UltraTech closing in on R-Infra's cement units

The Aditya Birla Group's cement company, UltraTech, is in talks to take over the cement units of the Anil Ambani-owned Reliance Infrastructure.

A source close to the development said Reliance Infrastructure's cement units were likely to fetch an enterprise valuation of Rs 5,000-5,500 crore. Reliance Infrastructure put up its cement units for sale last month to reduce its Rs 25,766 crore debt.

The source said UltraTech was conducting due diligence and negotiating the price. A decision is likely next month. There were a few private equity players in the race as well, but UltraTech is leading the race, the source added.

A Reliance Infrastructure spokesperson declined to comment on "market rumours", while the UltraTech spokesperson said the news was not true.

Reliance Infrastructure has three cement plants with a combined capacity of 5.8 million tonnes in Maharashtra, Madhya Pradesh and Uttar Pradesh. The plant in Madhya Pradesh has commenced commercial production. Reliance Infrastructure's cement business posted sales of Rs 541 crore and made a loss of Rs 114 crore in the 2014-15. Besides, Reliance Infrastructure has won in an auction the Sial Ghogri coal mine with reserves of 5.69 million tonnes.

An analyst said the takeover of the units made sense for UltraTech, which wanted to expand capacity from 69 million tonnes now to 100 million tonnes by 2020. With the acquisition of the Jaypee Group's cement units, UltraTech's cement capacity will touch 74 million tonnes by 2016-17. Kumar Mangalam Birla, chairman of the Aditya Birla Group, is also inheriting Century Textiles, which has 13 million tonnes of cement capacity.

 

Reliance Infrastructure is trying to reduce its debt by selling non-core assets. Earlier this month, it announced the sale of a 49 per cent stake in its Mumbai electricity distribution business to Canadian investment fund PSP Investment Board. Reliance Infrastructure also plans to sell 11 road projects.

The company is shifting its focus from infrastructure to defence as the Narendra Modi government is expected to issue billions of dollars of defence contracts to Indian companies under the Make In India campaign. Reliance Infrastructure has taken over Pipavav Defence.