Nuvoco Vistas, the Nirma Group’s cement division, has emerged as the frontrunner to acquire the Emami Group’s nine million tonne per annum cement business for Rs 5,500-6,000 crore enterprise value to consolidate its position in the east. The Nuvoco bid is likely to trump competing offers from top cement makers such as UltraTech, Star Cementand Ambuja, said people in the know.
This is the second time Nuvoco (formerly Nirma Cement) is set to create an upset beating bigger players. In July 2016, the Nirma Group acquired Lafarge Holcim’s India assets for $1.4 billion (Rs9,000 crore). The group that now has a capacity of 11 million tonnes is trying to consolidate its position in the industry that is 40% dominated by the biggest two players — Ultra-Tech Cement and Ambuja.
The binding bids were submitted on January 10. Nuvoco is expected to rope in a financial partner and has engaged with Aion, KKR, the Bain-Piramal India Resurgence Fund and Temasek to explore a potential partnership.
An announcement is due in the next seven days.
Emami and Nuvoco didn’t respond to queries.
The sale includes all the assets and mining leases on 300 million tonnes of limestone deposits that will last for 60 years. The company has four units in Chhattisgarh, Odisha, Bihar and West Bengal.
As per a December 9, 2019, rating release by Crisil, Nuvoco is a leading cement player in eastern India, with a market share of about 11%. The company has its own captive limestone mines, clinker capacity and is in the process of setting up captive power plants (CPP) and waste heat recovery systems (WHRS). Most of these are expected to be commissioned by fiscal 2020.
The established market position is supported by strong brands such as Duraguard, Concreto and Infracem and extensive network of over 5,000 dealers. “Also in fiscal 2020, Nirma plans to merge its cement undertaking with NVCL which shall increase the overall capacity to about 14 mtpa,” it said.
For FY19, the company earned a revenue of Rs6,513 crore, against Rs6,046 in 2018. The company’s profit after tax stood at Rs126 crore in 2019, against Rs145 crore in 2018, the Crisil report showed. The release sees the high net debt to ebitda ratio of around two times as a weakness and expects the company won’t further strain its financials with a higher debt to fund capex.
For FY19, the company earned a revenue of Rs6,513 crore, against Rs6,046 in 2018. The company’s profit after tax stood at Rs126 crore in 2019, against Rs145 crore in 2018, the Crisil report showed. The release sees the high net debt to ebitda ratio of around two times as a weakness and expects the company won’t further strain its financials with a higher debt to fund capex.
The company is looking to bulk up its cement portfolio before listing the business in the coming years.
Emami Group last year decided to monetise its cement assets for around Rs7,000 crore to become debt-free at the group level by the end of this financial year. The cement company had a total debt of Rs2,246.76 crore as of March 31, 2018, consisting of Rs2,093.86 crore as secured term loan from banks and financial institutions and Rs152.90 crore in working capital borrowings.
