Adani Group may not be able to swing the buy-out of Nirma group’s Nuvoco if the Competition Commission of India (CCI) were to strictly go by the threshold for mergers and acquisitions (M&A) transactions clearing.

The latest report from Jefferies on consolidation in the cement sector in India said that Adani may find it challenging to obtain the CCI approval for the Nuvoco buys based on the metric used by the competitor watchdog to pass or disallow M&A transactions.

Adani Group may be looking for a new purchase after buying out Holcim’s stake in ACC and Ambuja Cement. The next target was supposed to be Nuvoco.

CCI considers the Herfindahl Hirschman Index (HHI) when clearing acquisitions. The index is a measurement of market concentration, and it is applied to witness the extent to which a merger and acquisition (M&A) will improve concentration and weaken competition.

According to Jefferies, any M&A resulting in HHI surpassing 2,000 may face hindrances from the CCI, and merging Ambuja-ACC with Nuvoco gets the index close to uncomfortable levels.

For FY23, HHI for the Eastern region would move to 1945 from 1498 if we merge Ambuja and ACC with Nuvoco. It is a close number to Holcim Lafarge combination estimation where CCI felt it would be appropriate for Lafarge to divest, said the report.

In 2014, when Holcim and Lafarge announced their global merger, the competition watchdog in India had asked the combine to divest some of the assets in the country. In 2016, CCI approved the divestment by LafargeHolcim (now Holcim Ltd) of its assets in Lafarge India.

Presently, the players in the Eastern region, in descending order of their market share, are Dalmia (18%), Nuvoco (17%) Ultratech (15%); ACC+Ambuja (15%); Shree Cement (12%); Star Cement (5%); JSW Cement (3%); JK Lakshmi (3%) and Ramco (3%). The rest of the players have a mixed 9%. If ACC+Ambuja merges with Nuvoco, the combined market share will be 42%.

According to Jeffries, any single player surpassing 44% or two players crossing 31% each or three players surpassing 26% each, and so on will result in HHI surpassing 2,000.

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