Kumar Mangalam Birla seems to have finally agreed to go ahead with the long-awaited merger of the cement business of Century Textiles, owned by his grandfather B K Birla, with UltraTech.
Sources in the know told Business Standard the merger process had started and the deal was likely to be inked in a few months.
B K Birla group has its cement business under Century, Kesoram and Mangalam Cement with a collective cement capacity of around 17 million tonnes. Of that, Century Textiles alone controls 7.8 million tonnes of capacity.
If the deal goes through, it will mark the group’s third consecutive cement deal in recent years after its overseas acquisition of ETA Cement and merger of Grasim’s cement division with UltraTech last year.
On several occasions in the past, B K Birla had indicated his cement assets would go to his grandson. Even in several annual general meetings, shareholders had been suggesting a merger of the Birla family’s cement assets under one company — UltraTech.
Kumar Birla is also a director on the board of Century Textiles. Speculation over a possible merger had increased when Kumar chaired one of the AGMs of Century Textiles a few years ago.
None of the Aditya Birla group’s top officials Business Standard spoke to wanted to comment. In response to a query sent by Business Standard, the spokesperson of Aditya Birla group said, “(It is) not our policy to comment on speculative stories.” Queries sent to Century Textiles remained unanswered.
Market players believe there are synergies in such a deal. The cement business of Century Textiles did not witness any significant scaling up and the company was seen moving towards real estate and developing its high-end Worli project, where construction had already started, they said.
On the other side, Grasim, which owns UltraTech Cement, will be able to scale up its business and move ahead of Swiss major Holcim group companies ACC and Ambuja Cements. Currently, Aditya Birla group has an overall capacity of 52 million tonnes per annum and is neck and neck with the Holcim group.
However, on a stand-alone basis, UltraTech is India's largest cement maker and the eight largest in the world.
If Century's cement assets come to Aditya Birla group, it will surpass Holcim with a wide gap of over five million tonnes.
Century Textiles has a paper and textile business in addition to its cement business. Its textile mill is also being relocated with a state of the art plant in Gujarat.
Shares of Ultratech cement touched a 52-week high of Rs 1,188 on September 2. The stock is currently trading at Rs 1,130 on the Bombay Stock Exchange. The share price of Century Textiles, which had touched a 52-week high of Rs 550 on November 10, 2010, is currently trading at Rs 304.