The assets put together have a cement manufacturing capacity of 9.4 million tonnes per annum (MTPA), including clinker capacity of 6.7 million tonnes and thermal power plants of 280 megawatts and are situated in Madhya Pradesh, Uttar Pradesh, and Chhattisgarh.
A wholly-owned subsidiary of Dalmia Bharat, Dalmia Cement, has entered into a binding framework agreement to acquire the cement, clinker and power plants of Jaiprakash Associates (JAL) for an aggregate enterprise value of Rs 5,666 crore, the company informed the exchanges on Monday.
Arpwood was the adviser to the transaction.
The new plants will take the cement manufacturing capacity of Dalmia Cement to 46.3 million tonnes per annum (MTPA) from the present 35.9 MTPA, as per its website. This will take the cement maker closer to its target of achieving 75 MTPA capacity by FY27 and upwards of 110 MTPA by FY31.
It will also put the fourth-largest cement maker in India close to third-placed
in terms of manufacturing capacity. and the Adani Group – which recently acquired and – are the leading cement makers in India.
Debt-laden Jaiprakash Associates had said in a regulatory filing earlier this year that it would be divesting its cement assets. Earlier, media reports claimed the Adani Group as the frontrunner for acquiring these assets.
“In order to repay the loans of lenders and concentrate in its other core areas of working, JAL has decided to divest from the cement business completely. With the sale of cement capacity of 9.4 mtpa … JAL will further ‘cement’ its credentials of being a trustworthy organization in the infrastructure segment of the country in times to come,” Manoj Gaur, executive chairman, JAL, said as part of the deal announcement.
The group flagship had in the last decade been taking steps to reduce its debt and repay to lenders and meet its commitments. It had divested over 20 mtpa cement capacity to
Cement during 2014 and 2017, while selling its controlling stake of more than 2 mtpa capacity to Dalmia Group in 2015. According to Jaypee Group, the present transaction with Dalmia Group yet again demonstrates the quality of its assets. Back in October, JAL and had announced plans to divest their cement business as well as some non-core assets to reduce debt.
For Dalmia Cement, the acquisition will expand its footprint in the central region, furthering its target of being a pan-India player. The stock of
climbed 3.3% to Rs 1,905.7 on BSE on Monday compared to a flattish Sensex.
The transaction is yet another major consolidation in India’s highly fragmented cement sector. The acquisition of ACC and Ambuja Cements by the Adani Group earlier this year and Gautam Adani’s subsequent announcement of aggressive expansion plans jolted the cement industry into action. Incumbent leading players have followed suit and announced similarly aggressive expansion plans.
Experts have said that the capacity expansion by large cement makers will impact the smaller players, leading to further consolidation in the sector.
Large cement makers like UltraTech, Adani Group, Shree Cement and Dalmia Cement have better bargaining power given their scale, which helps them achieve lower cost of production compared to their smaller rivals. They also tend to have better distribution channels, which helps them improve their market share and capacity utilisation, experts said. They believe that a rapid expansion in manufacturing capacity by large cement makers will further tip the scales in their favour.
After Adani’s entry into cement, UltraTech approved a new capex plan of Rs 12,886 crore to increase capacity by 22.6 million tonnes per annum (mtpa) through brownfield and greenfield projects. This would entail setting up integrated and grinding units as well as bulk terminals across the country, the company said, in June, with commercial production from these units going on stream in a phased manner by financial year 2024-25 (FY25).
