Lafarge leads race for L&T Concrete

French cement major Lafarge SA, the world's second-largest cement maker, has emerged the frontrunner in the race to acquire the ready-mix concrete (RMC) business of engineering and construction major Larsen & Toubro (L&T).

Sources familiar with the developments said the deal is likely to be clinched next week.

Market sources estimated the deal value, including land, to be over Rs 1,000 crore.

When contacted, L&T's spokesperson said the company would not like to comment on market speculation. A Lafarge India spokesperson also did not want to comment at the moment.

In December last year, L&T had decided to hive off its RMC business into a separate entity called L&T Concrete. The company's chairman and managing director, A M Naik, had said recently that the company would hive off its non-core businesses.

The construction giant sold its cement business to the Birlas in 2003, now UltraTech Cement, but retained the RMC division. The company is the leader in the RMC segment with a market share of 25 per cent. The revenue is Rs 1,000 crore annually.

L&T has 66 RMC plants across the country with an overall annual installed capacity of around 4 million cubic metres. Twenty five of these plants are in the south, while the rest are in the west and the north. Industry analysts said RMC constitutes 3 per cent of the total cement business at present, but the growth opportunities are enormous with spending on infrastructure on the rise.

Lafarge entered the Indian market in 1999, with the acquisition of Tata Steel's cement business. This acquisition was followed by the Raymond Cement facility in 2001.

Lafarge currently has three cement plants in India, two in Chhattisgarh and a grinding station in Jharkhand. It is expanding capacity in Chhattisgarh and Himachal Pradesh, taking its overall capacity to 12 million tonnes by 2010 from the current 6 million tonnes.

ACC, one of the Indian arms of Holcim, has already made a separate company for RMC under the name ACC Concrete this year. Sources in ACC did not comment on the question whether they are out of the race, but added that even if the opportunity was lost, it would not be a big miss in view of low entry barriers and less investment required in starting RMC units.

Swiss cement major Holcim was also in the race as both cement firms see this business as the future of the cement industry. Holcim, in an email statement, said, "We cannot comment. However, we are interested if conditions and price are appropriate."