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Ajay Piramal eyes Lafarge’s India business; chooses cement as his next big play

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Among the long list of private equity buyout funds and cement companies jostling to grab Lafarge’s Indian assets that have recently been put up for sale is a surprise candidate – billionaire businessman Ajay Piramal.

In an interesting diversification move that has raised eyebrows of most competitors, Piramal, chairman of the over $4 billion eponymous group, has thrown his hat in the ring as Lafarge last month initiated plans to sell its entire Indian operations of 11 million tonnes per annum for an estimated $1.5 to $2 billion, said multiple sources aware of the transaction.

Ever since he sold his flagship pharma business for a jaw dropping $3.8 billion six years ago, there has been endless speculation on what could be Ajay Piramal’s next big play. When contacted, spokespersons from Piramal Enterprises and Lafarge India declined to comment.

At the core of Piramal’s investment thesis, say sources, is his belief that in the next 12-18 months, spending on infrastructure will pick up as India looks to bounce back on its 8 per cent plus growth trajectory. The group already has legacy manufacturing expertise that can be exploited going forward. "From railways to highways and roads, we are looking at several high profile projects taking off in the next 1-2 years. Cement will be the building blocks and at the core of it," said an official in the know. "This is a long term business that is unlikely to get disrupted by change in technology," he added.

Piramal is not looking to use Piramal Enterprises, the listed group flagship housing his healthcare, financial services and information management business for the Lafarge acquisition. Instead, one of his private companies or a family investment arm will be the likely vehicle for the transaction. However, the talks are still in early stages, cautioned these officials. It is also not clear as yet if Piramal would go solo or opt for a financial partner subsequently if they indeed progress to the final rounds of negotiations.

With large assets available for consolidation along with savvy management teams, some believe this is also the best time to enter the space and build a cement platform by backing the right management teams and scale up. One of the sources cited above even said headhunting firms have also been approached to scout for senior management personnel for the new foray and feelers have already gone out to a handful of top talent in existing firms, but this could not be independently verified. "Lafarge is a marquee asset and arguably the best opportunity if one is looking at scaled operations. Along with assets even the incumbent management team will move to the new acquirer. So for a newer entrant who is looking at this space seriously, this is one of the best opportunities available to build on," said a cement sector analyst privy to the ongoing discussions.

While some see this as an opportunistic exercise by Piramal to branch into a sunrise sector, many see the development as a natural extension of his existing interest in real estate and infrastructure. "From clean tech to roads, from telecom to real estate, the conglomerate has used its structured finance group to lend to various core sector projects. But that is largely through debt financing. This will be unique as it is a big strategic move to actually run the cement business as an operator using the equity route," said an investment banker who works closely with the group.

Since 2011, Piramal’s son Anand has also ventured into real estate development with Piramal Realty and is developing 10 million sq ft across 6 projects in Mumbai. Additionally, with over $3 billion parked through several of their sector-focussed funds and lending arms, the Piramals are today the second largest investor in realty after HDFC.

In February, LafargeHolcim had agreed to sell its entire India operations after regulatory hurdle over transfer of mines came in between its earlier plans to divest two of its assets to Birla Corp for Rs 5000 crore. Exiting the entire business was alternate remedy for the merger of LafargeHolcim’s legacy Indian operations. LafargeHolcim’s India presence comprises cement capacity held under three subsidiaries – Lafarge India Pvt Ltd, ACC Ltd and Ambuja Cements Ltd. Post divestment of Lafarge’s 11 million tonnes, the merged entity would have a total capacity of about 60 million tonnes.

Dalmia Bharat gets CCI nod to buy 15 per cent stake in Dalmia Cement Dalmia Bharat has got fair trade regulator CCI’s approval to acquire 15 per cent stake in its subsidiary Dalmia Cement Bharat from private equity giant KKR for over Rs 1,218 crore in a cash and stock deal. Post the deal, Dalmia Cement Bharat Ltd (DCBL) will become a wholly-owned subsidiary of Dalmia Bharat Ltd (DBL).

Competition Commission of India (CCI) has cleared the proposed deal, as per information on the regulator’s website.The deal has earned KKR Mauritius Cement Investment a return of 2.4 times on its investment of Rs 500 crore that it made in September 2010.

