India Cement and Raasi Cement: India Cement's open offer to acquire 20 per cent stake in Raasi Cement at a price of Rs 300 surprised the market. In return, India Cements will get Raasi Cements which has a capacity of 1.6 million tonne, which is being expanded to 2.5 million tonne. It also has a controlling stake in Sri Vishnu Cement which itself is a one million tonne cement plant. India Cement will be getting some of the most efficient manufacturing plants at far below its replacement cost.
Raasi will also control the limestone rights to a site near the proposed Tadapatri plant of L&T. The acquisation will also permit India Cement to enter the cement deficit regions of Tamil Nadu and Kerala and help it consolidate its position in the southern markets.
Saurashtra Cement by Autoriders group: Last week the Mumbai-based Autoriders group announced that it had acquired 9.51 per cent in Saurashtra Cement through its group companies Maharaja Builders and Autoriders India. It has now made an open offer to acquire additional 20 per cent. But it is unlikely to acquire a controlling stake in the company as around 35 per cent is held by the promoters and another 15 per cent by financial institutions.
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Saurashtra Cement has a relatively small capacity of 1.16 million tonne and has not been able too withstand the might of Gujarat Ambuja Cement in the region. Realising this, it had drawn up plans to expand capacity and build a captive jetty that will give it substantial cost advantages. Its peformance has been hampered by poor management. It had made a loss of Rs 9.86 crore in the year ended June 1997, reeling under the impact of weak prices and rising input costs. However, it has staged a turnaround in the half year ended December 1997 which saw it report a net profit of Rs 1.05 crore and sales increased on an annualised basis by 8 per cent.
Gujarat Ambuja Cement and Modi Cement: The acquisition of Modi Cement will aid Gujarat Ambuja achieve its five-year strategy of increasing capacities. The annual installed capacity of Gujarat Ambuja's four cement plants is around five million tonne which will be enhanced to 6.2 million tonnes after the acquisition of Modi Cement. Further, to revive the ailing Modi Cement, the company has drawn up a three-pronged strategy. First, it intends to generate a consistent quality of 53 grade cement from the plant that would be on par with the its own standards. Secondly, it will evaluate the market conditions and draw up strategies to push the products from the new company under the brand name of Ambuja Cement. Finally, it will ensure that the company operates at near-zero levels of debt servicing.
Gujarat Ambuja Cement and Priyadarshani Cement: Gujarat Ambuja Cement had invested five per cent in Priyadarshani Cement and is reported to have made an additional investment in the company. For Gujarat Ambuja, a possible acquisition makes sense as it does not have a presence in the south. Priyadarshini Cement is rated as one of the better performers in the southern region and has been operating at 134 per cent of its capacity. It has an eight per cent market share in Andhra Pradesh and four per cent share in Karnataka.