JSW lends with $11 billion war chest for Holcim India; Private equity firms and banks guarantee the funds

The race to acquire a majority stake in Holcim Group’s cement business in India is heating up, with Sajjan Jindal-led JSW Group lining up an array of private equity firms and lenders to fund the deal. The move follows a similar arrangement by the Adani Group, led by billionaire Gautam Adani, which is also in talks with a number of global lenders.

Sources close to the developments said that JSW Group had secured assurances for funds of up to $11 billion from private equity firms and lenders. These include US private equity group Carlyle, Advent International and Apollo Private Equity Investment, among others, who had expressed interest in jointly bidding for the twin assets of Holcim, Ambuja Cements and ACC.

Additionally, an array of Indian and foreign lenders have also pledged loan support, if needed, the sources said.

“Around five private equity majors have lent their support to the deal, while insurance from seven to eight banks and financial institutions are also on the table,” a banking industry source said.

“Many bidders’ teams are already in Zurich, as they expect the final outlines of the proposal to be tabled soon. The talks have further hardened and progressed from the initial stages, and at present the size of the deal is pegged at around $10 billion, but with many suitors in the fray it could even reach 13. billions of dollars,” another source said.

Sources declined to be identified as the talks are not in the public domain.

This move gains momentum as it shows JSW Group as one of the strong contenders. When contacted, a spokesperson for JSW Group declined to comment.

Ambuja Cements has an installed capacity of 31.45 million tonnes per annum (mtpa), with the retail segment contributing around 80% of its sales. For its part, ACC has a production capacity of 34.45 mtpy of cement and together these companies have a total production capacity of 65.9 mtpy.

JSW Group, which has an installed capacity of 16 mtpy at the end of March, planned to increase it to 25 mtpy by FY24. If successful, the acquisition would propel the group to the rank of second cement manufacturer in the country with a total capacity of 81.9 mtpa.

Ditto for Adani Group, which is not present in cement and is said to be exploring the sector. The group planned to set up a 5 mtpa cement manufacturing plant in Raigad district of Maharashtra with an estimated investment of Rs 1,000 crore.

Holcim, which has divested non-core assets in certain geographies, has a 63.1% stake in Ambuja Cements and a 4.48% stake in ACC, while Ambuja – Holcim’s flagship entity in India – holds a 50.05% interest in ACC.

Ambuja Cements has a market capitalization of Rs 76,159.42 crore (as of Thursday) and that of ACC is Rs 44,672.71 crore. Together, the companies’ market capitalization stands at 1.21 trillion rupees. This would make the deal, if signed, one of the biggest in the country.

India is the second largest cement producer in the world, accounting for around 8% of global cement production with an estimated production capacity of 550 mtpy.