Mumbai: Reliance Infrastructure Ltd has agreed to sell its cement assets to Birla Corp. Ltd for 4,800 crore as part of the Anil Ambani-led company’s efforts to pare debt and expand its new defence manufacturing business.

The transaction is subject to approval from the Competition Commission of India and other regulatory authorities, Reliance Infrastructure said in a statement on Thursday.

Anil Ambani’s Reliance Group has been trying to sell assets across its group companies to cut debt and expand its new defence business. In December, Reliance Communications Ltd entered into a non-binding pact to sell its mobile phone towers business to a consortium led by buyout firm TPG Capital Management.

“We are targeting to bring down our debt in Reliance Infrastructure to nil by March 2017 through our sale processes," said Lalit Jalan, acting chief executive officer of Reliance Infrastructure, adding the company currently has a debt of 16,000 crore.

Reliance Infrastructure in November announced plans to sell its cement and road business to focus on its new defence venture.

The company’s cement assets are spread across four states: an integrated unit in Madhya Pradesh and grinding units in Uttar Pradesh, West Bengal and Maharashtra.

Analysts said the transaction ascribes a fair value to the relatively newer cement assets of Reliance Infrastructure.  

“It is a good quality asset and complements Birla Corp.’s existing business and allows them to enter newer regions," said Ashutosh Maheshwari, managing director and chief executive officer at Motilal Oswal Investment Advisors Pvt. Ltd.

“Also, the Reliance cement capacity came on stream in the last two years, which means it is a new asset and they have done enough ground work where Birla Corp. can double its capacity very quickly."

Birla Corp. was among seven bidders shortlisted by Reliance for its 5.6 million tonnes cement assets.

Once the transaction is completed, the new assets will help Birla Corp. expand its capacity to up to 15 million tonnes.

The announcement comes two days after LafargeHolcim ended discussions with Birla Corp. for the sale of its east India assets of 5.15 million tonnes, citing regulatory issues. Birla Corp. had entered into an agreement with LafargeHolcim to buy its east India assets in August for 5000 crore.

On Thursday, shares of Reliance Infrastructure fell 5.85% to 409.85 on the BSE, while the benchmark Sensex gained 0.48% to 24,338.43 points. Birla Corp.’s shares rose 3.58% to close at 394.60. The announcement was made after the end of trading on Thursday.

Reliance Group is focusing on an asset-light strategy, staying away from projects that will yield results over 20-30 years, such as road development and entering new businesses such as defence, housing finance and renewable energy that have shorter gestation periods.

Reliance Group could reduce debt by more than 40% if its asset sale plan goes through and the funds raised are used to pare borrowings, Mint reported on 14 December.

If the sale programme is successful, it will also be the largest amount raised by any of the debt-ridden conglomerates this year.

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay High court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

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