The committee of creditors (CoC) of bankrupt Binani Cement on Wednesday issued a letter of intent (LoI) to Aditya Birla Group’s UltraTech Cement for acquisition of the cement company under the Insolvency and Bankruptcy Code (IBC) process. The move follows Monday’s meeting of the CoC, during which it voted in absolute majority in favour of the revised resolution plan submitted by UltraTech, which has offered to pay around Rs 7,960 crore for the debt-laden cement maker.
“As the company has already received the CCI (Competition Commission of India) approval, the resolution plan is now subject to the approval by NCLT,” UtlraTech Cement said in a stock exchange filing on Wednesday. The company said that the acquisition of Binani Cement (BCL) would provide it access to large reserves of high-quality limestone and increase its presence in the highly-competitive and fast-growing northern and western markets in the country. “Upon consummation of this transaction, the company’s cement capacity (including its overseas operations) will stand augmented to 116.15 MTPA including the recently announced acquisition of cement units of Century Textiles & Industries Limited,” UltraTech said.
After approval of the Kolkata bench of the National Company Law Tribunal (NCLT), UltraTech’s resolution plan will also need to be approved by the National Company Law Appellate Tribunal (NCLAT). The stance of the Supreme Court also needs to be seen as it has agreed to hear next week the petition of rival bidder Dalmia Bharat-controlled Rajputana Properties, which wants that UlraTech’s bid not be considered at all. The NCLAT has been hearing multiple petitions filed by both UltraTech Cement and Dalmia Bharat. It is scheduled to hear the matter again on July 10. In the interim, it asked the resolution professional (RP), Vijaykumar V Iyer, to continue with the resolution process, but said that the final outcome will be subject to its order.
Under the revised plan of UltraTech, financial as well as operational creditors of Binani Cement will receive their complete dues. The insolvent cement company owes around Rs 7,000 crore to both financial and operational creditors. Binani Cement, a subsidiary of Binani Industries (BIL), has a manufacturing capacity of 11.25 million tonne of cement per year with integrated plants in India and China, and grinding units in Dubai. In FY17, the cement maker had posted a net loss of Rs 348 crore on revenues of Rs 1,527 crore, according to data from Capitaline.
In Wednesday’s stock exchange filing, UltraTech Cement said, “The company is confident of turning around the operations of BCL which will benefit all the stakeholders of BCL and result in synergies from optimisation of costs and improved realizations. The company will be able to infuse the required financial stability and resources to enable BCL’s plants in Rajasthan to compete effectively.”
The anticipated synergies due to economies of scale, optimisation of costs, wider distribution network and expansion potential would enhance competitiveness and create value for shareholders, while also reducing cost components in relation to distribution, transportation and logistics, according to the filing.