Heidelberg, Italcementi and Lafarge in race to acquire Andhra Cement

Foreign players seen in race for Andhra cement co (MUMBAI, India) – The cement industry seems to be in a consolidation phase. Some of the smaller players in the industry are looking at cashing in on soaring cement prices to get better valuations. Andhra Pradesh-based Rain Commodities is said to be looking at either partially divesting its stake in its cement business to a strategic partner or entirely selling off the 1.5m tonne cement unit, according to industry sources. Heidelberg, Italcementi, Lafarge and a major Indian player are said to be interested in the cement unit. Sources said that the cement unit is likely to get a valuation of around Rs 800-1,000 crore. Rain Commodities is a holding company and has strategic investments in other companies. It holds 100% stake in Rain Industries (formerly known as Priyadarshini Cement), a producer of ordinary portland and blended cement in two locations in Andhra Pradesh, with a combined capacity of 1.5m tonne per annum. It markets its products in South India under the brand name ‘Priya Cement’. Sources said that Heidelberg Cement could be ahead in the race. In March Indorama Cement became a 50:50 JV between SP Lohia Group’s Indorama and Heidelberg Cement Group of Germany. Incidentally, Indorama Cement is holding a board meeting on Wednesday. Senior officials from Heidelberg are also going to attend the meeting. Indorama Cement has a capacity of 7.5 lakh tonnes per annum and has presence in Mumbai and Pune markets. The company has also initiated the process to set up a clinker plant in Gujarat. It manufactures slag cement and granulated blast furnace slag (GGBS). Even after repeated attempts, Jagan Mohan Reddy, director and one of the promoters of Rain Commodities, refused to comment on the issue. Sanjeev Parasrampuria, ED, Indorama Cement said, “We would not want to comment on market rumours.” Rain Commodities has said that the it is looking at expanding its cement facilities by another 1m tonne. However, bankers say that it has not yet started work on raising finances and the company is likely to sell its cement facility. The share price of Rain Commodities rose 62% from Rs 79 on March 29 to Rs 128.10 on Tuesday, at the Bombay Stock Exchange. Rain Commodities is also one of the original investors in Rain Calcining which is engaged in the business of Calcined Petroleum (Coke/CPC). It recently acquired a 100% equity stake in Rain Commodities (RCUSA) Inc. RCUSA had acquired 20.22% of the outstanding equity of GLC Carbon USA Inc, the world’s largest producer of CPC, for $102.7m. The transaction was financed by ICICI Bank and the debt was fully underwritten by the bank. According to sources the company had raised around Rs 250 crore in debt for the acquisition. The total debt in the group is said to be at around Rs 700 crore. Selling the cement unit would help bringing down the debt in the company. The promoters of the company – the Reddy family – has a 50.66% stake in Rain Commodities. Last year, Citicorp had invested in non convertible debentures of around Rs 115 crore issued by Rain Industries. The NCD had a tenure of 5 years with an interest rate of 9.5%. The investment was approved at a Corporate Debt Restructuring (CDR) meeting held on March 31, ’05. The CDR had also approved the reduction of interest rates on loans from 13% per annum to 9.5% per annum. The proceeds were used to settle and restructure loans of some of the banks financing Rain Industries. The cement industry is seeing a consolidation in recent times. Recently, the Jaypee group has struck a deal to acquire Gujarat Anjan Cement, which is building a 1.2m cement plant in Kutch, Gujarat. It had earlier this year taken over 2.5m tonnes belonging to the UP State Cement Corp.

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