After cashing out from its JV with French cement maker Vicat, Sagar Cement Limited is looking at to deploy the proceeds for inorganic growth. Sagar is said to be in talks to acquire Hyderabad based BMM Cements Limited, part of the BMM Ispat Group.
Sagar had pocketed INR 4,350 Mn from its JV divestment earlier this year and is seeking to buy cement units with capacities in the range 1-3 million tones that would give it access to Tamil Nadu, Karnataka and Maharashtra.
BMM has a capacity of one-million-tonne capacity greenfield cement facility and a 25 megawatt captive power project in Andhra project. While the Greenfield unit began output production in June 2012, the 25 mw thermal power plant started production in July last year.
BMM is being advised by o3 Capital and the deal is being stuck up on valuation with Sagar asking $70 per tonne (valuation INR 6,000 Mn) and BMM seeking $100 per tonne (valuation INR 4200 Mn).
It had made a loss of INR 514 Mn on INR 1,166 Mn of operating income during the nine months to December 2013. The south Indian cement industry which accounts for one third of the country’s output has been suffering from high supply and low demand has added added nearly 50% of its capacity in the past five years at an average cost of $100 ( INR 6000 Mn) a tonne.
The total capacity in South India is around 125 million tonne, while the consumption is only around 56 mt apart from another 10-15 mt exported to other states and to neighbouring countries.
A recent industry report by India Rating had expected heightened consolidation activity in South India, driven by the region's over capacity issues.
Sagar Cement Limited, which commenced operations in 1985, manufactures cement and currently has a clinker manufacturing capacity of 2.00 mtpa and cement manufacturing/grinding capacity of 2.69 mtpa. It manufactures ordinary portland cement, portland pozzolana cement, and sulphate-resistant cement.
Recently Dubai based Simec Group was planning to acquire a 51% controlling interest in ABG Cement’s 5.8 million tonne cement facility in Gujarat. Also Dalmia Cement (Bharat) Limited was acquiring the 74% interest held by Jaiprakash Associates Limited in the Bokaro Jaypee Cement Limited (a JV between JAL and SAIL) for INR 11.5 Bn.
Making the largest acquisition in the thermal power space, Adani Power Limited, the power business arm of Adani Group has acquired Lanco Infratech Limited’s 1200 MW Udupi power plant, in a deal valued more than INR 60 Bn.
UTI Ventures Funds Management Company Private Limited, the private equity investment subsidiary of UTI Asset Management Co Pvt Ltd, has sold its stake in Ascent Capital Pvt Ltd to the management of the firm, which is headed by Raja Kumar.