The cement industry appears to have taken one more step down the road to consolidation, with the AV Birla company Grasim acquiring a 10 per cent stake in diversified engineering major Larsen & Toubro. The deal, worth Rs 766 crore (representing a huge 47 per cent premium on L&T’s market price), puts the L&T-Grasim duo squarely in the lead with a combined cement capacity of 28 mn tonnes (out of a total of 119 mn tonnes) and a market share of around 30 per cent. The cement industry has seen a number of deals in recent years, such as Gujarat Ambuja’s purchase of the Tatas’ 14.4 per cent stake in ACC and India Cements’ acquisition of Raasi Cement. Both Grasim and L&T have spoken of the deal as one that will create ‘synergies’ and ‘cost advantages’ in an industry plagued by chronic overcapacity and persistent sluggish demand. It has also given fresh impetus to market speculation on the next round of consolidation involving smaller cement firms, driving up their share prices in recent weeks.
