The Telegraph
Since 1st March, 1999
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Buyout buzz around India Cements arms

Mumbai, June 29: The wave of consolidation expected in the wake of the Grasim-Larsen & Toubro (L&T) cement deal has swung the spotlight on India Cements (ICL).

The fate of ICL’s two arms, Visakha Cements and Raasi Cement, is the subject of intense speculation as the parent looks at ways to slough off its Rs 1,800-crore debt.

Given the difficult times faced by the company, industry watchers say the AV Birla group’s acquisition of L&T cement has come at the right time for ICL.

“The L&T acquisition is likely to result in some of the big players looking for suitable buyout candidates. ICL could benefit as it looks to strengthen its balance-sheet,” an analyst representing a local brokerage pointed out.

Experts say foreign majors will want to acquire fresh capacity ranging from 1 to 2 million tonnes in a situation where four local firms are controlling over 50 per cent of the total operating capacity.

Another analyst with a leading private-sector bank said if ICL is successful in selling some of its assets — cement and shipping business — and reducing its debt burden, it could emerge as a potential acquisition candidate.

The markets, too, have sniffed a change in the Chennai-based ICL. The stock finished at Rs 25.85 on Friday on BSE, up 39 per cent from Rs 18.60 a month back.

There are indications that ICL will divest its stake in Raasi and Visakha. Several companies are already believed to have started making enquiries for a possible deal.

ICL officials were not available for comment on the issue. Nor has the company confirmed whether it is on the hunt for strategic buyers who could snap up its two arms.

Last month, the corporate debt restructuring cell (CDR) headed by Industrial Development Bank of India (IDBI) approved a debt restructuring programme under which ICL would have to offer a voluntary retirement scheme, sell some assets and restructure debt.

Vishaka, which has a 1.2-million tonne cement unit at Tandur in Andhra Pradesh, was saddled with an outstanding debt pile of around Rs 186 crore last year. Industry analysts said the enterprise value of the factory could be around $ 70 per tonne — which means it could fetch a shade under Rs 390 crore if it is sold now.

India Cements is the market leader in the south with a consolidated capacity of around 9 million tonnes.

The company, which once epitomised consolidation in the cement industry, hit a lean patch after it went on a borrowing binge to fund its acquisitions.

For the third quarter ended December 31, 2002, ICL suffered a net loss of Rs 50.54 crore compared with a net loss of Rs 26.25 crore in the corresponding period of the previous financial year. Total Income (net of excise) fell to Rs 198.8 crore in the reporting quarter from Rs 221.46 crore in the previous year.

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