Bheema Cements plans to raise Rs 350 crore to fund expansion

Company looking at various options including divisting promotors' equity

Hyderabad-based Bheema Cements Limited is looking at options, including roping in a strategic partner, to meet the funding requirement of its expansion as well as financial restructuring plans, according to unconfirmed reports.

The company owns a cement plant with a one million-tonne annual production capacity  at Ramapuram in the neighbouring Nalgonda district. It had received clearances for the  expansion of the installed capacity by an additional 1.5 million tonnes and also to set up a 45-Mw  power plant proposed for captive usage.

Sources in the know told Business Standard the promoters of Bheema Cements would be willing to divest a sizeable equity if they found a right  partner and right valuation.

Other options like preferential issue of equity shares to the investors or qualified institutional placement (QIP) were also under consideration, it is learnt. When contacted, the company management refused to offer any comments in this regard.

According to the sources, the company was looking to raise about Rs 350 crore towards the equity funding of the proposed expansion and also to restructure its financial liabilities such as bank loans. The promoters hold 62 per cent of the total equity shares of the company, according to the BSE.

Bheema was among the several local cement players  who took up capacity expansion when they were riding a wave of healthy cash flows,  with a view to capturing a huge market demand that was projected prior to the beginning of the economic downcycle.

Subsequently, the cash flows dwindled when the consumption in Andhra Pradesh alone decreased from a peak of 40 million tonnes in 2009 to just 20-25 million tonnes afterwards.

Coming under financial strain, the smaller companies started looking at other ways to  fund the expansion or to reduce the debt burden. Companies like Anjani Cements and Jayajoti Cements had sold their plants to bigger peers in this process.  

Nalgonda houses one of the prominent cement clusters in Telangana strategically nearer to its biggest market, Hyderabad, besides being connected to other important markets through rail transport.