Birla Corp completes acquisition of Anil Ambani's Reliance Cement at Rs 4,800 crore
Birla Corporation said it has completed acquisition of Anil Ambani's cement business, a wholly-owned arm of flagship Reliance Infrastructure, for an enterprise valuation of about Rs 4,800 crore.
Following this, Reliance Infrastructure's (Rinfra) cement arm Reliance Cement Company Private Limited (RCCPL) is now a wholly owned subsidiary of Birla Corporation. The acquisition, which catapults the company's cement production capacity to 15.4 million tonnes per annum (mtpa) from 9.8 mtpa, has been funded through existing cash reserves and incremental debt. The company's stock closed at Rs 680.95 a share on the Bombay Stock Exchange, up by Rs 5.80 over Friday's closing price of Rs 675.15.
"Since Rinfra has mineral concessions in Madhya Pradesh, Maharashtra, Rajasthan, Karnataka, Andhra Pradesh and Himachal Pradesh, Birla Corp hopes to utilise the same by creating new capacities in the near future," sources close to the Lodha family said.
The mining lease at Mukutban would enable the company to set up a clinkerisation unit of 3 MT in the foreseeable future, the source added. Elaborating further, Birla Corp chairman Harsh V Lodha said, the company will be able to enhance its presence in the profitable western market by expansion of the Mukutban operations.
"The economies of scale and synergies would help the company invest in brand, channel, manufacturing, product and marketing innovations for creating greater value for all stakeholders. This apart, there is scope for further optimisation of the operation of Reliance Cement that would yield substantial benefit to the company," he said.
RCCPL has an integrated cement capacity of 5.08 mtpa at Maihar (Madhya Pradesh) and Kundanganj (Uttar Pradesh) and a grinding unit of 0.5 mtpa at Butiburi (Maharashtra). Rinfra plans to use the entire proceeds to reduce its debt in sync with its plan to monetise cement, roads and Mumbai power businesses to reduce its overall debt of Rs 15,500 crore as on March 31, 2016, the company stated in its media statement.
With an eye to turn Rinfra debt-free on a standalone basis by 2017, the company's management has been actively pursuing a series of asset sales. The company has been selling off capital-intensive businesses like cement and roads and looking to rope in partners for its Mumbai electricity distribution arm in an attempt to reduce debt and focus more on new, capital-light, high RoE defence business. It recently agreed to sell off its cement business to Birla Corp for Rs 4800 crore and has signed a non-binding term sheet to sell 49 % in its Mumbai power business to the Canadian pension fund Public Sector Pension Investment Board (PSP Investments).
Referring to the company's debt reduction strategy, Rinfra CEO Lalit Jalan said, the company hopes to clinch the road deal the next three months and consummate the same in the current financial year 2016-17.