Takeover of Raasi Cements by India Cements

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Case Details:

Case Code : BSTR001
Case Length : 8 Pages
Period : 1998-1999
Organization : Raasi Cements Sri Vishnu Cements Limited
Pub Date : 2001
Teaching Note : Available
Countries : India
Industry : Construction - Building Materials & Equipment

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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ICL was one of the largest cement producers in south India. The company had a strong presence in the states of Tamil Nadu, Kerala and Andhra Pradesh.

Cement constituted approximately 97% of ICL's total revenues. Besides cement, the company had a presence in wind energy and real estate. In early 1998, ICL had six cement plants, three each in Tamil Nadu and Andhra Pradesh and its capacity had increased to 5.2 mtpa. ICL entered Andhra Pradesh by acquiring the Chilamakur plant from Coromandel Fertilizers in 1990. In September 1997, ICL took a 100% stake in Visaka Industries Ltd through its subsidiaries and associate companies. Also in 1998, ICL acquired the Yerranguntla plant from the Cement Corporation of India (CCI). Raasi was promoted by Raju and his son-in-law, N P K Raju in 1978. Other than cement, the group also had interests in ceramics and paper.

Raasi's cement division had a capacity of 1.60 mtpa. Raasi seemed to be an attractive target for ICL as it was a relatively low cost producer.

Analysts felt that Raasi failed to capitalize on its low production cost, because of its weak marketing set-up, particularly in Kerala and Tamil Nadu. As a result, Raasi tended to dump the cement in its weak markets thereby putting pressure on other players in the region. The takeover of Raasi also would help in rationalization of various markets between ICL and Raasi, and interchangeable use of Sankar, Coromandel6 and Raasi brand names. Analysts felt that if ICL was indeed interested in Raasi and was buying its stock, then it was probably doing so in the belief that the family, despite Raju's assertion, would sell out. Raju had no sons, but his three sons-in-law were involved with the running of the company, and at least one of them seemed to be interested in selling out...

Excerpts >>

6] Sankar and Coromandel were the cement brands of ICL.


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