Mergers and Acquisitions in Indian Cement Industry A Diagnostic Analysis

Abstract

Indian cement sector after liberalization has shown enormous development. The development is reported to have come in line with the Gross Domestic Product (GDP) of the country at a faster pace than GDP in the current decade. When a sector grows with the economic development of the country, and is strongly under the influence of infrastructure sector for which the government is reported to be giving increasing importance, the study of its consolidation gains significance. Mergers and Acquisitions (MandA) has been a tool for many companies for their fast development across many industries around the globe. Indian cement industry has been witnessing MandA after liberalization at an increased pace in different sizes and types. Thus, study of the benefits of MandA in the industry had been taken up to be of immense use to the industry by knowing its impacts on some of the main objectives of MandAand#8223;s. The study has also been done to be useful for the future MandA activities in the cement industry, which is likely to take place at a brisk pace in next few years. newlineAfter the price de-control of Indian cement industry in 1989 and with the economic liberalization adding momentum to it, Indian cement industry had been expanding very fast such that as on March 2010 India is the second largest cement producer in the world. The structure of the industry looks significant as there are 51 manufacturers in India in competition, and still the top four of them controlled by two groups account for 40% of the market share. The factories are located in clusters across India based on the limestone availability for the industry, as it is the basic raw material for the industry. newlineIn the last twenty years big size MandA deals have taken place with all the top four companies involved in it. The deal between Grasim Industries Ltd (GIL) and Larsen and Toubro Ltd (LandT) was one of the biggest in the country across industries.