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Chennai-based Shriram EPC Ltd, a part of the $9 billion Shriram Group, has divested its entire stake in Sree Jayajothi Cements Limited to My Home Industries Ltd, for around Rs 1,400 crore. My Home Industries a 50:50 joint venture between Ireland-based CRH Plc and Hyderabad-based My Home Group.
The transaction proceeds will be used primarily towards debt reduction in line with Shriram EPC's goal of improving its financial profile and strengthening its core business.
However, T Shivaraman, managing director and chief executive officer, Shriram EPC, said, "it is not going to be a profitable exit for Shriram EPC." The stake sale includes original Sree Jayajothi promoter T R Kannan's stake.
Speaking to Business Standard, Shivaraman declined to quantify the loss, saying, "it is going to be quite large".
Shriram EPC has an exposure of Rs 700 crore, inclusive of debt, equity and others. In 2012, Shriram EPC and its group company acquired a majority stake in Sree Jayajothi after converting the latter's outstanding to equity. This acquisition paved the way for Shriram Group to enter the cement business.
According to Shivaraman, cement is a long-term business and given the current political scenario in Andhra Pradesh and other market-related issues short-term looks challenging. Hence, Shriram decided to exit. The company was also planning to raise private equity, "but at the current environment that is also difficult."
