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Nirma's Lafarge

Acquisition:
Pros and Cons
PRESENTED BYMILIND GOSWAMI
HEMANTH GANJI
HARISH KESARAPU

JASWANTH RAHUL MANDA


CHANDRAKANTH KASARLA
PARAGJYOTI SAIKIA

NIRMA

Nirma Ltd is a company based in Ahmedabad.

It has a turnover of around Rs. 3550 crores.

The most important products are Soap, detergent, Chemicals,


cement.

It has a 2-million-tonne cement plant in Rajasthan.


What's Wrong with their FMCG:

Heavy competition from multinational FMCG brands

Less segmental diversity

Soda ash business is facing problems Volatile prices


because of international fluctuations

INDIA CEMENT INDUSTRY-CURRENT

Indian Cement Industry-Future Scope


Cement

companies expected to add 56 MT capacity over


the next three years growing at 9.7% CAGR

India's

cement demand is expected to reach 550-600


Million Tonnes Per Annum (MTPA) by 2025

Eastern

states of India likely to be newer markets for


cement companies

In

the next 10 years, India could become the main


exporter of clinker and gray cement to the Middle East,
Africa, and other developing nations of the world

Lafarge Deal- What and Why


What:
Nirma is acquiring Lafarge India's 11million tonne cement business.
The deal is priced at Rs. 9478cr.
The valuation is around $130 per tonne.
Nirma will sell bonds worth Rs. 4000 crore to fund the acquisition.
Nirma would come in the top 10 cement players with this deal.

Why Lafarge:
Lafarge India which is part of Lafarge Holcim is world's largest cement
company, with great brand value
This would help increase its capacity from 2.5 to 13 mmtpa with a foot
print in east, North and West
Nirma gets access to Lafarge's RMC business that has 71 plants

Ansoff Matrix

Advantages for NIRMA


Among top 10 cement players with a footprint in Eastern, Northern and Western
India
This acquisition would increase its combined capacity to 13 mtpa
Has got one of the best distribution system in markets such as Bihar, West Bengal
and Jharkand
Access to Lafarge's RMC (Readymade Concrete) highly successful brands like
Concreto, Lafarge PSC and Duragaurd
Access to limestone reserves in South for which all approvals are available
Nirma's marketing and distribution channels for Soda ash can be integrated with
Lafarge's and can keep costs low

Challenges for NIRMA


Large share of funds for the deal are based on a Leveraged Buy Out
Nirma is struggling to ramp-up its production with its own plants, so handling 11
million tonnes will be a challenge
Valuation is a bit expensive ($130 per tonne) in the current environment i.e, an
oversupply situation in east India with fresh capacities coming in
Its entry into the cement sector have to deal with the risk associated with early
stage operations
Nirma could have invested in assets along the coastal line. In future transportation
may be a big problem from its current location

Thank You

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