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Market share of top 5 cement companies to reach 55% by March 2025: ICRA

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Market share of top 5 cement companies to reach 55% by March 2025: ICRA

Driven by promising demand, large cement producers plan to maintain their market share and boost capacity through both inorganic and organic expansions. The top five cement businesses, UltraTech Cement, Adani Group, Shree Cement, Dalmia Cement (Bharat), and Nuvoco Vistas, saw their market shares increase from 45% in March 2015 to 54% in December 2023, according to ICRA. By March 2025, it is anticipated to reach 55%, signalling additional industry consolidation. The majority of mergers and acquisitions (M&As) were brought about by the financial difficulties of the acquired companies, with the Adani Group’s purchases of ACC and Ambuja being two prominent exceptions.

“While organic growth is expected to continue in the medium term, cement companies are also preferring the inorganic route to boost capacities rapidly, leading to industry consolidation,” stated Anupama Reddy, vice president and co-group head of corporate ratings at ICRA. In the last nine years, there have been fifteen mergers and acquisitions (M&As) in the cement sector. The average M&A cost ($80/MT) was less than the cost of establishing an integrated greenfield cement plant ($110–120/MT), which resulted in capital cost reductions. This also includes having access to stocks of ready-made capacity and limestone, saving businesses the trouble of having to wait longer to stabilise operations in the event of a greenfield unit. A 28 MT asset block is being considered for acquisition, and ICRA anticipates M&A deals to continue, given the aggressive growth plans of the large incumbent players who want to maintain their market share.”

Typically, the majority of cement produced in a region is used there, with the remainder being transferred to neighbouring districts. India’s eastern and western regions are mostly leading the country’s consolidation. It is projected that in FY2025, the proportion of the top five cement businesses in both the eastern and western regions will rise from 54% in FY2015 to 76–79%. With just the top five cement companies controlling 40% of the market in FY2015, the southern region is extremely fragmented. This might increase to 50% by FY2025. It is anticipated that the northern and central areas, which were approximately 65–75% consolidated in FY2015, will continue to be roughly 75–85% consolidated by FY2025.

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947 corporate bankruptcy cases in various industries were settled under the Insolvency and Bankruptcy Code (IBC) till March 31, 2024, with an average haircut of 68%. Nonetheless, the average haircut for the cement industry via the IBC method is 21%, far less than the national average. The principal factors supporting brownfield acquisitions have been the availability of high-quality limestone reserves and the higher establishment costs of greenfield cement factories in contrast to the purchase of already-operating ones.

“ICRA anticipates that cement manufacturers’ credit profiles will be steady due to robust operating income growth, improved operating margins, and manageable leverage measures. The leverage metrics of the cement businesses, as measured by Total Debt/OPBIDTA, are anticipated to remain comfortable at 1.3-1.4x in FY2025 compared to 1.4-1.5x in FY2024, despite the likelihood that they would continue to rely heavily on debt to fund their ongoing capital expenditure commitments. As a result, Reddy continued, “With DSCR at 2.7–2.8x and an improvement in OPBIDTA in FY2025, the coverage metrics are expected to remain healthy.”

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