The Story Of India Cements: From Birth To Acquisition

India Cements is an iconic name in the southern part of India. Its history dates back to the pre-Independence era. It was incorporated on Feb. 21, 1946. It was founded by SNN Sankaralinga Iyer and TS Narayanaswami.

It had a chance birth. On a visit to the hamlet of Thalaiyuthu in Tamil Nadu one day in 1942, when Sankaralinga stumbled on a stone, he analysed it chemically and found it to be limestone that could make cement. Narayanaswami, an officer in Indo Commercial Bank, became his trusted partner. They managed to get overseas help to set up a cement plant. Thus was born The India Cements Ltd. on Feb, 21, 1946, in technical collaboration with FLSmidth & Co of Denmark.

ICL was the earliest in the pre-Independence era to become a public limited company. Its first annual report appeared on April 21, 1947. And, its maiden public issue of equity shares for Rs 1 crore was oversubscribed.

The indefatigable N Srinivasan got into ICL by chance. Events conspired to drag him into ICL sometime in 1968. That was when his father Narayanaswami passed away. Just 23 years of age then, Srinivasan had to return to India cutting short his higher studies abroad to take up the pivotal position of his father and become joint managing director of ICL.

But the chemistry between the promoters was apparently missing. Indeed, his early tenure in ICL saw a rift between him and the company's Managing Director KS Narayanan, who was the son of founder Sankaralinga Iyer. Both had different mindsets.

Not surprisingly, there was never an easy co-existence between them in ICL. Other extraneous factors had only helped accentuate their uneasy relationship. All these factors—from within and outside—saw Srinivasan ousted from the company in 1979. Of course, the financial institutions played a key role in the ouster of Srinivasan from ICL.

It took him nearly a decade to return as managing director of ICL in 1989 following a truce between the promoters. After his ouster from ICL, the FIs had inserted its nominee TM Thomas, a retired general manager of Southern Railways, as the company's MD in 1981. A partial decontrol in 1982 saw ICL numbers improve. When Thomas's five-year term ended, he was succeeded by PV Raja Raman, IAS.

But a new policy allowing FIs to sell their stake in a company to another corporate body led to an attempt by FIs (LIC and UTI) to transfer a large number of shares of ICL (about 45%) to ITC at a negotiated price of Rs 30 per share. That was however strongly resisted by the promoters, who were negotiating to take charge of ICL.

Surprisingly, ITC backed out. The reasons for the volte face by ITC were still not known. And, the share sale by FIs was reversed. “The only thing I was certain of was that I wasn’t going to fail in my efforts to come back,” Srinivasan had said then. “Giving up was never an option. My father had worked so hard for the growth of India Cements. How could I let it go?”

In the wake of the thwarting of ITC bid and his return to ICL in 1989, the promoter groups somehow or the other managed to co-travel for a considerable time. Significantly enough, the journey of ICL thus far has been defined by a sense of co-existence. Whether it was peaceful or not is, however, a debatable matter.

In mid-2000, Srinivasan and his brother N Ramachandran were compelled to buy out N Sankar (son of KS Narayanan) of the Sanmar group (the other promoter) in ICL.

A few years down the line, in 2009, Srinivasan bought out his brother Ramachandran in ICL and became the sole promoter with over 28% holding. The buyouts on both occasions weren't planned.

Once in firm control, Srinivasan demonstrated a lot more aggression. A sense of urgency marked his aggression, and he embarked on a series of daring takeovers and expansions that would give the company a significantly larger geographical presence in record time.

The first of these saw ICL acquire the 1 million tonne per annum capacity Chilamkur plant of Coromandel Fertilisers (now, known as Coromandel International Ltd.), for Rs 105 crore in 1990. This plant became the third plant of ICL and its first in the then composite Andhra Pradesh.

The Chilamkur buy took the industry by storm. It was an audacious move by a company of the size of ICL in the face of intense competition from giants. An emboldened Srinivasan was clearly on a singular pursuit to solidify ICL’s position in the South.

