Dalmia Bharat Cement plans expansion, aims to become pan-Indian player

While this acquisition will open up the Maharashtra and Gujarat market for the company, a plant in Rajasthan will help it enter the northern market as well.
Dalmia Bharat Cement is planning to expand beyond southern and eastern India and become a pan-India player by setting up units in the western and northern parts of the country.

The company is set to mark its entry into Maharashtra with the acquisition of Murli Cement through the corporate insolvency route, while in the Rajasthan, it is in the process of acquiring land to put up a plant there.

Ujjwal Batria, chief operating officer at Dalmia Bharat Cement, told Business Standard that the NCLT has approved its plans for the acquisition of Murli Cement with certain riders, which are being deliberated upon.

Dalmia Bharat has asked for the mining lease belonging to Murli Cement to be transferred in its name along with the incentives enjoyed by Murli Cement, if it is to acquire the west-based company.

Although the Mumbai bench of the NCLT approved Dalmia Bharat’s acquisition plan, it rejected a clause that allowed Dalmia Bharat to call off the deal at any stage, and instead has asked it to prevent Murli Cement's liquidation. Sources said Dalmia Bharat’s offer for Murli Cement stands at around Rs 400 crore while the liquidation value of Murli Cement is pegged at around Rs 230 crore.

While this acquisition will open up the Maharashtra and Gujarat market for the company, a plant in Rajasthan will help it enter the northern market as well.

The company has mining leases in Rajasthan and is in the process of purchasing land.

“We can get into this market at any point of time that we think is right,” Batria told Business Standard.

The idea of setting up a greenfield project in Rajasthan first came up last November, when Dalmia Bharat eventually failed to acquire the 6.5 million tonne per annum (mtpa) Binani Cement and mooted a plan to opt for a 4 mtpa plant in two phases.

While the cost of the plant is being worked out, had the Supreme Court allowed Dalmia Bharat control of Binani Cement, the former would have spent around Rs 7,000 crore to enter this highly competitive region.

Batria said the northern market is attractive for the company. In the first week of this month, cement prices in the north and the west rose by Rs 5 a bag while prices fell sharply in the southern markets, by Rs 25-30 a bag. Prices had stagnated in the central region but improved by Rs 5-10 a bag in the east.

In the northern region, UltraTech and Shree Cement are the market leaders, each having 24 mtpa of installed capacity. Together, these two firms now account for 45 per cent of total installed capacity in the north. The other biggies in the region are Ambuja Cements, with a 10 mtpa capacity, followed by JK Lakshmi and JK Cement at 7.5 mtpa, respectively.

“We are hopeful that the Murli Cement acquisition will be completed soon and would willing to look at other good opportunities as well,” Batria said.

Chhattisgarh is another market that the company could enter at a later date. In the auctions, Dalmia Bharat had won leases in Chhattisgarh and Odisha.

Besides, Dalmia Bharat is also investing about Rs 3,000 crore to strengthen its eastern market by ramping up the installed capacity from 26 mtpa to around 32 mtpa by March 2020.

At the same time, the company has also evinced interest to acquire the around 8 mtpa Emami Cement and is in the process of studying the latter’s financials before taking a call to put in a bid.

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