More consolidation in store for cement sector?

livemint.com:

The big players in the cement sector got bigger, thanks to a spate of acquisitions in recent years. This trend may continue as larger companies, with strong balance sheets, seek to boost or maintain their market share through inorganic growth. In contrast, smaller companies that are struggling to compete due to high debt or low profitability will likely exit the market, further driving consolidation.

According to recent media reports, UltraTech Cement Ltd is likely to acquire Kesoram Industries Ltd, which has a cement capacity of 10.75 million tonne per annum (mtpa) as per its website. Antique Stock Broking pointed out that the combined volume market share of the top four companies – UltraTech, Ambuja Cements plus ACC, Shree Cement, and Dalmia Bharat -- is expected to rise to around 58% by FY27 from around 53% in FY23. This is because these companies plan to add more than 70% of their capacity over FY24-27.

This market share is likely to further increase to around 65% by FY27 even if a few (half) of the mergers and acquisitions, discussed in various media articles, of 67-92 mtpa actually materialize in favour of the top four. Lately, many large cement manufacturers have been focusing on increasing their production capacity to achieve higher volume growth. To meet their targets, it would be crucial for the players to engage in strategic and timely merger or acquisition deals.

UltraTech, for example, aims to increase its grey cement capacity from 132.45 mtpa to 159.65 mtpa by June-end (FY25). The unorganized sector has many cement companies, which means there is potential for inorganic expansions. According to analysts, the south and west regions have a relatively higher number of small and mid-sized cement makers, making