Mumbai: Piramal Enterprises Ltd has invested 615.50 crore in two cement firms, betting that the government’s focus on improving rural incomes will boost demand for housing and, in turn, for the building material.

The company, through its Structured Investment Group (SIG), bought non-convertible debentures (NCD) of Sanghi Industries Ltd, the flagship company of the Ravi Sanghi Group, worth 265.50 crore, Piramal Enterprises said in a statement to stock exchanges on Thursday.

The funding will enable Sanghi Industries to reinforce its capital base and pre-pay lenders.

Piramal Enterprises has also invested in a structured finance transaction worth 350 crore with NCL Industries Ltd, the owner of the Nagarjuna Cement brand, according to one person directly familiar with the matter, who declined to be identified.

In response to an e-mail, Piramal Enterprises said, “As a company policy we do not comment on market speculation." NCL didn’t immediately respond to an e-mail seeking comment.

SIG provides structured mezzanine funding to corporate entities in various sectors including infrastructure.

“They (Piramal Enterprises) have done two structured lending transactions in the cement space and they are actively looking at more cement transactions," said a second person aware of the matter, who also requested anonymity.

“At a time when banks are provisioning more due to distressed assets, this is a comforting factor for banks where cement firms are looking at paying their debt before schedule," said Ashutosh Maheshvari, chief executive of Motilal Oswal Advisors, which advised Sanghi Industries.

Sanghi Industries operates one of the largest cement plants in the Kutch region of Gujarat, with an installed capacity of 4.1 million tonnes, or about 16% of the state’s production capacity.

The statement said the company will add another 4 million tonnes per annum (mtpa) capacity at its existing plant, taking its total capacity to 8.1 mtpa, at a competitive cost of less than $50 per tonne.

India has a total cement capacity of 415 mtpa with utilization of around 70% at the end of financial year 2016.

“Higher allocation by government towards improving rural income will also increase rural housing demand and hence improve outlook for cement. Sanghi Industries has built a very strong brand in Gujarat market and we feel optimistic about its growth prospects going forward," said Jayesh Desai, co-head of SIG.

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