JSW Group’s building material division JSW Cement is said to be in talks to acquire German cement company Heidelberg Materials in India, which produces 13.4 million tonnes of cement annually, according to a report by The Economic Times.
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Sources were quoted as saying by ET that JSW Cement initiated discussions following an unsolicited offer by the JSW Group to acquire the local entities of Heidelberg. These entities primarily operate in peninsular India.
The Indian building materials sector, ranking as the world's second-largest cement market in terms of capacity and consumption, exhibits a strong regional focus, heavily reliant on transportation logistics. In the context of mergers and acquisitions within this industry, the valuation multiples linked to profitability often hinge on the proximity of manufacturing facilities to the end-consumer market.
Recent reports suggest that another global cement manufacturer may be considering an exit from the Indian market, following Holcim Group's departure in 2022. The closely-contested bid for Ambuja Cements and ACC, previously owned by the Holcim Group, was secured by the Adani Group. It's worth noting that the JSW Group also participated in this competitive bidding process.
The fate of Heidelberg's exit strategy in India, on the other hand, remains uncertain. The company might opt to divest its assets through a competitive bidding process, potentially attracting a wider array of buyers and intensifying competition for the plants.
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Led by Sajjan Jindal, the JSW Group is actively striving to transform its cement and ports divisions into lucrative ventures, despite encountering setbacks in the past. While there have been notable advancements in the port operations, industry experts remain uncertain about the future prospects of the cement subsidiary.
JSW Group had IPO plans for JSW Cement. As per earlier media reports, Parth Jindal, who serves as the Managing Director of JSW Cement, had previously indicated plans to list the cement business in FY20.
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In a 2019 interview with Business Standard, Parth Jindal articulated his intention to go public in 2021. However, as of now, the business has not yet been listed. In August of this year, Parth Jindal unveiled a revised timeline, setting the new listing target for FY25.