ADAG firm eyes Jayajothi's cement biz valued at Rs 2k cr

Anil Ambani Group firm Reliance Cementation has started negotiations to acquire Tamil Nadu-based Sree Jayajothi Cements, valued at about Rs 2,000 crore.

"The deal may or may not happen depending upon the valuation... It still hinges on valuation. I am expecting to sell the business for at least Rs 2,000 crore," TR Kannan, promoter of Jayajothi Group, told PTI over phone.

Reliance Cementation, a 100% subsidiary of Reliance Infrastructure, has been in talks with Jayajothi Group to acquire its cement business which has 3.2 million tonne per annum (mtpa) installed cement making capacity now.

The proposed acquisition, if happens, will help Reliance Cementation to make a ready-made entry into cement industry.

Jayajothi Cements sells its produce in the four southern state of Tamil Nadu, Andhra Pradesh, Karnataka and Kerala under the 'Jayajothi' brand name.

"We have proved our capacity (to Reliance). Now, it is upto Reliance to take the call," Kannan, who is also the Managing Director of Jayajothi Cements, said.

According to a recent report by rating agency Ftich, the domestic cement industry was expected to add around 68 million tonne capacity by FY13 taking the total to 392.8 mtpa. The domestic consumption is likely to be 267 MT by then, leading to squeezed profitability of the cement makers.

However, for the Southern region the demand-supply gap will remain in the immediate future, it said.

Jayajothi Group has business interests in textiles with an existing capacity of two lakh spindles and has presence in areas like public transportation, education and windmill. For the year ended March 31, 2010, the Group had recorded over Rs 300 crore overall revenue.

Jayajothi Cements was incorporated as a public limited company in December, 2006 with the aim to develop, construct and operate cement manufacturing facility.

The company put up a greenfield integrated cement making facility in Kurnool District of Andhra Pradesh with a combined clinkerisation capacity of 2 mtpa and cement grinding capacity of 3.2 mtpa.

ADAG Chairman Anil Ambani had announced Group's foray into the cement business in 2009 and spelt out Group's plan of setting up plants with an aggregate capacity of 20 million tonne per annum at a cost of nearly Rs 10,000 crore over the next five years.

Reliance Cementation has already signed an MoU with the Maharashtra Government to set up a 5 mtpa cement plant in Yavatmal at an investment outlay of Rs 2,250 crore. This is in addition to the MoUs the company has already signed with the Governments of Madhya Pradesh and Gujarat.