RHI Magnesita extends rally, zooms 36% in one week; stock hits record high

On Saturday, November 19, the company announced acquisition of the Indian refractory business of Dalmia Bharat Refractories Limited (DBRL) for Rs 1,708 crore

Shares of RHI Magnesita India hit a record high of Rs 835.40 on the BSE on Wednesday after they surged 19 per cent in the intra-day trade, zooming 29 per cent in three days, after the company announced acquisition of the Indian refractory business of Dalmia Bharat Refractories Limited (DBRL) for Rs 1,708 crore.

The stock of the refractories company surpassed its previous high level of Rs 738.10, which it had touched on October 21, 2022. In the past one week, it has rallied 36 per cent as compared to nearly 1 per cent decline in the S&P BSE Sensex.

"DBRL will transfer its Indian refractory business to Dalmia OCL (DOCL). Under the terms of a share swap agreement, RHI Magnesita will acquire all outstanding shares in Dalmia OCL (DOCL) in exchange of 27 million new shares in RHI Magnesita India. Based on the issuance price of RHI Magnesita India at Rs 632.5029 per share, the share consideration had a value of approximately Rs 1,708 crore," RHI Magnesita said in regulatory filing on Saturday, November 19.

Through the consolidation of DBRL's production into RHI Magnesita’s existing operations, the management believes that significant network optimisation synergies will be captured. Moreover, the acquisition would add production capacities in important industrial regions in the southern and western regions of India where RHI Magnesita currently has no assets.

RHI Magnesita India is a leading India-based supplier of high-grade refractory products, systems, and solutions to India and West Asia region, which are indispensable for industrial high-temperature processes exceeding 1,200 degree celsius in a wide range of industries including steel, cement, non-ferrous metals and glass. DBRL is one of India's leading refractory players and a long-term trusted partner to customers in the region.

Meanwhile, in the past one year, the stock has zoomed 145 per cent, as compared to 5 per cent rise in the S&P BSE Sensex.

Refectories business demand is at peak in India due to heavy financial stimulus for infrastructure projects - domestic and global is expected to keep demand for refractories robust soon. Historically, refractory companies have been steady revenue compounder with stable margins, net cash balance sheets and superior return ratios, a remarkable contrast to its customer steel sector, thereby largely obviating the severe cyclicity of commodity companies, RHI Magnesita India said in FY22 annual report. The company expects recycling and localization to support margins for refractory players.