In Oct. 1994, the company came out with a $49.5-million Euro issue. That helped acquire the underconstruction Malkapur cement plant from the Hyderabad-based Visaka Industries for Rs 60 crore in Oct. 1997. This was kept as a subsidiary known as Visaka Cement and later, in 2007, merged with India Cements.

In 1998, the company made a couple of more acquisitions in the composite Andhra Pradesh. In Jan. 1998, it first acquired 0.4 million tonne capacity Yerraguntla cement plant from the public sector Cement Corporation of India.

Later, it bought Hyderabad-based Raasi Cement Ltd., which had an integrated cement plant at Vishnupuram in Nalgonda district with a capacity of 1.8 million tonnes a year. By 1999, Raasi Cements’ acquisition also brought its subsidiary—Sri Vishnu Cements Ltd.—which also had an integrated cement plant at Sitapuram in Nalgonda district, with a capacity of one million tonnes into the fold of India Cements. With this, India Cements’s total cement capacity had increased to 9 million tonne.

As it was racing ahead, ICL hit the speed-breaker. That was only expected. A combination of factors—excess capacity and falling prices in Andra Pradeh—pushed ICL into a tough position. It was forced to go in for a corporate debt restructuring scheme, which came into effect from Jan. 2003.

The CDR brought some respite and helped the company to focus on operations. An audacious Srinivasan pushed ICL to go for a GDR issue. That was, perhaps, a turning point in the annals of ICL. The crisis taught a lesson or two to him “Never expand in a fractured market using debt. When you have no control over prices, your ability to service debt will be impaired,” Srinivasan had said then.

Srinivasan always demonstrated a propensity for national limelight. That was clearly evidenced through his tenure at the Board for Cricket Control in India.

In 2009, ICL took controlling interest in a listed company—Indo-Zinc Ltd., which later became Trinetra Cement Ltd. and a subsidiary.

In Jan. 2011, Trinetra commissioned its greenfield integrated cement plant known as Mahi Cement Plant with a capacity of 1.5 million tonne at a cost of Rs 600 crore in Rajasthan. Since then, Trinetra has been amalgamated with ICL.

What has struck the long-time corporate watchers was the agility and nimbleness exhibited by Srinivasan in executing the takeover deals. Be it the Chilamkur buy or the acquisition of a controlling stake in Raasi, Srinivasan outwitted the competitors hands down to win the bids.

His desire to make ICL a pan-India organisation grew. In Oct. 2018, he acquired Springway Mining Private Ltd. for Rs 182.92 crore. SMPL owns limestone-bearing land in Madhya Pradesh. ICL was keen to put up a cement plant. Limestone is an ingredient used in making cement. But that remained a pipe-dream for Srinivasan. On Oct. 10, ICL sold Springway Mining—an idle asset—to Parth Jindal-led JSW Cement for Rs 476.87 crore.

Coming events cast their shadows before them. In hindsight, one can argue that the sale of Springway was the beginning of the end for Srinivasan as a promoter, a sort of an admission that may be a reflection of the reality faced by the largest cement producer in south India. A combination of factors—poor demand in the south, escalating costs due to legacy issues and high debt—conspired to have sealed ICL’s fate.

A Damocles Sword was hanging over the head of Srinivasan ever since the Damanias of the D-Mart fame bought into ICL shares a few years ago. With Damanias cashing out by selling their ICL shares to Ultratech, there isn't much option for Srinivasan. There are no two views that Srinivasan ruled the southern cement industry like a czar and cast a significant influence nationally. In fact, he was singularly responsible for the industry inking successive wage pacts with workers without let or hindrance for many years.

With a total capacity of nearly 14.45 million tonne, ICL has eight cement plants and one grinding unit located in Tamil Nadu, Andhra Pradesh, Telangana, and Rajasthan. (After selling Parli Grinding Unit in Maharashtra with 1.1.million tonne capacity to Ultratech).

The trusted brands of India Cements, Sankar and Coromandel and Raasi are associated with building several landmarks, infrastructure projects and dream homes.