Mumbai: As a part of restructuring its business, Aditya Birla group company, Grasim, on Saturday said that it was demerging its cement business into its wholly-owned subsidiary Samruddhi.
Samruddhi would be later merged with UltraTech Cement, another group company into cement manufacturing.
“In a proposed restructuring, we (Grasim Cement) would like to demerge our cement business into Samruddhi Cement, a 100% subsidiary of Grasim,” Grasim’s whole-time director and chief financial officer, Adesh Gupta, told reporters here.
On completion of the demerger, Grasim would hold 65% in Samruddhi while Grasim shareholders would hold the balance 35%.
Grasim Cement’s grey cement and RMC businesses would be transferred to Samruddhi post-demerger, he said.
The demerger of Grasim Cement is likely to be completed in the last quarter of this fiscal, he said.
“We expect the demerger to be completed by the fourth quarter of this financial year,” Gupta said.
The company would list Samurddhi and the process would take another six months from now, he said.
Samurddhi would then be merged with Grasim Cement’s subsidiary, UltraTech Cement.
“The next natural and desired step after demerger will be the consolidation of Samruddhi and UltraTech, subject to the deliberation of the respective boards,” Gupta said.
The Aditya Birla group had bought over L&T Cement, belonging to construction major, L&T, and then rebranded it as UltraTech.
Grasim has a majority stake of 55% in UltraTech Cement.
“Post consolidation of Samruddhi and UltraTech, a cement company with a capacity of 49 million tonnes will be created,” Gupta said.
Presently, the capacity of Grasim is 26 million tonnes while UltraTech has a capacity of 23 million tonnes.
“The entire consolidation would be over in the next 8-10 months,” Gupta said.
The Aditya Birla Group chairman, KumarMangalam Birla, in a statement said, “The restructuring move is designed to ensure Grasim’s majority stake in, and continued support to, the rapidly-growing cement business, while simultaneously providing Grasim shareholders direct participation in the pure-play cement company.”
Presently, Grasim Cement has a market share of 19% and post-merger the consolidated company would enjoy the same share, Gupta said.
Post-merger (Samruddhi and UltraTech), Grasim’s holding in the consolidated entity would be somewhere between 55-65%, Gupta said.
“Our holding in the merged entity will be between 55-65% as we hold 55% in UltraTech Cement while post-demerger our holding in Samruddhi will be 65,” he said.
As a part of the restructuring exercise, Samruddhi would issue one equity share of Rs5 each to Grasim shareholders for every share they hold in Grasim.
The advisors to Grasim’s restructuring process are DSP Merrill Lynch, Enam Securities, Amarchand and Mangaldas, Suresh A Shroff and Company and Ernst and Young.
On fund-raising plans, Gupta said “If the need arises we can go to market.”
Grasim Industries on Saturday also said that it will invest Rs1,000 crore to set up a greenfield plant to produce viscose staple fibre (VSF) at Vilayat in Gujarat.
The capacity of this plant would be 80,000 tonnes of VSF.
The facility is expected to start commercial production by March 2013, and would increase Grasim’s total capacity by about 25%.