 "8 new bidders for R-Infra cement biz")
The board of directors last month had already taken a decision to sell cement business. According to sources, UltraTech Cement is currently leading the race. The company spokesperson declined to comment. JP Morgan in its report dated November 26 said RInfra could fetch premium valuations as it has the largest single location plant in the country. It provides access to surplus limestones reserves, which can support capacity expansion to 15 mtpa from the current 5.6 mtpa. Another advantage is immediate market access to central India, which is a steady demand market while supply in the market has peaked with no new capacity in the pipeline.
“Organic expansion in central India is difficult due to limestone constraints and, hence, acquisition is the only route for market access/expansion,” said JP Morgan.
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According to JP Morgan, RInfra's cement business divestment will be done via share sale and not as asset sale; so, it is unlikely to be impacted by the provision of Mines and Minerals Development and Regulation Amendment Bill, 2015 restricting transfer of mines.
RInfra has its operational cement capacity with an integrated unit in Madhya Pradesh and grinding units in Uttar Pradesh and Maharashtra with total production capacity of 5.6 million tonnes per annum (mtpa). It had recently indicated the overall capacity can be scaled up to 15 mtpa overtime with the available limestone reserves. It also has coal reserves of 5.7 mt. The plants are fairly new and are currently operating at 70 per cent utilisation, despite flattish pricing in central India.