Indian industrialist Sajjan Jindal’s steel conglomerate, JSW Group, is to make a $7 billion bid for Holcim’s Indian subsidiaries as the Swiss cement group seeks to divest itself of international assets.
Jindal said in an interview that JSW would offer $4.5 billion in equity and $2.5 billion in undisclosed private equity partners for the Indian assets of Holcim, Ambuja Cement and ACC.
The JSW chairman said the acquisition of 63% of Ambuja would be a game-changer.
If the deal is successful, it would increase JSW’s market share in India’s cement market by around 3% to 16%, analysts said.
“This M&A opportunity is a once-in-a-decade opportunity,” said Sumangal Nevatia, senior vice president for metals, mining and cement at Kotak Securities.
Jindal would face other powerful Indian conglomerates, including the Birla and Adani families for Ambuja, which controls 13% of India’s market, Nevatia said, with an annual output of 26 million tonnes in 2021.
Ambuja shares rose 14% over the past month to Rs 370.43 ($4.78). Holcim declined to comment.
JSW’s bid to expand its cement business comes as the steel company, India’s largest market capitalization with revenues of $9.4 billion last year, strives to acquire mines of coal abroad to compensate for supply disruptions and high raw material costs.
Rising post-pandemic demand and the war in Ukraine pushed steel prices to record highs, with Australian coking coal hitting $590 a tonne in March, according to data provider CoalMint.
“The conflict affects commodity prices globally and there is great concern,” Jindal said. “A lot of people are postponing their projects because they all feel like the cost has gone up by almost 40, 50 percent.”
Jindal said he was pressuring Indian Prime Minister Narendra Modi’s government to develop more coking coal deposits, which have been nationalized until 2020.
“Now with this kind of price, there is a big opportunity and a big incentive for the private sector to extract this coal and start using it,” Jindal said.
He added that he had spoken with Modi about the matter, saying: “We have to import this coking coal from Australia and Canada and we are sitting on such a big deposit so why not start the ‘mission of coking coal’? And he [Modi] immediately accepted this.
Jindal added that Modi was “close to all businesses in India that are growth-oriented, that are nationalistic, that are ready to take big bets in this country, to build big industries.”
He said JSW Steel met with Russian coal traders but was not offered a serious discount. “It’s not very interesting to buy from Russia, and it would bother our customers in the United States and Europe as well,” he said.
The tycoon has outlined plans to start mining in the Jharia coalfields in the eastern state of Jharkhand.
Jharia is estimated to contain 19.4 billion tonnes of coking coal, according to JSW, although the site has been controversial due to poverty and pollution in the communities that live and work there.
Jharia is “a densely populated area, and the government is also having a hard time resettling these people and opening these mines,” Jindal said.
JSW said “the main operational challenge would be the rehabilitation and resettlement of approximately 1 million residents”.
JSW’s steel business in India has overtaken rival Tata Steel in terms of market capitalization, with the former reaching $21 billion at the close of trading on Monday. But Jindal said JSW Steel’s two overseas companies had struggled and partly blamed their 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 United States and Italy as “unsuccessful.”
He added that JSW Steel was selling its Italian business, acquired in 2018 for 55 million euros. He admitted there would be “a few casualties, but not much”.