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Business News/ Companies / News/  Sagar Cements may sell stake in joint venture with Vicat
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Sagar Cements may sell stake in joint venture with Vicat

The board will meet on 15 July to consider the sale of its investment, Sagar Cements informed BSE

Half of Sagar’s sales come from Telangana and Andhra Pradesh, which together have 37 large cement plants with a combined capacity of 68 mtpa.Premium
Half of Sagar’s sales come from Telangana and Andhra Pradesh, which together have 37 large cement plants with a combined capacity of 68 mtpa.

Hyderabad: Cement maker Sagar Cements Ltd on Friday said it was planning to exit its joint venture (JV) Vicat Sagar Cement Pvt. Ltd.

The board will meet on 15 July to consider the sale of its investment, Sagar Cements informed BSE.

In 2008, Sagar Cements had formed the JV with French cement firm Vicat for a 5.5 million tonnes per annum (mtpa) greenfield cement plant with a 60 megawatts (MW) captive power plant at Chatrasala in Karnataka’s Gulbarga district at 2,500 crore.

The project is coming up in two phases with a capacity 2.75 mtpa each. It has three captive limestone mines close to the Karnataka-Andhra Pradesh border, spread across 1,200 acres which can last up to 80 years.

Sagar holds 47% in the JV, while Vicat has the remaining 53%.

Out of the total investment of 500 crore, Sagar Cements’ contribution was 86 crore, while Vicat invested around 414 crore. The lower equity infusion by Sagar is due to the local expertise it brought to the table and the premium paid by Vicat to make an entry into India, one of the biggest cement markets of the world.

The project’s first phase commenced commercial operations in January 2013.

As per the joint venture agreement, both partners have the right of first refusal on buying out each other, making Vicat the most likely contender.

A spokesperson of Sagar Cements could not be reached for a comment.

The Economic Times in March reported that the JV was valued at around 4,100 crore.

In the year ended March, Sagar Cements posted a loss of 25.6 crore, down 12.5% over the year-ago period, on sales of 488.9 crore. It has has a gross debt of 198 crore.

Half of Sagar’s sales come from Telangana and Andhra Pradesh, which together have 37 large cement plants with a combined capacity of 68 mtpa. Sagar has a capacity of 2.35 mtpa.

“Sagar is expected to benefit significantly from this sale due to higher stake at lower capital infusion and some improvement in valuation," said an analyst tracking the cement sector at a Mumbai-based brokerage house who did not want to be named, citing his company’s policy.

Vicat’s sales in India increased 12.7% to €155 million or 1,258 crore in 2013, largely due to the start-up of Vicat Sagar, which boosted volumes by close to 28%.

Vicat also owns 51% stake in Bharathi Cement Corp. Pvt. Ltd, with a production capacity of 5 mtpa at Kadapa in Andhra Pradesh. Bharathi is promoted by Y.S. Jaganmohan Reddy, YSR Congress Party chief and son of former Andhra Pradesh chief minister Y.S. Rajasekhara Reddy

Vicat operates across 11 countries, generating nearly 62% of its €2,286 million sales from outside France.

The cement industry is going through a phase of consolidation, as foreign cement companies and large home grown companies have been acquiring other Indian companies to increase their capacities, at a time when the demand for cement dropped due to macro economic slowdown.

The economic growth rate of India for fiscal 2014 is projected at 4.9%, marginally higher than 4.5% in the previous fiscal, by the Central Statistics Office.

Shares of Sagar were up 5% to close 325.50 on BSE, the benchmark Sensex gained 0.54% to end at 25,962.06 points.

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Published: 05 Jul 2014, 12:14 AM IST
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