Kolkata-based diversified conglomerate Emami Group announced on Thursday that it had entered into a binding agreement with Nuvoco Vistas Corp, part of the Nirma group, for divesting its 100 per cent equity stake in Emami Cement for an enterprise value of Rs 5,500 crore.
Emami Cement has a debt of Rs 2,000-2,200 crore and loans against shares of Rs 1,000 crore. The net gain for Emami from the deal, therefore, will be around Rs 2,500 crore.
The move is part of Emami’s efforts to reduce debt at the group level. A clutch of companies — Shree Cement, Dalmia Bharat Cement, UltraTech, and Ambuja Cement — and private equity investors were understood to have evinced an interest in acquiring Emami Cement. The company operates an integrated cement plant and three grinding units with a cement grinding capacity of around 8.3 million tonnes per annum.
Manish Goenka, director, Emami Group, said the transaction was an important step in the group’s stated objective of becoming debt-free.
Aditya Agarwal, director, Emami Group, said with this deal, the promoters' pledged shares would come down.
After adjusting for Emami Cement, the promoter-level debt will approximately be Rs 600 crore.
The group has been trying various options to pare its debt. In June last year, the promoters had sold 10 per cent of their stake in Emami for around Rs 1,230 crore to partially bring down the promoter-level debt. The debt then was Rs 3,300 crore, which was brought down to about Rs 2,200 crore.
Agarwal said Emami Cement had successfully established a very strong brand equity in the market for its highest standards of operation and high-quality products, which helped in getting a good value. "We strongly believe that Nuvoco and the Nirma group will continue from here and strengthen the business further,” he said.
With the completion of the acquisition and the merger of the Nirma business in Rajasthan, Nuvoco would become one of the leading cement players in the country, and specifically in the East. This will bring its total cement capacity in eastern, northern and western India to 23.5 mtpa (which includes the ongoing capacity expansion project in its Jojobera plant) and over 60 ready-mix plants. The transaction is subject to customary approvals, including from the Competition Commission, and is expected to be consummated in the next 3-4 months.