Birla Corp to raise loans for Reliance Cement

With the takeover of Anil Ambani group's cement companies for Rs 4,800 crore, Birla Corporation is set to become an aggressive player in the sector, by looking at similar merger-and-acquisition opportunities. The company has enough cash and investments and debt-taking capacity to fund its acquisitions, chairman Harsh Lodha said on Friday.

Analysts said with its cash and investments of Rs 1,760 crore, Birla Corp will have to take on additional debt to fund the takeover. Lodha said the company will fund the takeover by taking 50 per cent debt of the acquisition cost while the rest will be funded from its own cash. The company has debt of Rs 1,300 crore as on March last year. The company's sales have doubled in the last five years to Rs 3,209 crore as on March 2015; its net profit has slowed to Rs 175 crore in 2014-15 from Rs 557 crore reported in 2009-10.

The acquisition of ADAG group's cement company will also help Birla Corp tap the South Indian markets, which will open up with the acquisition of Reliance Cement.

"Earlier, we were only a North Indian player but now, with this acquisition, we will be able to enter the South India markets," Lodha said.

 

Reliance Cement has plants of 2.8 million tonnes per annum (mtpa) at Maihar in Madhya Pradesh, 2.2 mtpa at Kundanganj in Uttar Pradesh and 0.5 mtpa at Butibori in Maharashtra. Birla Corp has seven plants across Madhya Pradesh, Rajasthan, and Bengal.

The acquisition will help Birla Corp tap the Andhra and Maharashtra and Karnataka markets, said a cement analyst.

"We were offered many cement companies in the past but we looked at only those assets which add value to our own cement capacity," Lodha said.

Early this week, Birla Corporation withdrew its offer to take over Lafarge's two plants in Central India for Rs 5,000 crore. Birla Corporation said it will take legal action against Lafarge for not selling its two plants but did not elaborate further.

The latest acquisition is expected to help Birla Corporation to increase its capacity to 15.5 million tonnes per annum - pipping BK Birla's Century Textiles which has capacity of 13 mtpa.

The company, however, will not be among the top 5 companies by capacity with the acquisition.