Dalmia Bharat’s deal to acquire Jaypee Group’s cement business at an enterprise value of Rs 5,666 crore would help it inch closer to Shree Cement, the third-largest cement manufacturer in the country by installed capacity. The deal would help Dalmia Bharat, now the fourth-largest cement maker, increase its cement production capacity to 46.4 MTPA from the current 35.9 MTPA.
However, the deal would not immediately change the pecking order with Shree Cement continuing to be the third-largest with a production capacity of 47.4 MTPA.
UltraTech Cement, an Aditya Birla Group company, continues to be the largest with 121.25 MTPA, followed by Adani Cement (Ambuja and ACC) with a total of 67.5 MTPA capacity.
“The move will help Dalmia Bharat gain a presence in central India and reduce the regional risk. At present, the company has a presence in the south and east, and a small presence in the west. In my opinion, the deal is neutral on the stock price front,” Ravi Sodah, equity analyst at Elara Capital, said.
According to an investor presentation by Dalmia Bharat made on Monday, central India is an attractive market from the demand-supply and market structure perspective. It is one of the lowest per capita cement consumption regions in India at about 170 kg and represents 15% of the total cement demand in the country.
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The deal would give the company a head start with about 10% capacity share in the central region, even as it represents a significant step towards reaching 110-130 MT capacity by FY31, Dalmia Bharat said.
The demand is expected to grow at 7% on a compounded annual growth rate in the medium term, while the top five players in the region hold about 75% of the market. The region utilisation has been at about 75%, compared with a pan-India utilisation of about 65-70%, it said.
On Monday, Dalmia Bharat signed a binding agreement to acquire Jaiprakash Associates’ cement, clinker and power plants for Rs 5,666 crore. The deal — which includes takeover of cement plants with 9.4 MT capacity, clinker units of 6.7 MT and thermal power plants with 280 MW capacity — will help the company realise its vision to become a pan-India player and diversify its regional presence, Dalmia Bharat said in the investor presentation.
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These units would be acquired from Jaypee group’s flagship company Jaiprakash Associates (JAL) and group firm Jaiprakash Power Ventures.
India is the second-largest cement producer in the world, accounting for about 8% of global cement production with an estimated production capacity of 550 MTPA.