The all-cash deal will increase Aditya Birla Chemicals’ market share in chlor alkali from 18 per cent to 22 per cent.
Kolkata-based Kanoria Chemicals, a leader in chemical intermediates, has sold its chlor alkali business to Aditya Birla Group for Rs 830 crore in an all-cash deal.
With this, Aditya Birla Chemicals’ caustic soda capacity doubles to 220,000 tonnes a year.
“The acquisition solidifies the group’s position as the country’s largest producer of chlor alkali. It is a critical input in the aluminium sector. Given our large expansion plans for the aluminium business, this serves as an excellent sourcing point,” said Kumar Mangalam Birla, the group’s chairman.
Kanoria will use the funds to expand its existing business and explore new related businesses.
The division, located at Renukoot in Uttar Pradesh, clocked revenues of Rs 303 crore and profit before tax of Rs 47 crore in 2009-10. It can manufacture 130,000 tonnes of caustic soda every year as the main product, in addition to liquid chlorine, hydrochloric acid and hydrogen as by-products.
The transaction was approved by Kanoria’s board of directors in New Delhi on Saturday. The business transfer agreement, too, was executed by the two parties on Saturday. The transaction will be done by way of a slump sale and is expected to be complete by the end of May this year.
“We are looking to enter value-added chemicals. The money from this deal gives us flexibility to look for acquisitions in related chemical businesses,” said R V Kanoria, chairman and managing director of Kanoria Chemicals.
| DEAL VALUE: all cash Rs 830 crore |
| Kanoria’s chlor alkali division revenues in 2009-10 stood at Rs 303 crore |
| PROFIT Rs 47 crore |
| Aditya Birla Chemicals’ annual capacity doubles to 220,000 tonnes |
After this deal, the company will have two manufacturing facilities: One at Vishakhapatnam in Andhra Pradesh and the other at Ankleshwar in Gujarat. The Gujarat plant manufactures alcohol and alcohol-based intermediates. The one at Visakhapatnam makes formaldehyde and is poised to start making hexamine.
It has surplus land of 23 acres at the Vishakhapatnam unit, which gives the company flexibility to undertake hassle-free expansion.
“With the acquisition, Aditya Birla Chemicals will increase its market share in chlor alkali in India from 18 per cent to 22 per cent,” said Lalit Naik, head-chemicals, Aditya Birla Group.
Another advantage for Aditya Birla Chemicals, a subsidiary of Hindalco Industries, is the location. Renukoot is where Hindalco's existing aluminium smelter plant is being expanded. The chlor alkali produced from the Kanoria unit will be mostly consumed by Hindalco. In case there is surplus, Aditya Birla Chemicals will look to sell it.
The entire chlorine output will be sold.
“We plan to increase production in the Renukoot complex by another 150 tonnes a day,” said Naik.
Aditya Birla Chemicals followed the asset valuation model for this acquisition. Although the company has not yet frozen its funding plan, Naik said 60 per cent of the proposed acquisition cost may be raised through debt and the rest through internal accruals.
“We would like the top management team of Kanoria to continue with us,” said Naik.
The company plans to pump in Rs 1,000 crore in two years to increase its chlor alkali production capacity both in Gujarat and Patalganga through two greenfield projects. These units alone will produce 250,000 tonnes a day.
Kanoria Chemicals’ chlor alkali unit at Renukoot is an integrated complex with a captive power generation capacity of 50 Mw through two 25-Mw plants which use coal as fuel.
The unit also manufactures chloro-derivatives such as stable bleaching powder (30,000 tonnes), aluminium chloride, poly aluminium chloride and chlorinated paraffins (11,500 tonnes).
The division has its own salt works at Gandhidham, Gujarat, which supplies a part of the salt required for the manufacture of caustic soda.
