Birla Corporation completes acquisition of Reliance Infra's cement business

M P Birla Group's flagship company, Birla Corporation on Monday said it has completed the acquisition of the cement business of Anil Ambani-owned Reliance Infrastructure Ltd (RIL) in a stake sell agreement it concluded with RIL in February, this year.

In a regulatory filing with the Bombay Stock Exchange, Birla Corporation (Birla Corp) said that it has acquired 100% equity shares of Reliance Cement Company Private Ltd (RCCPL) which has made the latter a wholly owned subsidiary of Birla Corporation.

The stake sell was subject to the nod from the Competition Commission of India.

The Kolkata-based diversified company, having interests in cement and jute business, had signed a deal with RIL whereby it took over cement production unit of RIL for Rs 4,800 crore at a valuation of $140 a tonne.

RCCPL has three cement units — an integrated cement plant at Maihar (Madhya Pradesh) and grinding units at Kundanganj (Uttar Pradesh) and Butiburi (Maharashtra), with an aggregated capacity of 5.58 mtpa (million tonnes per annum) of cement and 3.30 mtpa of clinker.

"Reliance plants add a lot of strategic value to the existing cement business of Birla Corp. We have got not only modern and efficient plants but also excellent opportunity of synergizing the business of Birla Corp and RCCPL to gain maximum advantage in the region we operate in and increase our share in the rapidly growing cement market," Harsh V Lodha, chairman of Birla Corp said.

"That apart, there is scope for further optimisation of the operation of RCCPL that would yield substantial benefit to the company," he added.

In a statement, the company said it can gain a sizeable presence in the profitable western market by expansion of the Mukutban operations.

RIL had a consolidated debt of Rs 25,800 crore at the end of the last financial year and the sell off of the cement business is being seen as a move to improve the financial health of the company.

Earlier, the Anil Ambani-led Reliance group had announced plans to raise Rs 14,000 crore by selling cement and road assets by March 2017. In November last year, RIL said it was selling a 49% stake in its power generation, distribution and transmission business in Mumbai to Canada's Public Sector Pension Investment Board for an estimated sum of Rs 3,500 crore.

Signing of the deal marks Birla Corp's move to scale up its business following its deal with Lafarge going sour.

In August last year, Birla Corp had acquired 5.15 mtpa cement capacity of Lafarge India in Chhattisgarh and Jharkhand for Rs 5,000 crore. But the deal failed as an amendment in the Mining Act prohibited transfer of mining rights in case of asset sale.

While Lafarge is now planning to sell its entire asset of 11 mtpa capacity through share sell to complete its global merger with Holcim, Birla Corp took legal recourse over this deal.