Birla Corporation Limited said it agreed to buy the entire cement business of Reliance Infrastructure Ltd for a valuation of Rs 4800 crores including debt.
The debt portion of the valuation will not go to Reliance Infrastructure. The equity value of Reliance Cement was not disclosed.
The two companies have agreed that Birla Corp shall acquire all of the shares of Reliance Cement Company Pvt. Ltd. (Reliance Cement).
The acquisition, subject to approval of Competition Commission of India and other relevant regulatory authorities, will be funded through existing cash reserves and incremental debt, Birla Corp said.
“This acquisition will provide Birla Corp ownership of high quality assets taking its total capacity from ~ 10 MTPA to ~15.5 MTPA strengthening its presence in the high growth Central region. The company’s expansion potential will also be enhanced – with mineral concessions in states of MP, Maharashtra, Rajasthan, Karnataka, Andhra Pradesh and Himachal Pradesh – to emerge as a pan-Indian player in the foreseeable future,” it added.
Reliance Infrastructure is one of the key companies of the Anil Ambani group and is engaged in construction and infrastructure. The group has been trying to reduce debt by selling non-core businesses. It has also recently sold real estate belonging to Reliance Communications.
Reliance Cement has three cement units, an integrated cement plant at Maihar (Madhya Pradesh) and grinding units at Kundanganj (Uttar Pradesh) and Butiburi (Maharashtra). Birla Corp will also benefit from Reliance Cement’s strategically located raw material sources, captive coal mine, optimum manpower, efficient operating parameters and technical capability for producing top end quality product.
Birla Corp, established in 1919, is part of the MP Birla Group with presence across Cement and jute; cement constitutes over 90% of the company’s revenues with units in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal.
Mr. Harsh Lodha, Chairman of Birla Corp, said: “I am very pleased to announce this very important transaction in Birla Corp’s history. Reliance Cement fits our plans to grow the business profitably very well and offers lucrative prospects for Creating Synergy with existing operations. It provides an excellent platform for increasing our footprint in existing as well as new geographies. ”