Heidelberg Materials holds a 69.39 per cent stake in HeidelbergCement India Ltd, which is publicly valued at US$1.2bn. The leading players in India's cement sector are now circling in discussions to see if they can acquire the assets and increase their market share.
The market value of the Indian unit of Heidelberg Materials Group rose by 14.5 per cent on Monday 7 October, off an earlier high of 18 per cent. In July 2024, Heidelberg Materials chief executive Dominik von Achten said the group's market position in India was "not perfect yet" and it was looking at all options, adding that the sector was expecting further consolidation.
HeidelbergCement India operates two integrated cement plants in Damoh, Ammasandra, and grinding plants in Jhansi which sell the Mycem brand of cement. The largest plant in the portfolio is the 2Mta Damoh plant and the company operates a total cement capacity of 6.26Mt. However, under the Zuari Cement company, Heidelberg Materials also operates a further four cement manufacturing units, and a cement terminal, in India. The Zuari Cement subsidiary includes the Yerraguntla and Sitapuram integrated plants, and the two grinding plants at Sholapur and Chennai, plus the Cochin cement terminal. The Zuari subsidiary has a cement capacity of 7.1Mta.
According to local media outlets, the most likely buyer is Adani Cement. Adani Cement is currently the second largest cement producer in the country behind UltraTech Cement. If successful, the HeidelbergCement India Ltd acquisition would add a further 14Mta of cement capacity to its leading position, according to The Global Cement Report 15th Edition. However, The Economic Times reports that the Adani Group might back out of a deal if the involves other competitors.
Increased profitability and green investment
In the FY24 HeidelbergCement India recorded an EBITDA of INR659/t, up 16 per cent YoY. Increased profitability was mainly due to a decrease in the input costs of power and fuel. Cement sales volumes reached 1.23Mt in 1Q24, up four per cent from 1.18Mt in the 1Q23 and rose to 4.8Mt in the FY24 compared to 4.3Mt in the FY23, a rise of 9.4 per cent. The company also announced a de-bottlenecking project.
The Narsingarh plant (Damoh) is consistently operating at 40 per cent green power and has a 5.5MW solar project in development. The sites recently signed a long-term hybrid Power Purchase Agreement (PPA) for 8MW wind and solar power for 37GWh per annum. The Ammasandra plant is consistently operating above 90 per cent for green power. The group aims to reach above 40 per cent green power by FY25.
Outlook
Heidelberg Materials is constantly assessing its portolio and is looking to optimise its brand in lucrative markets and link its decarbonisation investment to sustainable loans. Its most recent acquisitions have been in Morocco where it acquired Votorantim Cimentos’ assets earlier this year, along with concrete and aggregate producer Highway Materials in the USA and the largest supplier of pulverised fly ash in Malaysia, ACE Group. The diversification of the group into a wider building materials provider may yet see more divestment from the cement sector, where CO2 emissions remain hard to abate.