interview | Industry

The action is in India, so now our focus is completely here: Kumar Mangalam Birla

Idea, Vodafone merger expected to be completed by the middle of 2018

Aditya Birla Group chairman Kumar Mangalam Birla, whose UltraTech Cement on Thursday completed the acquisition of Jaypee group’s six cement plants and five grinding units for ₹16,159 crore, spoke in an interview about the group’s business plans. Edited excerpts:

What does this deal mean for UltraTech?

This deal primarily gives us complete geographical coverage including eastern Uttar Pradesh and coastal Andhra Pradesh.

We didn’t have a presence there.

In some States, we were there but not strong enough like in Uttarakhand and Himachal Pradesh.

Also, the complexity of setting up greenfield assets is still there.

What will your focus be now?

Now the focus is on upgrading these assets, retrofitting them, improving efficiency and utilising the capital.

Whole focus is now on consolidation and getting returns out of these assets. We will invest a further ₹500 crore to ₹700 crore spread over the next two years.

How does this deal impact the financials?

Even after such a significant investment, the financials are very strong. Our debt to equity is about 0.6, debt to EBITDA is 2.6.

Generally, after such big acquisitions, the financials are stretched so it speaks volumes about the financial health of the company.

Are you looking at refinancing your loans for UltraTech?

No, most of it is done and most of the financing is at sub 8% level.

Given that two large deals including Lafarge and Jaypee are done do you see more scope for consolidation in the industry?

I don’t think that there is any trigger for consolidation now.

When do we see UltraTech hitting 100 mt of cement capacity?

100 is actually a mirage. We never said 100. It’s basically about the value that we create. I am sure we will go beyond 100 at some point in time.

How much time will it take the acquisition to be value accretive?

It will take eight quarters for it to be EPS accretive.

Cement prices are quite depressed. What is your take on the matter?

Prices are very much a product of demand and supply. It is very difficult to make a projection. This is an existing plant that we are taking over. There is no new capacity addition so I don’t see prices going up or down after this transaction.

Demand for housing is not picking up. Is it affecting cement demand?

Housing is one sector that is yet to take off. It has a big bearing on cement growth. One is banking on housing infrastructure development when we do deals like this one. I think affordable housing needs to reach a scale to affect demand for cement but that trajectory is great not only for cement but the economy as a whole.

We see a policy push for infrastructure but don’t see things moving on the ground?

Some sectors are good like roads, railways, metros, irrigation but there is headroom for more development in the infra space. Investments like this are based on the premise of infrastructure development.

Grasim still gets the holding company discount. Right?

It’s a holding company one way but it has operating assets. So I will call it a quasi-holding company. I think that the task for the management of Grasim is to ensure that discount goes down substantially.

At a point of time, you were looking overseas for acquisition in the cement space. Is the plan still on?

No. Now our focus is completely on India. Now the action is in India so that focus has to be here.

When can we expect the payments bank to start?

It will be sometime in July but it will be a phased launch.

What’s the update on Idea-Vodafone merger?

Merger of Idea and Vodafone is on track and is expected to be completed by the middle of 2018.

Are you seeking a bailout package like other telcos?

Idea has made some representation on the issue to the Government.

GST rollout starts July 1...?

GST is a structural move in the right direction. It could take a few months to settle down. It’s one of another fundamental shift and it will make us a much more robust economy.

What’s happening in the financial services space?

Our financial services business will be listed in the middle of August and Premji Invest has come in as value investors valuing ABCL at ₹32,000 crore.

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Printable version | Feb 17, 2020 4:02:52 PM | https://www.thehindu.com/business/Industry/payments-bank-will-start-in-phases-sometime-in-july/article19180614.ece

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