Jhunjhunwala, Damani offer to match all competing bids for Binani Cements

Stock market czars want to turnaround the company within a year

Mumbai’s billionaire stock brokers, Rakesh Jhunjhunwala and Radhakishan Damani have made aggressive bids for Binani Cements as both see long-term prospects in the company which owns and operates 11 mtpa of cement capacity in India. The duo have offered to match any competing bid for the cement company which once featured Amitabh Bachchan as its brand ambassador.

Jhunjhunwala-owned Rare Enterprises has a significant equity stake in many companies including Titan (around 9 per cent), Aurobindo (appox 2 per cent), Delta (18%), Escorts (9.16 %). Jhunjhunwala is also among the bidders for Star Health & Allied Insurance which is valued at $1 billion.

Damani, on the other hand, stormed into the Indian billionaires' club with the listing of Avenue Supermarts, operators of D-Mart brand of stores, which currently has a market value of Rs 732 billion (Rs 73,180 crore) as on Wednesday.

“Binani Cement has good prospects and is facing a short-term liquidity crisis… both can revive it easily within a year and banks will get more money than their debt,” said a source who is aware of the development.  According to a lender, Jhunjhunwala and Damani have made an offer with a deal sweetener that they would better any other competing offer from Ultratech, Bain Piramal and Ambuja Cement.

Sources said Binani Cement can be listed at a later date by the new investors and it would get a far better valuation after the fire sale by Indian lenders.

Earlier, Jhunjhunwala, 57, had joined hands with another stock broker, Ramesh Damani, 60, for the acquisition of Aptech. Both saw an opportunity in Aptech way back in 2005 and decided to takeover the company. Jhunjhunwala became Chairman of Aptech in November 2005 after buying stake from the market. Ramesh Damani is also on the board of Aptech alongwith Jhunjhunwala since the company was taken over by Jhunjhunwala who consistently increased his stake in the company to 45.22 per cent as of now. Damani owns around 7 per cent stake in Aptech.

Ever since Jhunjhunwala bought stake in computer education firm, Aptech, its stock has moved consistently up to Rs 366 as on Wednesday.

Bidders see a possibility to bag Binani Cement at a fire sale value of as less as Rs 70 billion (Rs 7,000 crore). The Binani acquisition would be far lower than Nirma’s acquisition of LaFargeHolcim’s units in India which were sold for $1.4 billion with a similar capacity in July 2016.

According to analysts, Binani Cement, which made a loss of Rs 4.27 billion (Rs  427 crore) in the financial year 2017 on sales of Rs 15.34 billion (Rs 1,534 crore), had said its sales were impacted by demonetisation in November 2016.

Its lenders had agreed to restructure the account under Joint Lenders Forum (JLF) mechanism and a corrective action plan was finalised by JLF and master restructuring agreement was signed.  But, some of the consortium lenders had not sanctioned the facilities as per plan and some of the lenders.  

The company defaulted and lenders sold loans and the interest due thereon to Edelweiss Asset Reconstruction Company (EARC). As on 31st March, 2017, the outstanding of loans assigned to Edelweiss is Rs 22.52 billion (Rs 2,252 crore) by 14 Banks and financial Institutions. The company was sent to NCLT last year.