Consolidation Move Warms Competition Cockles

Grasim Industries' decision to pick up 10 per cent stake in the diversified conglomerate Larsen & Toubro has been welcomed by most of its rivals in the cement industry.

At a time when the industry is going through a rough patch with a supply overhang characterised by price instability, consolidation is the call of the hour.

Anil Singhvi, executive director at Gujarat Ambuja Cements, said: "The deal deserves to be cheered as it marks the strong positioning of matured players in the cement industry."

Speaking to Business Standard, A K Jain, president-marketing at ACC, said: "Any move towards consolidation is good for the cement industry. It was a good deal and the industry will benefit from it."

According to Grasim's rivals, the Birla flagship had no other option but to pick up a stake in L&T. The Birlas were one of the serious contenders for the 37.5 per cent stake sale in L&T's cement business in the initial stages. However, the Indian players were kept away with terms and conditions that were not in their interest.

With more than 45 per cent market share in the hands of the top 4 players, industry players feel that there would be a better understanding between the players in the cement industry. This will also enable price stability in the domestic market.

They added that the Birla-L&T combine will have a better negotiating power when the combine will work towards establishing its position in the northern market which is at present dominated by Gujarat Ambuja-ACC combine with a market share of around 24 per cent.

In a similar move, Gujarat Ambuja had picked up a strategic stake in ACC when it bought out 14.4 per cent from the Tatas. This has helped both the companies work together towards increasing their effeciencies and improving their bottomline.