UltraTech Cement is leading the race to take over Binani Cement by offering around Rs 62 billion and a 20 per cent stake in the company to unsecured financial creditors. Dalmia Bharat Cement had made a slightly better offer at Rs 63 billion, but is likely to lose as UltraTech has offered equity stake to creditors.
On Thursday, the Aditya Birla group company sought permission from the Competition Commission of India (CCI) for the takeover and said its merger proposal for Binani Cement was being submitted in relation to the resolution plan filed by UltraTech on February 12 under the Insolvency and Bankruptcy Code.
With its offer, UltraTech has pipped five others — Dalmia Bharat, JSW Cement, HeidelbergCement, stock broker Rakesh Jhunjhunwala, and Ramco Cements. However, the final decision on the winner will have to be ratified by the National Company Law Tribunal (NCLT).
When contacted, an UltraTech spokesperson declined to comment on the issue.
Binani Cement was sent to the NCLT in July last year following a petition by the Bank of Baroda. The company had defaulted on its debt of Rs 39.76 billion as of March 2017 (see chart).
The debt-laden company has a production capacity of around 11.25 million tonnes per annum (mtpa).
If the merger goes through, the capacity of UtraTech will rise to around 100 mtpa, lower than the CCI’s threshold in the relevant markets — Gujarat, Haryana and Rajasthan.
India’s total cement production capacity is about 425 mtpa, but the industry is producing 280 mtpa due to low demand.
The deal could still run into trouble, as a petition from Binani Industries — the promoter of Binani Cement that is interested in taking part in the insolvency process of the cement firm — is pending with the Kolkata Bench of the NCLT. Binani Industries has claimed that the deal was being undervalued by the resolution professional.
According to Binani Industries, the cement company's valuation is Rs 173 billion, including mining rights of Rs 117 billion, much higher than that offered by UltraTech. Also, the company said the valuation was that of its India plant alone and did not take its assets in China and Dubai into account.
Binani Industries also claimed that despite owning entire stake in Binani Cement it was not provided any information by the resolution professional, crucial documents were withheld, and the directors of Binani Industries were not invited to any meeting of the committee of creditors.