Shree Cement to buy JP's cement grinding unit for Rs 360cr

Written By Unknown on Senin, 25 Agustus 2014 | 23.25

Shree Cement  will acquire 1.50 million tonnes (mt) cement grinding unit of Jaiprakash Associates , at Panipat, Haryana, for Rs 360 crore.

Speaking to CNBC-TV18 about the deal, HM Bangur, managing director of Shree Cements said that the company has signed an agreement for the deal and due diligence is currently underway. He expects the due diligence process to be completed in two weeks.

"Shortage of grinding unit led to the decision for this acquisition. We expect the Indian cement market to grow at 8 percent. To prepare for growth in cement industry, we have decided on this acquisition," he added.

The Jaypee group has been a debt-reduction spree and is selling most of its cement assets to reduce its debt of Rs 60,000 crore. In September, the company offloaded its Gujarat cement plant to UltraTech Cement for Rs 3,800 crore.

Below is the verbatim transcript of HM Bangur's interview with CNBC-TV18's Menaka Doshi and Anuj Singhal

Menaka: Can you talk us through the details of this acquisition that you are making?

A: The details are yet to materialise. The only thing is that we have signed a agreement and subject due to diligence we will like to acquire and they will like to sell the unit. The due diligence process is on and only after that the details will come up.

Menaka: We have some details on our news flashes saying that this agreement at Rs 360 crore to buy cement grinding plant of 1.5 million tonne per annum capacity in Panipat?

A: The information is correct. The Rs 360 crore is the price and then it is all subject to due diligence of certain things. Whatever the other liabilities or the assets are there, small changes in the transaction cost will be there.

Menaka: Can you talk us through the valuation of this Rs 360 crore and how you arrived at that and also the strategy behind Shree Cements wanting to purchase the plant?

A: We have put the clinkerisation unit and we had shortage of grinding units. So, we were thinking of putting up a grinding unit in Haryana and other part we have already in Rajasthan. So, for Haryana we were finding that land should be purchased and it will take about two years and the two grinding units will cost around Rs 350-370 crore somewhere in between. So, it is basically a retracement cost.

Anuj: In terms of EBITDA per tonne, if you could give some numbers on that valuation front?

A: That valuation, EBITDA per tonne is not the – because it is starting from the intermediatory, it is not a total plant, but we think that our marketing in North India will go cheaper by Rs 200 a tonne and our production cost there will be that much down.

Menaka: Can you also talk us through the process, were there a variety of bids invited by JP or was this a one-on-one conversation that JP Associates was having with you?

A: I don't know much about from the JP side, but we were not part of any group. They had talked to us, they might have talked to many others or they have not talked, that I am not able to say.

Menaka: But there wasn't any secret bid process that was carried out or anything like that?

A: No, it was not that we had not given a secret bid. I had met them and we discussed about a price and then they took some time. In the meanwhile they might have consulted themselves or somebody else; I don't know what happened from their side.

Menaka: What was the timeline, when did you originally meet them and how long has it taken for this deal to fructify?

A: The deal is going through for about last one month or so. We have been talking them and it is a continuous melting process. No firm date can be given.

Menaka: But few months, few years?

A: About a month back we started talking.

Menaka: The reason I am asking you all of these questions is Rs 360 crore while it is a material amount it is not very material when it comes to JP Associates debt and their effort to pay down that debt. So, were they discussing to you several other cement related asset sales or was it just you were only interested in this one Panipat grinding plant so with you they have only discussed this?

A: We were already interested in this part of the grinding plant and we were putting up everything from the Greenfield. I don't know about the JP strategy but we were interested only in one unit.


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