Mumbai: Shree Cement Ltd has submitted a preliminary offer to buy a majority stake in Odisha-based Shiva Cement Ltd, two people aware of the development said.
“The promoters of Shiva Cement have been in exit mode for a while now and have been in talks with several suitors and have mandated SBI Caps and L&T Finance to find a buyer,” one of the two people said on condition of anonymity as the talks are private.
Shree Cement’s offer has been in the vicinity of Rs15 a share, said the second person, also declining to be named. Both Shree Cement and Shiva Cement are listed on BSE and the National Stock Exchange.
The Economic Times on 24 October reported that JSW Cement was in talks to acquire Shiva Cements. JSW Cement has denied any such plans.
Shiva Cement was incorporated in 1985 and its first commercial production started in 1986. The company has an integrated plant located near Rourkela city in Odisha’s Sundergarh district with an annual production of close to 200,000 tonnes per annum, which is being expanded to 1 million tonnes per annum, according to its website. The firm also has captive limestone reserves in the vicinity and produces both Portland Slag Cement and Portland Pozzolana Cement, marketed under the Sumangal brand.
While an email sent to Shree Cement remained unanswered at the time of going to press, Shiva Cements managing director R.P. Gupta said, “we had given mandate to L&T Finance for arranging strategic investor for expanding plant capacity. They are on the job. Mandate with SBI Cap is not in force. Other information as quoted by you are speculative and hence we have no comment”.
Currently, ACC Ltd holds close to 13% in Shiva Cements and, according to the people cited earlier, it also has a right of first refusal in the transaction. ACC had not responded to an email seeking comment at the time of going to press.
Promoted by the Bangur family, Kolkata-based Shree Cement is among the largest cement producers in north India, with an annual production capacity of 27.6 million tonnes per annum.
The company registered a revenue growth of 18.1% in the last financial year and it has been on a capacity expansion drive for the past few years.
Last year, it commissioned new plants in Chhattisgarh and Uttar Pradesh and acquired a clinker-grinding unit at Panipat in Haryana from Jaiprakash Associates. In fiscal 2016, the company clocked an Ebitda (earnings before interest, tax, depreciation and amortization) of Rs1,120 crore from its cement business, up 21.01% over the previous year.
The cement sector in India has seen a number of assets changing hands in the recent past. In July, LafargeHolcim Ltd, the world’s largest cement maker, sold its India assets to Nirma Ltd for an enterprise value of about $1.4 billion. Lafarge India operated three cement plants and two grinding stations with a capacity of about 11 million tonnes a year.
In July this year, UltraTech Cement, part of the Aditya Birla Group, bought Jaiprakash Associates’s 17.2 million tonnes per annum cement capacity for an enterprise value of Rs16,189 crore.
According to industry estimates, cement demand in India is expected to grow 5.3% in the next fiscal year from its current annual production of 246 million tonnes per annum.