Market share of cement makers could tighten, as recent acquisitions indicate rising competition between UltraTech Cement Ltd. and Adani Group on the horizon. The top five cement manufacturers in the country held a 60% market share in terms of capacity in all regions, except the south, in fiscal 2024.
Backed by healthy demand prospects, almost all the key cement players in India have announced large capacity additions to support future growth.
ICRA Ratings expects organic capacity growth to continue, but cement companies are open to inorganic routes via acquisitions or mergers. This has led to consolidation in the Indian cement industry.
Increased Consolidation
Market share of India's top five cement companies increased by 9 percentage points from fiscal 2015 to the first nine months of fiscal 2024, according to ICRA. This indicates consolidation in the cement industry.
The ratings agency also expects the market share of the top five cement companies to reach 55% by March 2025, indicating further consolidation.
Ultratech Cement Ltd. continues to be the market leader across the years, as per NDTV Profit's calculations. The other players in top five include Shree Cement Ltd., Adani Group (Ambuja Cement Ltd. and ACC Ltd.), Dalmia Bharat Ltd., and Nuvoco Vistas Corp. as of March 31, 2024.
East And West Lead Consolidation
The eastern and western regions are spearheading the consolidation trend, according to ICRA. The top five cement players commanded a market share of 60–68% in these regions as of March 2024. The ratings agency anticipates this combined market share to rise to 76-79% by fiscal 2025.
Contrastingly, the southern region exhibits significant fragmentation, with merely 43.5% of the market held by the top five cement players as of March 2024. However, projections indicate that this figure will rise to 50% by fiscal 2025. This estimate can also be backed by the latest acquisitions—UltraTech Cement's acquisition of Kesoram Industries Ltd.'s cement assets and Ambuja Cement's complete acquisition of Penna Cement Industries Ltd.
Historically, the North and Central regions have witnessed substantial consolidation, with levels ranging from 65-75% in fiscal 2015. By March 2024, this range had reached 72-75%. ICRA Ratings foresees a further increase of 9-10% in this share by March 2025.
Past Mergers And Acquisitions
Apart from those announced by the Adani Group and Dalmia Bharat in June 2024, there were 15 mergers and acquisitions.
Calendar year 2023 saw five major deals take place, with UltraTech Cement being part of two of them.
Consolidation: The Positives And Negatives
Consolidation in the Indian cement industry leads to synergies with respect to cost reduction and efficiency improvement, said ICRA Ratings.
The acquirer has access to ready-made capacity and limestone reserves, eliminating long gestation periods for organic capacity additions.
Over the past nine years, the average cost of the last 15 mergers and acquisition deals was $80 per million tonne, lower than the $110–120 per million tonne typically spent on establishing an integrated greenfield cement plant. This underscores the cost-saving advantage of capital expenditures. Ambuja Cement's recent acquisition of Penna Cement Industries followed a similar pattern, with a deal enterprise value of Rs 10,422 crore.
Players seeking market share gains will face short-term challenges, according to Emkay Research. However, Emkay Research expects the industry's consolidation to improve pricing discipline and enhance profitability in the long run.
Due to this trend, small and mid-cap cement players are likely to remain in momentum, owing to ongoing news flows on M&As, Emkay said.
Prabhudas Lilladher also noted that smaller players with a capacity of 3–10 million tonne per annum could cash out by the end of the decade, where strong growth and the right valuation are key for the large players.
Disclaimer: NDTV Profit is a subsidiary of AMG Media Networks Limited, an Adani Group Company.
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