In a significant development, Birla Corporation has announced an agreement with Lafarge India to acquire Lafarge India’s Jojobera plant in Jharkhand and Sonadih cement business in Chhattisgarh (Acquisition Business) for an enterprise value of Rs.5,000 crore.
The transaction is subject to approval from India’s anti-trust body Competition Commission of India (CCI). Earlier, in a global amalgamation, French Lafarge SA had merged with Swiss cement major Holcim to create the world’s largest cement company. In April 2015, CCI had approved the merger in India subject to the condition that Lafarge divest two cement plans in order to eliminate competition concerns.
“As announced in April 2015, LafargeHolcim has received conditional clearance from the CCI for the merger,’’ it said in a statement. “In that context, a package of assets for divestments had been agreed with the CCI which includes the Sonadih cement plant and Jojobera grinding station in Eastern India, currently operated by Lafarge India.’’
The two plants have an annual cement capacity of 5.15 million tonnes and mineral rights over all limestone reserves. In a statement, Birla Corporation said the transaction would be funded through existing cash reserves and incremental debt. The transaction is subject to the approval of CCI and other relevant regulatory approvals.
A part of the MP Birla Group, Birla Corporation has presence in cement and jute with cement constituting 90 per cent of its revenue. It has an operational cement capacity of 10 million across Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal.
Birla Corporation said the acquisition businesses has a demonstrated track record of operational and commercial excellence with profitability amongst the highest in the industry aided by raw material linkages, strong distribution networks and excellent brand loyalty in the attractive Eastern India cement market.
With the addition of these brands to its existing basket of brands, Birla Corporation will derive synergy benefits through consolidation of its capacity. Upon completion of the transaction, Birla Corporation will consolidate its position in the Eastern India cement market where the demand-supply scenario and outlook continue to remain buoyant, the company said.
“India is an important market for LafargeHolcim with a balanced portfolio in cement, aggregates and ready-mix concrete. Following the divestment, the Group will have a cement capacity of around 68 million tonnes in India,’’ LafargeHolcim said.
statement that the business together with the brands “ perfectly fit into our strategic vision and ambition of enhancing competition in chosen markets.”
The company, which suffered a major dent in its profits in the first quarter, said that the resilient eastern markets had partly offset the impact of weakness in realisations in north and central regions. The company was also modestly upbeat about the outlook saying that margins would improve as the economy was showing signs of pick-up.
Shares up by 19 % Shares of Birla Corporation rose sharply by 19 per cent on Monday.
The shares went up by 19.27 per cent to settle at Rs.540.25 on the BSE. During intra-day, the shares touched the upper-circuit limit of Rs. 543.50.
On the NSE, the scrip zoomed 18.9 per cent to Rs. 539.25. The market valuation of the company rose by Rs.673.21 crore to Rs.4,160.21 crore.
