UltraTech Cement Limited, India's largest cement company, on November 30 announced its strategic decision to acquire Kesoram Industries Ltd. The Board of Directors of UltraTech convened on Thursday, giving their unanimous approval to the arrangement. In adherence to the proposed demerger scheme, UltraTech is set to issue one equity share at a face value of ₹10 for every 52 equity shares of Kesoram, each valued at ₹10.
The deal was done at an Enterprise Value (EV) of ₹7,500 crore, which works out to an EV/tn of approximately $85/tn on a blended basis.
The demerger will see Kesoram transferring its cement business, including two integrated units located in Sedam (Karnataka) and Basantnagar (Telangana), boasting an impressive combined capacity of 10.75 million metric tonnes per annum (mtpa). This capacity includes 8.50 mtpa of clinker-backed capacity and an additional 2.25 mtpa of surplus grinding capacity. Notably, Kesoram's cement business also encompasses a 0.66 mtpa packing plant in Solapur, Maharashtra.
The acquisition, which was initially broken by CNBC-TV18 on November 23, is expected to enhance UltraTech's geographical reach, particularly in the Western and Southern markets, addressing the highly fragmented and fast-growing demand in these regions. The transaction is poised to fortify UltraTech's operations in Southern markets, such as Telangana, where the company currently lacks a manufacturing presence.
The proposed transaction, subject to approval from shareholders, creditors, stock exchanges, National Company Law Tribunal (NCLT), Competition Commission of India (CCI), and other relevant authorities, is expected to be completed within the next 9-12 months.
ICICI Securities Limited has offered a favourable valuation opinion on the deal, and legal counsel for the transaction will be provided by Khaitan & Co, Mumbai, and Trilegal, specifically advising on Competition Law matters.
Upon successful completion of the Scheme of Arrangement, UltraTech's cement capacity is set to increase to 149.14 mtpa, consolidating its position as a key player in the Indian cement industry. This move aligns with UltraTech's long-term vision of achieving a 200 mtpa cement capacity in India.
First Published: Nov 30, 2023 7:02 PM IST
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