Calcutta, Aug. 21: The B. K. Birla group is looking to divest a substantial holding in Mangalam Cement. Talks with Mexican cement major Cemex having failed, chairman Basant Kumar Birla has engaged a Calcutta-based investment bank to scout for a strategic partner yet again.
Cemex, which was in talks with the management for a substantial investment in the debt-ridden company, withdrew silently when the Industrial Development Bank of India (IDBI) threatened legal action against Mangalam under the Securitisation Act.
Mangalam is indebted to the tune of Rs 200 crore, which the promoters had offered to settle by paying Rs 135 crore. But the talks between the Mangalam management and lenders failed, resulting in Cemex withdrawing its offer to invest in the company.
“Though Cemex had evinced interest in investing in Mangalam, we haven’t heard from them since IDBI threatened legal steps against the company,” said a senior official in the B. K. Birla group. “Talks with a potential investor could materialise only if lenders co-operate. Let’s hope good sense prevails this time,” he added.
“The investor who takes over Mangalam will have to bring in around Rs 250 crore to repay debts and set up a power plant. Mangalam needs to have its own power plant to save on power costs. A power plant could be set up at a cost of Rs 60 crore,” said the owner of the investment bank that has been mandated to find a partner.
Feelers would be sent to cement majors soon, but Grasim, which holds a small stake in Mangalam, is not being considered as a possible buyer. “It has just bought over Larsen & Toubro’s cement business, and is unlikely to consider any acquisition for the next couple of years,” he added.
“The plant also has a small problem about sourcing a particular variety of limestone. It spends quite a bit on having it transported from a distance. But a limestone mine could be secured on lease nearby to cut transport costs,” the investment banker said.
Industry experts say mergers and acquisitions in the cement industry are set to start again after a two-year lull thanks to the fall in cost of funds. Lafarge has already indicated that it intends to grow through acquisitions in India. The ACC-Gujarat Ambuja combine, too, seems hungry for inorganic growth.