In a bid to pare debt, the diversified Emami Group on Thursday announced that it has entered into a binding agreement with Nuvoco Vistas Corporation, part of the Nirma Group, for selling its cement business for an enterprise value of `5,500 crore.
The Kolkata-based group has agreed to sell its 100% equity stake in Emami Cement (ECL), which was launched in 2016. “It is an all-cash deal. The firm’s equity value is roughly Rs2,500 crore. It has a bank loan of around Rs2,000 crore, while around Rs1,000 crore is loan against shares,” Emami Group director Aditya Agarwal told FE.
Nirma Group said the acquisition of ECL will enable Nuvoco, a building materials company, to take its business to the next level to become one of the leading cement players in the country and specifically in the east. ECL operates one integrated cement plant in Risdah, Chhattisgarh, and three grinding units — in West Bengal, Bihar and Odisha — with a total cement-grinding capacity of around 8.3 million tonne per annum (MTPA). It sells products under the brand name of ‘Double Bull’. “After the completion of the transaction, the brand will be owned by Nuvoco. There is no doubt that they will also get the mining leases,” Agarwal said. The transaction is subject to customary approvals, including an approval from the Competition Commission of India (CCI), and is expected to be consummated in next three-four months.
Notably, ECL has mining leases in Chhattisgarh, Rajasthan and Andhra Pradesh. “During the nine months ending December 31, 2019, the cement firm’s revenue was around Rs1,800 crore. It is now cash positive,” Agarwal informed.
According to Manish Goenka, director, Emami Group, this transaction was an important step in the group’s stated objective of becoming debt-free, and with this transaction it would substantially achieve this objective. A person with knowledge of the move said after selling the cement business, Emami group will have around Rs600 crore debt at the promoter level.
Significantly, the promoters of Emami Group had in June last year undertaken a stake sale 10% in Emami Ltd, the flagship FMCG entity of the group, for raising approximately Rs1,230 crore. This amount was intended to be used primarily for further reducing debt at the promoter level. The stake sale had occurred on the floor of the stock exchange to marquee institutional investors. Apart from the FMCG business, the group has significant presence in bio diesel and edible oil, paper, realty segment and healthcare, among others.
“This acquisition is a momentous and transformational step in Nuvoco’s journey to becoming a major building materials company in India delivering superior performance. Emami Cement will enable us to take our Cement business to the next level and continue to serve our customers with innovative and high-quality products that they trust,” said Hiren Patel, chairman, Nuvoco.
In a release, Nirma Group said with the merger of the Nirmax business in Rajasthan and completion of this acquisition, Nuvoco will become one of the leading cement players in the country and specifically in the East.