India: rejuvenating a cement brand under HeidelbergCement

Having advised HeidelbergCement AG in its acquisition of the SK Birla-owned Mysore Cement, Ashish Guha, CEO of HeidelbergCement India (HIL), has steadily been rebuilding HeidelbergCement India.

It was seven years ago when Daniel Fritz, who headed the multinational’s Asia Pacific market, asked Guha if he would be willing to take up the position of CEO and managing director of HIL. Apart from Mysore Cement, the new entity would include Indorama Cement, which HeidelbergCement had bought earlier. Mysore Cement, now HIL, had been profitable only once in 15 years.

Though the deal was designed such that the company would still need redirection and careful handling to bring it back into profit. Its brand Diamond was languishing at the bottom of the market and was known as ‘contractor’s cement’ because of its low price and poor quality. There was hardly any synergy between the units that functioned as separate companies. Despite these hurdles, Guha took the challenge on. “I agreed because I liked the challenge. I also had the comfort of knowing I could go back to investment banking if it didn’t turn out well,” says Guha. 

Mysore Cement had been relatively cheaper at a valuation of US$80/t as against US$180/t that HeidelbergCement was willing to pay for another local cement maker. Guha had to make sure the acquisition also paid dividends in the long run.

HIL has since turned operationally profitable within a year of Ashish Guha's stewardship. In the following year, it reported net profits for the first time since 1996. The financial performance has been impressive. From a top line of INR5170m (US$82.9m) and a loss of INR900m (US$14.4m) in 2006, the company touched revenues of INR11140m (US$178.8m) and net profits of INR300m (US$4.81m) in 2012. Its capacity has increased from around 3Mta to 6Mta, thanks to expansion efforts.

This change has reflected in its reputation too. Its new brand Mycem, which replaced Diamond, now sells in the upper B segment (cement brands sell in A, B and C category) and is close to matching the pricing power of heavyweights like ACC and UltraTech Cement.