JSW Group Makes Unsolicited Bid for Heidelberg's India Cement Assets

3 Oct 2023 , 11:56 AM

Initial negotiations are underway between JSW Cement, the building materials division of the steelmaker JSW Group, and Germany’s Heidelberg Materials to acquire the latter’s 13.4 million-tonne-per-year cement operations in India, according to news reports.

As per the aforementioned reports, the bilateral conversations began after the JSW Group made an unsolicited approach to purchase Heidelberg’s regional firms, which primarily operate in peninsular India.

India is the second-largest cement market globally, both in terms of production capacity and consumption. Its building materials industry is highly regional and freight-intensive, with manufacturing proximity to the final consumer market often impacting enterprise valuation multiples linked to profitability in mergers and acquisitions.

Heidelberg has not finalized its exit strategy from India yet, and based on the reports mentioned above, it’s possible that it will ultimately decide to put the assets up for auction to attract more interested parties and increase competition among potential buyers.

If completed, it will mark the departure of another major cement producer from India after the Holcim Group, a Swiss building materials company, exited the country in 2022 and sold Ambuja Cements and ACC to the Adani Group in a fiercely contested auction in which the JSW Group also participated.

Heidelberg currently possesses a cement manufacturing capacity of more than 13 MTPA in India, with 6.3 MTPA held by the publicly traded company HeidelbergCement India and 7.1 MTPA by the privately held Zuari Cement. This contrasts with the nearly 70 MTPA capacity of the Adani Group, the second-largest competitor, and the almost 140 MTPA capacity of the market leader, UltraTech Cement.

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