"Dalmia Bharat Ltd (DBL) signed a definitive agreement with KKR, under which it will acquire KKR’s 15 per cent stake in DCBL in return of KKR getting 8.5 per cent stake in DBL as well as Rs 600 crore in cash," Dalmia Bharat Group MD Punit Dalmia had said in January.

As per reports, DBL will make a preferential issue of 7.5 million shares to KKR at Rs 825 a share and pay KKR Rs 600 crore (USD 89 million) in cash for its around 15 per cent stake (about 3.79 crore shares) in DCBL. With the agreement, KKR will be the largest institutional shareholder in DBL.

DBL provides management services to the group companies belonging to the Dalmia Bharat group, owns intellectual property such as trade names for its group companies and holds shares in the group companies, either on its own or through its subsidiaries. DCBL is active in the cement manufacturing industry. It is also engaged in the manufacturing of refractories.

This was the first major deal in the cement sector after the government in January this year sought views from public on amending the Mines and Minerals (Development & Regulation) Act, 2015 to include provisions allowing transfer of captive mines granted through procedures other than auction.

Shree Cement readies Rs 6,000 cr for expansion
Unlike the other companies such as UltraTech, Birla Corporation and JSW Cement Etc. who have been in the race for acquisitions, relying on takeovers and mergers to expand. However Shree cement on the other hand is taking a different route, focusing on greenfield projects.

It has lined up a capital expenditure of Rs 6,000 crore to construct three new cement plants.

The first in the line – a plant in the Baloda Bazar-Bhatapara district in Chhattisgarh, with a minimum capacity of 3 mt – will be announced in four months. The company has recently won a bid for limestone reserves at the Karhi-Chandi area in the state, through an e-auction in February.

This block has an estimated reserve of 166 mt, with 80 mt cement-grade limestone. In Karnataka, the company has already purchased 1,500 acres over five years. These expansion plans will be funded from the company’s internal accruals. Its net profit took a hit, falling from Rs 1,003.97 crore in 2013 to Rs 787.24 crore in 2014, and then to Rs 426.33 crore in 2015.

During the July-December period this year, the company registered a net standalone profit of Rs 231.59 crore, while the profit margin fell to 6.52 per cent.

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Concrete

Material Benefits

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Supplementary cementitious materials are changing the way and the speed at which cement manufacturing is moving on the spectrum of environment sustainability. With large stakes on the line for achieving net zero targets, how is the Indian cement industry rising up to the challenge, finds out ICR.

Across the globe, cement is one of the most consumed and important materials for building all infrastructure. From homes, to factories, roadways or tunnels, everything would require cement in one form or the other. India especially is moving towards becoming infrastructurally strong with new projects in the works across the sub-continent. All infrastructural projects demand the consumption of concrete and cement, which has led to the rise of concrete requirement, thus, increasing the production of cement.

India’s cement production is expected to reach 381 million tonnes by 2021-22, while the consumption is likely to be
around 379 million tonnes in light of the country’s renewed focus on big infrastructure projects. Source: RBI Reports


India is the second largest producer of cement. Limestone is at the core of its production as it is the prime raw material used for production. The process of making cement involves extraction of this limestone from its quarries, crushing and processing it at the cement plant under extreme temperatures for calcination to form what is called a clinker (a mixture of raw materials like limestone, silica, iron ore, fly ash etc.). This clinker is then cooled down and is ground to a fine powder and mixed with gypsum or other additives to make the final product, cement.
Limestone is a sedimentary rock composed typically of calcium carbonate (calcite) or the double carbonate of calcium and magnesium (dolomite). It is commonly composed of tiny fossils, shell fragments and other fossilised debris. This sediment is usually available in grey, but it may also be white, yellow or brown. It is a soft rock and is easily scratched. It will effervesce readily in any common acid. This naturally occurring deposit, when used in large volumes for the cement making process is also depleting from the environment. Its extraction is the cause of dust pollution as well as some erosion in the nearby areas.
The process of calcination while manufacturing cement is the major contributor to carbon emission in the environment. This gives rise to the need of using alternative raw materials to the cement making process. The industry is advancing in its production swiftly to meet the needs of development happening across the nation.

