CRH makes foray into Indian cement market in €290m deal

BUILDING MATERIALS giant CRH is set to make its first foray into India with a €290 million deal. The Irish group said yesterday that it has agreed to buy 50 per cent of Hyderabad-based My Home Industries Ltd (MHIL), one of the biggest cement producers in India's southern region.

CRH said that it is spending €290 million on buying the MHIL stake. It will jointly manage the Indian company with its existing owners. Along with China, India is one of the world's fastest-growing economies. Its total wealth has grown by more than 7 per cent annually since 1997, and stood at $3,000 billion last year.

CRH chief executive Liam O'Mahony told The Irish Times yesterday that while the group recognises that emerging economies such as India's offer "great growth opportunities", they also pose risks. "Our approach to them has been gradual rather than a big bang. This deal in India is typical of that, and we've done something similar in China by starting small and then expanding."

CRH said recently that it was taking a 26 per cent holding in Chinese group Jilin Yatai. It already has a foothold in China through an interest in a smaller operation the northeast of the country.

Mr O'Mahony said the Irish group intends working with MHIL on a planned expansion. The Indian company currently produces 3.2 million tonnes of cement a year from three plants. It is proposing to expand that capacity to 4.2 million tonnes.

"We can provide the technical expertise that they need, while MHIL knows the market and will provide the local expertise," Mr O'Mahony said. He added that CRH will have some of its own staff on the ground in India.

MHIL will become part of CRH's Europe materials division - one of four that make up the group - because executives in this part of its business have the technical expertise that the Indian company needs.

MHIL is a privately held company. Mr O'Mahony said that CRH does not have an option to increase its stake in the company, and is simply focused on growing its investment by taking part in the planned expansion.

Last week, CRH agreed to buy US paving manufacturer Pavestone for $540 million (€350 million). It spent €2.2 billion on 78 deals in 2007 and hopes to maintain this level of acquisition spending this year.

When the company released its 2007 results earlier this month, Mr O'Mahony acknowledged that as the credit crunch has squeezed many private equity buyers out of the market, this could result in "fairer" prices for companies that it is interested in buying.

CRH is Ireland's biggest company. Last year it generated sales of close to €21 billion. Its business is split roughly 50-50 between its American and European divisions.