<article>Media reports say that French cement maker Lafarge SA has decided to sell all its assets in India.</article>

Media reports say that French cement maker Lafarge SA has decided to sell all its assets in India.
This is a bolt from the blue, given that its earlier decision to sell only two units—totalling 5.2 million tonnes per annum (mtpa) capacity—to Birla Corp. Ltd is still hanging fire.
Why this sudden move? What would be the implications for the Indian entity of the globally merged Holcim-Lafarge group, and for the sector?
The earlier Birla Corp-Lafarge deal is stuck perhaps due to the restrictions on the transfer of limestone mining rights.
Analysts say that selling its entire 11 mtpa business in India will mostly be done through the sale of equity shares, which will not be bound by such restrictions.
Another reason for the sale could be the complexity involved in integrating three large firms in India—Holcim’s ACC Ltd (31 mtpa) and Ambuja Cements Ltd (29 mtpa) with Lafarge India (11 mtpa), according a 6 January report by Nomura Research.
Such an integration is the outcome of the global merger between two cement companies.
Meanwhile, the proposed change in structure of holding of ACC and Ambuja under the Holcim Group, is also pending approval of the Foreign Investment Promotion Board (FIPB) and, hence, lacks clarity.
Anyway, Lafarge’s exit would, in the near term, pull down the presence of Holcim-Lafarge in India, which currently has the largest capacity, although the Aditya Birla-owned UltraTech Cement Ltd is also on par.
A media release by both the global cement makers during the merger had said that India is an important market for the future LafargeHolcim Group with a balanced portfolio in cement, aggregates, and ready-mix concrete and a combined 68 mt capacity in India. This raises another question—is the exit only to get around the regulatory and structural complications that thwarts growth for the group?
Investors now need to wait for further developments.
Who will buy 11 mt assets of Lafarge?
Large cement conglomerates such as Shree Cement Ltd and UltraTech have a strong eastern market presence and are bound by the Competition Commission of India’s (CCI’s) rule that the acquirer cannot have huge existing presence in the region.
Mid-sized firms that may want to buy do not have a strong balance sheet to bid.
Note that the 5 mtpa sale to Birla Corp. was gainful for both. Some analysts say that the company may still bid for the entire asset. Alternatively, some private equity firm could be the white knight. Or, some global firm could be interested in Lafarge’s assets.
Meanwhile, from an investor standpoint, Lafarge’s exit would “be a lost opportunity for ACC/Ambuja,” says Nomura.
Analysts had expected that the balance capacity (after the sale to Birla Corp.) would be transferred to either of the two companies.
That said, the two company stocks have not reacted negatively to this news yet.
In any case, the larger picture which could delay sale of assets is the state of oversupply in the Indian cement market. Unless the core manufacturing and infra sectors post robust growth, the cement sector will continue to be unattractive for investors.
<h4>This article was first published on <a href="http://www.livemint.com/Companies/kqufHzcuiNqqHSgPVbjt2O/IIFL-Edelweiss-to-invest-in-Mumbai-Bengaluru-projects.html" target="_blank">Livemint.com</a></h4>

Lafarge's India asset sell-off: a new twist to tale on home turf

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