The move will create the largest cement company in India and the 10th largest cement company in the world.

Samruddhi Cement is to merge with UltraTech Cement to create what will be the largest cement company in India and the 10th largest cement company in the world. The boards of directors of the two companies met here on Sunday and unanimously approved the merger. Both companies belong to the Aditya Birla Group.

A joint statement said the exchange ratio approved by both boards is 4 (four) equity shares of UltraTech of face value Rs.10 each for every 7 (seven) equity shares of Samruddhi of face value Rs.5 each. UltraTech will issue 14.95 crore new shares, thereby increasing its equity capital to Rs. 274.20 crore.

As per the proposal approved by the boards, the merger is to be undertaken through a Court approved Scheme of Amalgamation with the appointed date as July 1, 2010.

Commenting on the merger, Kumar Mangalam Birla, Aditya Birla Group Chairman, said, “The merger will achieve the Group’s objective of consolidating its cement business into a single entity, thereby creating a platform that will help in pursuing aggressive growth going forward.”

Grasim’s cement business is currently under demerger to Samruddhi, and the proposed merger will take effect only upon completion of the demerger and the issuance of shares by Samruddhi to Grasim shareholders .

When the scheme comes into effect, UltraTech’s expanded equity capital will be held 60.3 per cent by Grasim while 39.7 per cent will be held directly by the other shareholders of UltraTech and Samruddhi. The scheme is likely to be completed by the third quarter of 2010.

The merger will result in UltraTech emerging as the largest cement company in India with a combined capacity of 48.8 million tonnes per annum (tpa) of grey cement spread across 22 plants. The merged entity will also have 504 MW of captive thermal power plants and an 11.7 million cubic metres capacity of Ready Mix concrete spread over 68 plants. Consequent upon the merger, UltraTech will become a pan-India player with a 20 per cent market share and will also add to its portfolio speciality products such as white cement and wall care putty.

Adesh Gupta, whole time Director and CFO, Grasim, and a Director of Samruddhi said: “Upon effectiveness of the merger, Grasim will retain a strategic and controlling interest in UltraTech while providing UltraTech flexibility for future fund raising.”

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