Aditya Birla Group’s Ultratech buys 23% in India Cements, adds muscle to take on Adani
The deal comes as a welcome news for India Cements, which is plagued by a host of issues in the recent days
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CHENNAI: Adding muscle to take on the increasingly bigger rival Adani Group, Kumaramangalam Birla-owned UltraTech Cement on Thursday announced its plan to buy 23 per cent shares in the Chennai-based India Cements for more than Rs 1,900 crore.
The deal, if it goes through the Competition Commission of India and other statutory bodies, will turn the clock back to 1998, when the Aditya Birla Group’s tryst with cement business in Tamil Nadu began.
It was that year that Grasim Industries, the flagship of the Aditya Birla Group, bought over Dharani Cements’s mini plant in Ariyalur, spread over limestone-rich 1,100 acres, from NRI industrialist and the diversified Dharani Group promoter Palani G Periasamy for about Rs 75 crore.
“It was a fair price and a clean deal. The plant was set up by investing $9,75,000 using NRI funds as mini cement plants were in vogue in India,” Periyasamy recalled in a conversation with DT Next. When the plant was set up in 1985, Ariyalur was chosen as the location due to various factors, including tax exemption and employment generation in a backward area.
“Dharani Cements was an idealism-driven enterprise. But circumstances played the spoilsport,” he said, terming the loss that the company suffered as a “misfortune” in his life.
Discussing the development, a corporate expert opined: “Perhaps, this is the first time in the cement sector that such a strategic stake acquisition happened without acquiring controlling stake or a complete takeover. In recent times, the consolidation of capacity in the sector has been either through complete takeover or by acquiring the stake of promoters.”
The deal comes as a welcome news for India Cements, which is plagued by legacy issues, loss of market share, and also fall in dealership network by more than half from 10,000 in its heydays.
The cement major is sitting on a huge land bank, providing scope for striking deals as it has been disposing of some parcels in recent times. With the potential cash flow, the company’s performance is expected to improve, apart from bankers and rating agencies starting to look at it more positively, said an industry source.