Global private equity funds in race to buy Reliance Cement

Global private equity funds in race to buy Reliance Cement

By Accommodation Times News Service

Global private equity funds Blackstone, Carlyle, Barings Asia are competing with cement players JK Lakshmi Cement, JSW Cement, China Resources Cement which have put in initial bids to acquire the cement business of Reliance Infrastructure, part of Anil Ambani-led Reliance Group. The bid values the company at Rs 5,000crore, people close to the development said. The shortlisted players are expected to submit their binding offers by December 24.

Reliance Cement, which started in 2007, is a fully-owned subsidiary of Reliance Infra with a total installed capacity of 5.8 million tonnes per annum (mtpa). Of this, 2.8 MTPA is at the flagship unit in Maihar, Madhya Pradesh that was commissioned last year.

The remaining units are in Kundaganj (UP) and Butiburi in Maharashtra. The company also has leases to extract limestone in Madhya Pradesh, Karnataka, Uttarakhand, Chattisgargh, Himachal Pradesh and Rajasthan. Reliance Cement is sold in UP, MP, Jharkhand, West Bengal and in select cities of Maharashtra. The original plan was to scale up operations to 15 MTPA over the next 5 years with integrated units in MP and Maharashtra, but the capital intensive plans were put on the back burner as the Reliance group got caught in high debt in recent years. The company’s consolidated debt stood at Rs 26,630crore at the end of June, according to the firm’s site.

Reliance Infrastructure has mandated Morgan Stanley and SBI Caps to manage the sale. When contacted, a Reliance Infrastructure spokesperson declined to comment. Mails sent to Blackstone, Carlyle, Barings Asia remained unanswered till the time of going to press, while spokespersons from JK Lakshmi Cement, JSW and CRC too did not respond. Reliance Group’s flagship infrastructure company Reliance Infrastructure is seeking to turn debt-free on a standalone basis by 2017 and the company’s management is actively pursuing divestment goals to achieve his target.

“The proposed monetization will be huge value accretive to Reliance Infrastructure’s shareholders and will be earnings per share accretive. This will enable the company to become a debt free in FY17, from the current level of more than Rs 16,000crore on a standalone basis,” Lalit Jalan, group’s director, told. Since 2008, Anil Ambani had been planning to emerge as one of the biggest cement players in the country with the largest single location cement facility. It had initially planned to set up four cement plants of 5 milliontonnes capacity each at a total investment of Rs 10,000crore.

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