Thursday, October 8, 2015

INDIA: Reliance Infrastructure plans to exit cement business, puts unit on block

Reliance Infrastructure, part of Anil Ambani led Reliance Group has decided to exit the cement business by putting privately held Reliance Cements up for sale. 

Reliance Group has recently mandated Morgan Stanley and SBI Caps to find potential buyers as the group has decided to focus on new growth areas like defence. Earlier in the year, it had plans to monetise the cement operations by roping in a joint venture partner and using that cash to fund the acquisition of Pipavav Defence and Offshore Engineering, but this did not generate sufficient interest, said multiple sources aware of the developments. 
Reliance Cement is a fully-owned subsidiary of Reliance Infra. Started in 2007, the cement foray was originally linked to the growth of its power business with fly ash generated from its Sasan power project being used as a key raw material. Promoters are believed to be expecting an enterprise valuation of Rs 5,500-Rs 6,000 crore for the business. 

The company has 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 Maharastra. The company also has leases to extract limestone in Madhya Pradesh, Karnataka, Uttarakhand, Chattisgargh, Himachal Pradesh and Rajasthan. 

Reliance Cements 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 3-5 years with integrated units in MP and Maharashtra, but the capital intensive plans were put on the back burner as the group got saddled with high debt in the recent years. Reliance Infra's total debt stood at around Rs 25,766 crore at the end of FY-15. The limestone reserves are believed to be sufficient for the fully expanded capacity.

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