CRH has been acquiring construction related companies aggressively in the Asian region. The company, through its Indian partner – MHIL, recently acquired Sree Jayajothi Cements. We wondered, what attracted the regional, national and international leader in building materials, to this asset? And how will MHIL benefit from this deal? Indian Cement Review takes a closer look with inputs from Dr. Rameswar Rao Jupally, Founder Chairman of MHIL.
The international building materials group, CRH plc, announced on 12th August 2013, that its 50:50 joint venture in India, My Home Industries Limited (MHIL) has reached an agreement to acquire hundred per cent shares of Sree Jayajothi Cements (SJC). Based in South India, SJC has an installed capacity to produce 3.2 million tonnes of cement p.a. SJC had been in debt for quite some time and the deal will help its promoters to clear that debt.
CRH, which stands for Cement Roadstone Holdings, is a diversified building materials group which manufactures and distributes a wide array of building material products world over. The company generates over C18.5 billion euro of sales per year and employs approximately 76,000 people at 3,500 operating locations in 35 countries. CRH was formed through a merger in 1970 of two leading Irish public companies, Cement Limited (established in 1936) and Roadstone Limited (1949). Back then, with sales amounting to C27m, the group was the sole producer of cement and the principal producer of aggregates, concrete products and asphalt in Ireland.
To reduce its dependence on local markets, the company designed a strategy for achieving a balance in its geographic presence and portfolio of its products. It conducted a detailed review of the Asian markets based on market size and scale, population growth and GDP per capita to identify possible opportunities to enter the building materials sector in this region. China and India, emerged as the top two countries for expansion since they are regarded as the largest cement and construction materials market. With strong population growth in both countries, GDP growth of 7 to 9 per cent p.a. and progressive urbanisation, the development potential was clear. CRH has since then focussed on these two countries as their primary targets for entry into the Asian markets.
The company rationalises that as the Chinese and Indian markets develop, more sophisticated construction markets will emerge creating a demand for a wide range of value-added construction products. The company is focused on sustaining and growing a geographically diversified business with exposure to all segments of construction. The portfolio is well balanced across geographies, end-uses and both new and repair, maintenance and improvement (RMI) construction thus providing exposure to multiple demand drivers which help in lessening the effects of varying economic cycles.
CRH has been picking up small to mid-sized companies usually in cement and often in partnership with strong local established businesses. New acquisitions complement the existing network augmenting it with larger deals.
In the developing economies of China and India, CRH looks for entry platforms that have well-located quality operations and good regional market positions. The company screens for assets which have the potential to develop into integrated building materials businesses as construction markets become more sophisticated over time. This tried and tested approach was applied by CRH for entry into the Polish market in the mid-1990s. Today the group is the leading integrated building materials company in Poland. The company is now replicating this approach in India and China. In 2006, CRH invested in a cement factory based in the Heilongjiang region in China. Building on that presence, the company has acquired 26 per cent stake in the Jilin Yatai Group. CRH entered the Indian market in 2008 with the acquisition of a 50 per cent stake in MHIL, a cement business located in Andhra Pradesh in South India for C290 million ($452 million). The rest 50 per cent stake is held by My Home Constructions. My Home Constructions is one of the renowned players in the real estate market in Hyderabad.
MHIL
At the time of acquisition by CRH, MHILÆs operations consisted of three cement production units at Mellacheruvu in central Andhra Pradesh with an annual production capacity of approximately 3 million tonnes. The main plant is located at Mellacheruvu. The modern plant consists of three units with the combined installed capacity of 3.3 million tonnes per annum. The Mellacheruvu plant is equipped with the latest machinery from leading suppliers like Walchand industries, FLS, LNV, and KHD-Humboldt. All three units are located at a common location and the captive limestone mines are just a stone throw away. This plant is supported by a 15 mega watt captive power plant. The plant is equipped with expert control systems and is run by the FLS automation system.
The company is environment conscious with as many as 99 pollution control devices installed in three units to minimise emissions from the plant.
The Grinding unit at Vizag is the recent addition to My Home Industries. ItÆs a Greenfield plant located at Mulkapalli village Yelamanchili Mandal, Vizag District. Endowed with advanced technology from Loesche, Germany, this plant produces 1.5 million tonnes per annum.The Vizag plant is strategically planned to serve the eastern markets like Odisha, West Bengal and Bihar. Clinker is procured from the mother plant at Mellacheruvu. Slag is sourced from Vizag steel plant and the gypsum from Coromandal Fertilizer plant. Clinker, slag and gypsum are grounded in a Vertical Roller Mill supplied by Loesche, Germany.
MHIL offers four cement products to suit all construction requirements, right from the tiny abode to the mighty dams. The range includes Maha Cement (OPC 43 Grade), Maha Gold (OPC 53 Grade), Maha Shakthi (PPC) and Maha Shakthi PSC.