It’s as puzzling as it is bold for building materials manufacturing MNC to pull the plug on a country where 10-15 million families still live in kutcha and semi-pucca houses with mud, wood, or bamboo floors. Although Jan Jenisch, Holcim CEO, recognised that cement and climate are becoming increasingly incompatible.

Holcim’s founders, the Swiss Schmidheiny family, were unable to escape a controversy involving the Italian asbestos manufacturer Eternit Genova, which was determined to be responsible for the deaths of over 2,000 people supposedly exposed to the poisonous substance.

Stephan Schmidheiny, the primary shareholder of Eternit Genova, was found guilty by a Turin court in 2012 of refusing to implement asbestos-prevention measures that would have protected employees and residents.

The verdict was reversed by the Italian Supreme Court two years later, but the reputational harm had already been done.

Jenisch and his shareholders wouldn’t want another malignant sore point after the lingering controversy and the 2016 discovery that the then-post-merger firm LafargeHolcim had paid taxes to Islamic State (IS) intermediaries in 2013-14 to keep its facility in Jalabiya, Syria, operational.

Therefore, Jenisch has started preparing the groundwork for a new Holcim, moving away from past obsessions with cement, aggregates, and ready-mix concrete and toward a more sustainable and environmentally friendly future.

Cement production necessitates high temperatures and produces significant volumes of greenhouse emissions.

Jenisch is not shying away from divesting Holcim’s sprawling India operations, as well as similar sales in Brazil, Mozambique, and Northern Ireland, to speed up its transition to a green company.

The company aims to over halve its cement revenue share by 2025 while increasing its greener portfolio by more than 3.5 times.

It also makes business sense to promote ESG in today’s era of conscientious capitalism (environmental, social and governance).

Holcim, which trades at a 12.8 price-to-earnings (PE) ratio, might see its valuation rise if it transitions from a pure commodities player to offering solutions or diversifying into building chemicals.

Sika, on the other hand, trades for over four times the multiples. And if you consider Pidilite, the Indian adhesives behemoth, which is presently trading at 97.9 PE, the value difference is eight times larger.

This Holcim playbook will be adopted by an increasing number of industrial enterprises throughout the world, including India. Asian Paints has progressed to become a home renovation expert, while cement companies JSW and JK, like the Aditya Birla Group, have expanded into paints and other value-added services.

A rising number of industrial firms throughout the world, particularly in India, will follow Holcim’s lead. Asian Paints has evolved into a home remodelling specialist, while JSW and JK, like the Aditya Birla Group, have diversified into paints and other value-added services.

An intermediate way might be to use the moat of predictable cash flows created by old activities.

Ambani’s move into telecommunications and retail was first financed by his conventional petrochemicals sector, just like ITC did with tobacco to support its hotels, FMCG, and paper verticals.

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