The Larsen & Toubro-Grasim deal is expected to aid the recovery in cement prices and limit the share of the multinational companies, according to CRIS INFAC, a research subsidiary of the rating agency CRISIL Ltd.

High operating rates would also lead to considerable improvement in prices over the next two to three years while increase in demand would be higher than the rise in capacity in the current fiscal, CRIS INFAC observed in its study.

Increasing consolidation would improve the pricing flexibility of cement manufacturers, it added.

With Grasim gaining effective control of the L&T's cement capacity, the share of the top five players would increase considerably in southern and western India, it said.

CRIS INFAC, in a release said, with smaller players getting increasingly marginalised, price co-ordination would be easier, especially against the backdrop of high operating rates. The commissioning of Sanghi Cements' 2.6 million tonne greenfield capacity in March-April 2003 would limit short term price recovery in the West.

On the role of MNCs, it said the concentration of large capacities with the Indian players would limit the presence of foreign players in the cement industry in the country.

The five large Indian producers account for over 55 per cent of the cement capacity while Lafarge, the largest cement MNC in India, has only around three per cent, it said.

CRIS INFAC said with cement being the core business for the top five Indian players, it was unlikely that any of them would be available for sale. The balance capacity was divided among 44 players with a medium capacity of 1.2 million tonnes.