Panyam Cements and Mineral Industries Ltd (PCML), the Andhra Pradesh-based ailing cement manufacturer, has found eight suitors for the promoters’ controlling 50.4% stake in the 0.72 million tonnes per annum company.
The cement maker which had appointed Mumbai-based niche investment bank Edelweiss Capital has received interest from an equal number of global and domestic players and an announcement is likely in a fortnight, says an official close to the development.
“(The promoters) are looking at a valuation of over $120 per tonne,” says a person familiar with the development. In comparison, Holcim bought its first stake in Gujarat Ambuja Cements at an enterprise value of $220 per tonne in 2006. At $120 per tonne, Panyam would be valued at Rs385.45 crore as compared to its current market capitalization of Rs115.13 crore. The stock closed at Rs82.65, down 4.95% on Bombay Stock Exchange while the benchmark Sensex gained 2.27%.
The company is, meanwhile, expanding capacity to 1.2-million tonnes, which is being part-funded by a preferential allotment of 20.9 lakh shares at Rs55 made on 1 March.
The allotment will provide the company Rs11.49 crore of cash. Panyam’s promoters, on 5 March, also announced an open offer to acquire another 20% stake in the company. If successful, this would hike their stake to 70.54%.
Investment bankers say foreign companies like Heidelberg Cement, France-based Vikat and Egyptian company Orascom are believed to have shown interest in Panyam. However, Panyam declined comment on the issue. Panyam’s general manager, Satyanarayana Reddy, told Mint that some parities did begin the due diligence exercise with Edelweiss’ help. The company’s modernization-cum-expansion plan involving an investment of Rs 60 crore will go into replacing the kiln and other equipment, Reddy said. Part of this is being met by unsecured loans. The plant remained shut from September 2004 till May l2006. Panyam’s accumulated losses stood at Rs113.77 crore during 2005-06 on an equity base of Rs13.93 crore. But in the quarter ended December 2006 the company had a net profit of Rs3.16 crore.