Recent Cement M&A May Delay

Recent Cement Mergers & Acquisitions May Go On Hold

The new Mining Act that has a clause that bars the transfer of mines that were not allotted via auctions. Prior to this new act, hundreds of mines had been allocated for captive use by industries in the past. However, under the new act, when these businesses change hands via mergers and acquisitions, it could be an issue if the captive mines linked to production capacities are not transferable as most of the M&A take place with the intent of transfer of the associated mining and mineral rights.

In the amended Mines & Minerals (Development & Regulation) Act 2015, Sub Section 6 of Sec 12A says that only mines which have been allocated through auctions can be transferred. "The transfer of mineral concessions shall be allowed only for concessions which are granted through auctions". But it is unclear if it covers historically allocated mines given via nominations or only ones in future. This ambiguity in the law makes it open to different interpretations. The core question here is "Does the new rules apply prospectively or retrospectively?".

This confusion directly impacts 2 major cement industry M&A of recent days. One, the takeover of Jaypee Group's cement plants in MP by KM Birla's Ultratech Cement which has been stuck for months on this issue. Two, the recent deal by Lafarge-Birla Corp. in which Birla Corp. part of the MP Birla Group is to take over 2 of Lafarge India's cement units.

Read more on Cement Mining and Mineral Rights here...

Cement Acquisition Business

Birla Corp. To Accquire Lafarge India's 2 Cement Units

Birla Corp. has announced that it has come into an agreement with Lafarge India Private Limited (Lafarge India), wherein Birla  Corp, either directly or through its wholly owned subsidiary, will acquire both the Jojobera and Sonadih cement businesses from Lafarge India for a value of Rs. 5,000 crores.

Under this transaction, in addition to the cement units, Concreto and PSC brands and an excellent management team are part of the deal. The tranaction has a cement capacity of around 5 million tonnes per annum (mtpa), with mineral rights over  adequate reserves of limestone.

Birla Corp, part of the MP Birla Group has presence across cement and jute industries among others. Cement constitutes over 90% of the company's revenues with a total operational cement capacity of 8.79 mtpa.

The Cement Division of Birla Corporation Limited has seven plants, two each at Satna (M.P.) - Satna Cement Works & Birla Vikas Cement, Chanderia (Rajasthan) - Birla Cement Works & Chanderia Cement Works, Durgapur (W.B.) - Durgapur Cement Works & Durga Hitech Cement - and one at Raebareli (U.P.)-Raebareli Cement Works it has units in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal.

Post completion of the transaction, Birla Corp will have a total capacity of approx.14 mtpa.

Cement Business Acquisition

Cement Companies Offer 33% Wage Hike

Cement Manufactures Finalise 33% Increase In Wages

Cement Manufacturers’ Association, India (CMA), the one and only employers’representative association for the cement industry, has finalized plans to grant all workers under it's representative cement companies a 33% hike in salary, under a new wage accord. A settlement to this effect has been arrived at with the National Federation of Trade Unions (INTUC, BMS, AITUC, HMS, CITU and LPF), representing cement company workers across India.

The new wage settlement will be valid for a period of four years, covering the period from April 2014 to March 2018.

Cement company workers thus benefitted are employed by 20 companies having 85 cement units across the country, which, covers approx. 66 per cent (189 million tonnes) of the total annual cement production capacity in India (285 million tonnes of cement).

The settlement, effective from April 1, 2014, envisages an increase of Rs 6,000 per month in the gross pay of cement company workers (to be paid in two installments of Rs 3,000 each in April 2014 and September 2016), which converts to an enhancement of 33% in their salary. It also provides for increased dearness allowance benefits. The arrears for 16 months will be paid in two instalments, said cement industry spokepersons in Chennai.

Cement Manufacturers’ Association has been representing the employers in wage negotiations since 1978. After the two Arbitration Awards in 1978 and 1982, the cement industry has been signing 12 (3) settlements under the Industrial Disputes Act, 1947 at the conclusion of bilateral negotiations with the National Federation of Trade Unions (comprising INTUC, BMS, AITUC, HMS, CITU and LPF), representing cement workers across India. Together with the current settlement effective April1, 2014, there have been 7 such national-level settlements for the cement company workers from 1989 onwards.

The current settlement was reached between CMA and representatives of trade unions before chief labour commissioner P P Mitra in New Delhi. Those present at the meeting were:
N Srinivasan, Vice-Chairman and MD, India Cements,
O P Puranmalka, President of CMA,
S Chouksey, Vice-President of CMA,
N A Viswanathan, Secretary-General of CMA,
and representatives of the trade unions.

N. Srinivasan, Vice-Chairman and MD of The India Cements Ltd.,Chennai said ...“The current settlement is unique in today’s scenario since it is perhaps the only nation-wide settlement reached for workers of a major organised industry in the private sector. Despite the difficult conditions being faced by the industry, due to subdued demand and lower capacity utilisation, it has agreed to implement the wage revision in the overall interest of a large number of workers.”

N. Srinivasan, Vice-Chairman and MD of The India Cements Ltd.,Chennai, has been taking the lead in the negotiations on behalf of Cement Manufacturers’ Association for the past 25 years having concluded six out of seven settlements signed so far.

Read more in detail in the below referred links...

Cement Wage Settlement

Cement Company Wages

CMA Wage Settlement

Cement Manufacturers Wage Settlement