Emami Cement, part of the diversified Emami Group, has appointed Arpwood Capital the deal adviser. “The bidding is likely to commence from mid-January,” a source said.
Emami had initially sought a valuation of Rs 8,500-9,000 crore for a full-fledged sale of its 8 million tonne per annum (mtpa) cement assets, spread across east India, but chances are that the group may settle for a Rs 7,000-7,500-crore deal.
The person reasoned that the valuation is based on calculating $110 per tonne for the installed capacity of Emami Cement
and also includes a 10 per cent premium considering the stretch and reach of this company. It translates into a valuation of around Rs 7,000 crore. The bidding will encompass all the assets and mining leases.
While Emami Cement has a 2.5 mtpa integrated manufacturing plant at Risda in Chhattisgarh and another 2.5 mtpa plant in Panagarh of West Bengal, its unit in Jajpur in Odisha is yet to be commissioned. Trial production at the Jajpur unit commenced in December 2018.
A brownfield expansion at its plant in Bhabua in Bihar to increase capacity by another 1.2 mtpa from the current 1.8 mtpa is underway.
Industry sources said although the Panagarh plant has a 2.5 mtpa installed capacity, Emami Cement has approvals for producing only 2 mtpa.
On the other hand, its Risda plant has installed Waste Heat Recovery System (WHRS) where the waste from the plant is recycled to generate power. A captive 30-Mw power plant is also installed in this plant and the company sources nearly all its electrical energy requirement for this unit internally.
However, Emami Cement has no coal linkages and depends entirely on sourcing coal from the market.
Apart from these assets, the company has mining leases in Chhattisgarh, Rajasthan, and Andhra Pradesh.
UltraTech has been on an expansion and acquisition mode, especially in Tier-2 and Tier-3 markets, for the past few years.
Towards the end of 2019, UltraTech decided to expand its grinding capacity by 0.6 mtpa in Bihar and West Bengal, respectively. Additionally, it decided to open a 2.2 mtpa grinding unit in Odisha.
In 2018, after a heated legal contest with Dalmia Cement, the Aditya Birla company took over the stressed assets of Binani Cement in Rajasthan and in 2017, it acquired 21.2 mtpa cement capacity from Jaiprakash Associates.
WHAT’S THE DEAL
Emami Cement initially sought a valuation of Rs 8,500-9,000 crore, but it may settle for Rs 7,000-7,500 crore in an all-cash deal
Emami Group plans to monetise its cement assets to become debt-free at the group level by the end of this financial year
Emami Cement had Rs 2,246.76-crore debt as of March 31, 2018
The company has appointed Arpwood Capital the deal adviser
UltraTech, which is leading the race to buy Ambuja Cement, is on an expansion & acquisition mode, especially in Tier-2 and Tier-3 markets