Indian industrialist Sajjan Jindal’s steel-to-energy conglomerate JSW Group will make a $7bn bid for Holcim’s India subsidiaries as the Swiss cement group seeks to divest from international assets.
Jindal said in an interview that JSW would offer $4.5bn in its own equity and $2.5bn from undisclosed private equity partners for Holcim’s Indian assets Ambuja Cement and ACC.
The JSW chair said the acquisition of 63 per cent of Ambuja would be a “game-changer”.
If the deal is successful, it would increase JSW’s market share of the Indian cement market from about 3 per cent to 16 per cent, said analysts.
“This M&A opportunity is a one in a decade opportunity,” said Sumangal Nevatia, senior vice-president for metals, mining and cement at Kotak Securities.
Jindal is reportedly up against other powerful Indian conglomerates including the Birla and Adani families for Ambuja, which controls 13 per cent of the Indian market, Nevatia said, with annual production of 26mn tonnes in 2021.
Ambuja’s shares have risen 14 per cent over the past month to Rs370.43 ($4.78). Holcim declined to comment.
JSW’s attempt to expand its cement business comes as the steel company, India’s biggest by stock market capitalisation with revenues last year of $9.4bn, is working to acquire coal mines abroad to offset supply disruptions and high commodity costs.
Surging post-pandemic demand and the Ukraine war have pushed prices for the steelmaking commodity to record highs, with Australian coking coal hitting $590 a tonne in March, according to data provider CoalMint.
“The conflict is affecting the commodity prices globally and that’s giving a big concern,” Jindal said. “A lot of people are deferring their projects because they’re all feeling the cost has gone up nearly 40, 50 per cent.”
Jindal said he is lobbying Indian prime minister Narendra Modi’s government to develop more coking coal deposits, which were nationalised until 2020.
“Now with these kinds of prices, there is a big opportunity and big incentive for the private sector to go out there and mine that coal and start using it,” said Jindal.
He added that he had spoken with Modi about the issue, saying: “We have to import this coking coal from Australia and Canada and we are sitting on such a large deposit so why don’t we have ‘mission coking coal’ started? And he [Modi] immediately accepted that.”
Jindal added that Modi was “close to every business house in India which is growth oriented, which is nationalistic, which is willing to take big bets in this country, build big industries”.
He said that JSW Steel had met Russian coal traders but was not offered a serious discount. “It’s not very attractive to buy from Russia, and then also that would upset our customers in the US and in Europe”, he said.
The tycoon outlined plans to start mining in the Jharia coalfields in the eastern state of Jharkhand.
Jharia is estimated to contain 19.4bn tonnes of coking coal, according to JSW, although the site has been controversial because of poverty and pollution in the communities that live and work there.
Jharia is “a densely populated area, and the government is also finding it very difficult to do resettlement of those people and open up those mines”, Jindal said.
JSW said that “the main operational challenge would be rehabilitation and resettlement of approximately 1mn residents”.
JSW’s steel business in India has outpaced rival Tata Steel by market cap, with the former’s rising to $21bn as of the close of markets on Monday. But Jindal said JSW Steel’s two foreign ventures have struggled, and partially blamed business rivals for influencing governments against them.
“In any country, for a foreign company to come and do business, it’s not very easy,” Jindal said, describing his ventures in the US and Italy as “not successful”.
He added that JSW Steel is selling its Italian business, which it acquired in 2018 for €55mn. He admitted there would be “some loss, but not a big deal”.