Ireland-headquartered cement maker CRH Plc may acquire Sree JayaJothi Cements, the cement arm of the $9-billion Shriram Group, three people familiar with the development told ET Now.
"The deal is likely to be announced soon and CRH Plc is set to buy the target through its joint venture partner MyHome Industries Ltd, an AP-based cement manufacturing company. The enterprise value of Sree JayaJothi Cements has been pegged at around Rs 1,500 crore," said one of the persons mentioned above.
He further said that it can also divest non-core asset and reduce its debt obligation of around Rs 2,100 crore. Sree JayaJothi Cements has a manufacturing facility at Kurnool, Andhra Pradesh, with a combined clinkerisation capacity of 2 mtpa (million tonnes per annum) and cement grinding capacity of 3.2 mtpa.
"There's a lot of interest from both strategic and financial investors in the cement sector, but the high valuation expectations of the Indian promoters are a hurdle for any sizeable deal to happen. The Shriram EPC deal may turn out to be an ice-breaker," said Anil Khatri, director at Delhi-based Coral Bay Advisors. Shriram EPC Ltd did not respond to e-mail queries from ET Now and its MD and CEO T Shivaraman offered no comments when contacted over the phone. In a communication to the exchanges, Shriram EPC said, "We are in discussion with a couple of potential investors, including CRH, but nothing has been finalised as of date." E-mails and phone calls to CRH Plc remained unanswered. "The strategic location of the facility will provide cost benefits to CRH and proximity to the Bangalore market. Through the India JV, CRH has access to three manufacturing units (capacity of 3.2 mtpa) and one cement grinding unit (1.5 mtpa). This deal could make it the largest player in the AP market in terms of capacity utilisation," said the person.
Chennai-headquartered Shriram EPC is a high-end engineering services company providing EPC and turnkey solutions to several segments like power, water infrastructure, mining, etc. The promoters hold 38.43% stake in the company while a clutch of private equity funds and venture capital players like Bessemer Venture Partners, New Vernon Private Equity, Argonaut Ventures and UTI-IAS together hold 41.61%. CRH is a diversified building materials group with operations in 36 countries and employing approximately 76,000 people at over 3,600 locations. In 2011, CRH had sales of 18.1 billion generated from operations across the United States, Europe and emerging markets. Shares of Shriram EPC ended at Rs 45.60, down 1.2%, on the Bombay Stock Exchange on Tuesday.