Kumar Mangalam Birla is set to acquire the cement business of Kesoram Industries, a prized asset of his late grandfather BK Birla’s business empire. In separate announcements, Kesoram and UltraTech Cement unveiled an all-share deal under which BK Birla Company will divest its cement business to India’s largest cement producer.
UltraTech said that Kesoram has decided to separate its cement business and has approached UltraTech Cement in this regard. It said the board of directors of UltraTech in its meeting held today (Thursday) considered the proposal of Kesoram and approved a scheme of arrangement between Kesoram, the company and their respective shareholders and creditors.
Kesoram is headed by BK Birla’s daughter Manjushree Khaitan. In 2018, UltraTech had acquired the cement business of BK Birla’s firm Century Textiles in a similar share swap deal. The cement sector giant said in its statement that under this plan, Kesoram will separate its cement business into UltraTech. The deal is being done at an enterprise value of Rs 7,600 crore.
Under the demerger plan, UltraTech will issue one equity share of face value Rs 10 for every 52 equity shares of face value Rs 10 of Kesoram. The deal was done at Rs 173 per share of Kesoram, which is 24 percent more than today’s BSE closing price.
Kesoram’s cement business has two integrated cement units at Sedam (Karnataka) and Basantnagar (Telangana), with a total capacity of 10.75 million tonnes per annum. Of this capacity, 85 lakh tonnes is clinker based while 22.5 lakh tonnes is surplus grinding capacity. Solapur’s 6.6 lakh tonne packing plant is involved in the cement business.
This will help UltraTech reach South Indian markets such as Telangana, where UltraTech does not have a manufacturing plant, said Mangesh Bhadang, analyst at Centrum Broking. We believe that UltraTech will now bring Kesoram’s operations up to UltraTech standards in six to nine months.
UltraTech said, this deal will give us the opportunity to take us to the highly competitive and fast growing markets of the West and South. The deal will depend on shareholders, creditors and regulatory approvals including NCLT, CCI. It is expected to be completed in 9 to 12 months. Kesoram’s cement business as on March 31, 2023 was Rs 3,517.45 crore.
