After Dalmia Bharat, Shree and Nuvoco join race to acquire Emami Cement

Earlier, only Dalmia Bharat was in the fray for the acquisition

After Dalmia Bharat Cement, Shree Cement and Nuvoco Vistas Corporation have joined the race to acquire Emami Cement.

Sources aware of the development told Business Standard that all the three companies were studying the financial position of the Rs 6,000-crore Emami Cement.

After this is done, asset quality will be analysed and a final call or the bid proposal will be given.

“We have decided to look into the acquisition of Emami Cement’s assets. Currently, the financial position of the company is being studied, and thereafter, a valuation can be arrived at,” H M Bangur, managing director, Shree Cement, told Business Standard.

Other sources said Nuvoco as well as Dalmia Bharat have also undertaken an acquisition feasibility study and are checking Emami Cement’s financial position, including its debt.

Preliminary estimates suggest that the cement arm of the diversified Emami Group has a debt of around Rs 2,200 crore. Bangur, however, said the debt will not be a hindrance in the takeover proposal as the debt component from the total valuation will be adjusted against lower equity. “Once the valuation is decided, it will not change. Higher debt will mean payment for lower equity,” he said.

Asked about the acquisition plans, both Nuvoco as well as Dalmia Bharat officials said they do not want to comment on market speculation.

Sources said both these companies are also mulling a strategic investment rather than a full-fledged acquisition. 

However, if Bangur bids for Emami Cement, he will opt for only a complete acquisition of the company and would not be interested in any strategic investment.

“All options for Dalmia Bharat are open and the financial study is under way. Once it is concluded along with some other related studies, then the proposal — either full acquisition or strategic investment or majority stake — can be worked out,” said a source aware of the development.

Asked about the ongoing talks, an Emami Cement spokesperson said, “We wouldn’t like to comment on market speculation.”

The Rs 16,000 crore Emami Group has been looking to cut its entire debt of around Rs 2,600-Rs 3,000 crore in the next 8-9 months.  It had selected to sell assets in non-core businesses like cement, hospitality and real estate. 

On the other hand, all of these interested acquirers are looking at enhancing their installed capacity.

Last year, Dalmia Bharat had a bitter legal battle with UltraTech Cement in the NCLT over acquisition of Binani Cement which it finally lost. Since then, it has been on the lookout to buy cement manufacturing assets. 

Shree Cement is also bullish on potential opportunities in the eastern part of the country, which it feels, will be a key demand driver. 

Although this company has been relying on greenfield and brownfield projects to ramp up capacity, Bangur is of the view that “Emami Cement is a neighbour”, and so, it is an acquisition target. The 6 million tonne per annum (mtpa) Emami Cement has plants in Risda in Chhattisgarh, Panagarh in West Bengal, and Jajpur in Odisha. It had also acquired 0.60 mtpa capacity from Eco Cement in October 2018 at Bhabua in Bihar and is planning to double capacity. 

It is also in the process of setting up a 2.5 mtpa plant in Kalinganagar in Odisha. Besides, it has a 40-Mw captive power plant, which started operations in December 2016.