JSW Cement's offer of Rs 60 billion emerges as highest bid for Binani

JSW Cement has emerged as the highest bidder for Binani Cement, with Indian lenders not taking any haircut on their debt.

According to a source close to the development, JSW Cement’s offer of approximately Rs 60 billion was better than its nearest rivals Ultratech Cement and Piramal-Bain stressed asset fund. 

Mumbai-based billionaire stock brokers Rakesh Jhunjhunwala and Radhakishan Damani also made a joint bid for the firm and offered to match competitive bids. JSW Cement, which currently has 11.6 million tonnes per annum (MTPA) capacity, would double its capacity with the acquisition if banks accept its offer. "Binani Cement has good prospects and is facing a short-term liquidity crisis… The company can be revived easily within a year and banks will get more money than their debt," said a source. 

Prospective bidders say Binani’s acquisition would be far lower than Nirma’s acquisition of LaFargeHolcim’s units in India, which were sold for about Rs 90 billion with a similar capacity in July 2016.

According to analysts, Binani Cement, which made a loss of Rs 4.27 billion in financial year 2016-17 on sales of Rs 15.34 billion, had said its sales were impacted by demonetisation of high-value notes in November 2016. Its lenders had agreed to restructure the account under the joint lenders’ forum (JLF) mechanism, following which a corrective action plan was finalised and a master restructuring agreement was signed. But, some of the consortium lenders had not sanctioned the facilities.  

The company defaulted, and lenders sold loans and the interest due to Edelweiss Asset Reconstruction Company (EARC). As of March 31, 2017, the loans assigned to Edelweiss were Rs 22.52 billion by 14 banks and financial institutions. The company was sent to the National Company Law Tribunal (NCLT) last year. 

Binani Cement has an operating capcity of 11.25 MTPA across India, China, and Dubai, and has good limestone reserves in Rajasthan, making it attractive for existing cement companies like UltraTech and Shree Cement.