Sourced from Money Control Website, Calculated by author.

Company Name	Net Sales (Rs. cr)	Market Share
UltraTechCement	20,279.80	27%
ACC	11,168.94	15%
Ambuja Cements	9,160.35	12%
Shree Cements	5,887.31	8%
Prism Cement	4,964.86	7%
India Cements	4,440.88	6%
Ramco Cements	3,683.51	5%
Birla Corp	3,016.35	4%
J. K. Cement	2,795.85	4%
JK Lakshmi Cem	2,056.60	3%
OCL India	1,855.52	2%
Orient Cement	1,438.45	2%
Heidelberg Cement	1,208.91	2%
Mangalam Cement	697.31	1%
KCP	622.19	1%

                                         Table Compiled from Money Control Data

Structural analysis of cement industry shows that there is no competitive issue on the basis of market share analysis. Because Heidelberg cement has approximately 2% market share in the overall Indian market.

2.2 Presence of JSW in Cement Market

JSW Cement is a relatively new player in the cement industry.

Sr. No	Plant	Commenced Mfg.	Capacity
1.	Vijaynagar Plant	2009
2.	Nandyal plant	2011-12 (trial run)	Designed to manufacture Clinker- 2.2 million ton per annum (mtpa) and Portland Slag Cement-4.80 mtpa
3.	Dolvi, Raigad (Maharashtra)	2013-14	0.1 mtpa

2.3 Vertical Relationship of JSW Cement and HCIL

JSW Steel is selling BF slag generated as a residue from its steel plant at Dolvi, Raigad (Maharashtra) to the Raigad Undertaking of HCIL. It has been stated in the notice that as part of the proposed combination, the obligation of HCIL to lift BF slag from JSW Steel will end and the proposed combination would help JSW Steel to use the blast furnace slag produced by it effectively and efficiently.

Prima facie it seems that this acquisition is going to increase efficiency of JSW group.