Aligning Sustainability Goals
In one of its recent bulletins, owing to India’s announcement at the Glasgow Climate summit to reach net-zero by 2070, the RBI noted that with India aiming to reach half of its energy requirements from renewables and reduce the economy’s carbon intensity by 45 per cent by 2030, it ‘necessitates a policy relook across sectors, especially where carbon emission is high’ and ‘cement industry is one of them.’ However, it said, recent developments in green technologies, particularly related to reverse calcination, offer ‘exciting opportunities’ for the cement sector.
The RBI report noted that India’s cement production is expected to reach 381 million tonnes by 2021-22 while the consumption is likely to be around 379 million tonnes, in the light of the country’s renewed focus on big infrastructure projects like the National Infrastructure Pipeline, low-cost housing (Pradhan Mantri Awas Yojana), and the government’s push for the Smart Cities mission is likely to drive demand for the cement in future. On similar lines, according to the Eco-Business news portal report of April 2022, the India Energy Outlook 2021, which notes that most of the buildings that will exist in India in 2040 are yet to be built. Their projection suggests that urbanisation in the near future will demand an increase in infrastructure, which will ultimately lead to increase in the cement consumption.
With these forecasts in mind, RBI has recommended that there is a need to align India’s economic goal with its climate commitments by implementing emerging green tech solutions. It has also recommended an increase in finance towards green sustainable solutions through subsidised interest loans, proactive engagement with the leading research institutes and countries involved with green tech-related innovation in the cement industry.
“When clinker is blended with other supplementary cementitious materials like fly ash, slag or both, products are called Portland Pozzolana Cement (PPC), Portland Slag Cement (PSC) and composite cement (CC) respectively. Blended cement products have a much lower carbon footprint than OPC. Since clinker manufacturing is the phase where most thermal energy is consumed and CO2 is emitted, reducing clinker factor in cement not only results in lowering the process CO2 but also the thermal energy and electrical energy requirements,’’ says Manoj Kumar Rustagi, Chief Sustainability and Innovation Office (CSIO), JSW Cement.

Increased cement plant capacity, reduced fuel consumption
and lower greenhouse gas emissions are some of the
advantages of blended cement.

Alternative Raw Materials
Alternative cementitious materials are finely divided materials that replace or supplement the use of portland cement. Their use reduces the cost and/or improves one or more technical properties of concrete. These materials include fly ash, ground granulated blast furnace slag, condensed silica fume, limestone dust, cement kiln dust, and natural or manufactured pozzolans.
“Each material has its own composition and behaves differently during the burning process. In order to maintain the consistent clinker quality and stable clinkerisation process, we need to analyse these materials with respect to quality (during raw mix design) and also impact on the environment (if any harmful gases are released). There are certain materials which come in both ARM and cement additives like Ashes from coal fired thermal plants and slag from steel plants that have to be looked at from various angles,” says Gulshan Bajaj, Vice President (Technical), HeidelbergCement India.
The use of these cementitious materials in blended cements offers advantages such as increased cement plant capacity, reduced fuel consumption, lower greenhouse gas emissions, control of alkali-silica reactivity, or improved durability. These advantages vary with the type of alternative cementitious material.
Cement manufacturers are moving towards incorporating these supplementary cementitious materials in their raw material:
Fly Ash: Containing a substantial amount of silicone dioxide and calcium oxide, fly ash is a fine, light, glassy residue generated during ground or powdered coal combustion.
Ground Granulated Blast-furnace Slag (GGBS): It is a by-product of the iron and steel industry. In the blast furnace, slag floats to the top of the iron and is removed. GGBS is produced through quenching the molten slag in water and then grinding it into a fine powder. Chemically it is similar to, but less reactive than, Portland cement.
Silica Fume: It is a by-product from the manufacture of silicon. It is an extremely fine powder (as fine as smoke) and therefore it is used in concrete production in either a densified or slurry form.
Slag: It is a by-product of the production of iron and steel in blast furnaces. The benefits of the partial substitution of slag for cement are improved durability, reduction of life-cycle costs, lower maintenance costs, and greater concrete sustainability. The molten slag is cooled in water and then ground into a fine powder.
Limestone Fines: These can be added in a proportion of 6 to 10 per cent as a constituent to produce cement. The advantages of using these fines are reduced energy consumption and reduced CO2 emissions.
Gypsum: A useful binding material, commonly known as the Plaster of Paris (POP), it requires a temperature of about 150OC to convert itself into a binding material. Retarded plaster of Paris can be used on its own or mixed with up to three parts of clean, sharp sand. Hydrated lime can be added to increase its strength and water resistance.
Cement Kiln Dust: Kilns are the location where clinkerisation takes place. It leaves behind dust that contains raw feed, partially calcined feed and clinker dust, free lime, alkali sulphate salts, and other volatile compounds. After the alkalis are removed, the cement kiln dust can be blended with clinker to produce acceptable cement.
Pozzolanas: These materials are not necessarily cementitious. However, they can combine chemically with lime in the presence of water to form a strong cementing material. They can include – volcanic ash, power station fly ash, burnt clays, ash from burnt plant materials or siliceous earth materials.
Dr Sujit Ghosh, Executive Director – New Product and R&D, Dalmia Cement (Bharat), says, “Blended cements made using supplementary raw materials, have ‘additional’ activated silica (SiO2) and/or activated lime (CaO), which when co-processed with cement clinker, provide ‘additional’ cementitious gel paste (complex calcium-silica-oxide-hydrates) when mixed with water, that renders improved strength and durability to the cement-concrete structure.”
He adds, “With specialised processing and with the use of performance enhancers, blended cements using supplementary raw materials, provide acceptable rate of strength gains, comparable to pure-clinker cement and top-class long-term durability, with lower carbon footprints and at the same time effectively finding value-solution to other industry wastes!”
Besides having the advantage of lower emissions and better environmental conditions, use of supplementary cementitious materials also has a cost benefit. “Cost of production depends on the plant location, limestone and raw material quality. The source of alternative raw materials for some plants are significant and in some instances because of high logistic cost economics do not work out. For example, if a cement plant is located near the industry where chemical gypsum is generated, there will be a significant gain to that particular cement plant,” says Rajpal Singh Shekhawat Senior General Manager (Production and QC), JK Lakshmi Cement.

