Bidding for the acquisition of Emami Cement is likely to commence by mid-January this year with Aditya Birla Group firm UltraTech Cement leading the race at an offer price of Rs 6,500-7,000 crore in an all-cash deal.
Emami Group has decided to monetise its cement assets to pare debt and is aiming to become debt-free at the group level by the end of the current fiscal year.
Although several cement firms, including Shree Cement, Dalmia Bharat Cement, Nuvoco and other investors had shown initial interest, sources said that UltraTech and Ambuja Cements Ltd, part of the LafargeHolcim Group, are likely to eventually put in their bids.
Emami Cement, part of the diversified Emami Group, has appointed Arpwood Capital as the deal adviser.
“The bidding is likely to commence in mid-January,” a source close to the development said.
Although Emami had initially sought a valuation of Rs 8,500-9,000 crore for a full-fledged sale of its eight- million-tonne-per-annum (mtpa) cement assets, spread across east India, chances are that the group may eventually settle for a Rs 7,000-7,500 crore deal, the source said.
The person reasoned that the valuation is based on calculating $110 per tonne for the installed capacity of Emami Cement and also includes a 10 per cent premium considering the stretch and reach of this company. It effectively translates into a valuation of around Rs 7,000 crore.
The bidding will encompass all the assets and mining leases.
Emami Cement declined to comment on the development.
While Emami Cement has a 2.5-mtpa integrated manufacturing plant at Risda in Chhattisgarh and another 2.5 mtpa plant in Panagarh, West Bengal, its unit in Jajpur in Odisha is yet to be commissioned.
A brownfield expansion at its plant in Bhabua in Bihar to increase capacity by another 1.2 mtpa from the current 1.8 mtpa is still underway.
Trial production at the Jajpur unit, however, commenced in December 2018.
Buyer sources said although the Panagarh plant has a 2.5 mtpa installed capacity, Emami Cement has approvals for producing only 2 mtpa.
On the other hand, its Risda plant has installed Waste Heat Recovery System (WHRS) where the waste from the plant is recycled to generate power. A captive 30-Mw power plant is also installed in this plant and the company sources nearly all of its electrical energy requirement for this unit internally.
However, Emami Cement has no coal linkages and depend entirely on sourcing coal from the market.
Apart from these assets, the company also has mining leases in Chhattisgarh, Rajasthan and Andhra Pradesh.
Emami Cement had a total debt of Rs 2,246.76 crore as on 31 March, 2018, consisting of Rs 2,093.86 crore as secured term loan from banks and financial institutions and Rs 152.90 crore working capital borrowings from the banks.
UltraTech has been on an acquisition mode since the past few years especially in tier 2 and tier 3 markets.
Towards the end of 2019, UltraTech decided to expand its grinding capacity by 0.6 mtpa in Bihar and West Bengal respectively. Additionally, it decided to open a 2.2 mtpa grinding unit in Odisha.
In 2018, after a heated legal contest with Dalmia Cement, the Aditya Birla company took over the stressed assets of Binani Cement in Rajasthan and the year before, in 2017, it acquired a total of 21.2 mtpa cement capacity from Jaiprakash Associates.