Bio Solutions
Researchers at the Indian Institute of Technology, Madras, are finding ways to use bacteria to develop bio-friendly cement and reduce carbon dioxide emission, as per a report in The Hindu earlier this year.

Use of other industrial waste will make way for a circular economy and reduce ocean pollution and landfills


Professor GK Suraishkumar and assistant professor Nirav Bhatt in the Department of Biotechnology and Subasree Sridhar, a research scholar, are conducting the research. They have developed a mathematical model to produce an alternative to current cementation process. They have suggested the use of bacteria like S Pasteurii, which will microbially-induced calcite precipitation.
This bio cement will require temperatures in the range of 30 to 40 degrees as opposed to the traditional process that would require over 900 degrees for the calcination process. The emitted carbon dioxide will be negligible in this case and industrial waste like lactose mother liquor and corn steep liquor can be used as the raw materials for the bacteria, thus making the manufacturing of this cement more economical.
One of the most important ways of reducing carbon emission in cement manufacturing is the use of alternative raw materials from various other industries. This gives way to a circular economy, utilising waste from other industries and bettering the environment with reduced emission of harmful gases, especially carbon dioxide. It also helps the avoidance of landfills or ocean pollution, as waste of industries is utilised in manufacturing cement. Overall, new compositions of cement are the future.

-Kanika Mathur

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Environment

FLSmidth unveils world’s largest clay calcination solution

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A new clay calcination project by FLSmidth in Ghana marks a key milestone in the green transition of cement production.

FLSmidth will deliver equipment to replace cement clinker with environmentally friendly clay, cutting up to 20 per cent of CO2 emissions compared to current practices on site. The order includes the world’s largest gas suspension calciner system and acomplete grinding station adding another 120 per cent grinding capacity. Using calcined clay to minimise the need for traditional, carbon-intensive clinker is a key technology in eliminating the environmental footprint from cement production. “Calcined clay cements are the most sustainable alternative to traditional clinker-based cement. With the support from FLSmidth, we will be able to operate clay calcination in a large scale,” said Frédéric Albrecht, CEO, CBI Ghana Ltd.

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Concrete

EU states agree on a carbon border adjustment system for cement

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The European Union’s ‘Fit for 55’ package includes a carbon border adjustment system for cement, which is one of the major aspects.

This environmental measure’s main goal is to prevent carbon leakage. It would also urge partner countries to implement carbon pricing measures in order to combat global warming. CBAM does so by focusing on carbon-intensive product imports in full compliance with international trade rules, in order to avoid offsetting the EU’s greenhouse gas emission reduction efforts with imports of products made in non-EU countries with less ambitious
climate change policies than the European Union.

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