Why Jhunjhunwala, Damani Joined The Race For Binani Cement
What makes Binani Cement an enticing bet.
Billionaire Rakesh Jhunjhunwala told BloombergQuint that he has jointly bid for debt-ridden Binani Cement Ltd. with D-Mart supermarket chain owner Radhakishan Damani and another wealthy partner, as he is bullish on the building materials sector amid the government’s affordable housing push.
Binani Cement has been put on the block by the National Company Law Tribunal after lenders initiated insolvency proceedings against the company. Its outstanding debt stood at Rs 3,608 crore as of March 2017.
Damani and Binani Cement were yet to respond to BloombergQuint’s emailed queries.
The company’s substantial capacity with limestone reserves and a captive power plant make it an attractive target for potential acquirers, said Sabyasachi Majumdar, senior vice-president at ICRA Ratings. Cement makers with already established brands, logistics and sales network in Binani Cement’s catchment area will be well placed to derive synergies from the acquisition, he said.
The Economic Times, quoting people aware of the development, had first reported the bid by Jhunjhunwala and Damani, besides cement makers such as UltraTech Cement Ltd., Heidelberg, JSW Group, Dalmia Bharat Ltd. and Ramco Cements Ltd. UltraTech, in its earnings conference call, confirmed its interest in Binani Cement.
The asset sale sets the stage for a bidding war between pan-India UltraTech which has some presence in the north and other cement makers looking to enter the region.
Emailed queries to Heidelberg, JSW Group, Ramco Cements and Dalmia Bharat remained unanswered.
Binani Cement is one of the few assets with a sizeable capacity available in the land-locked northern region. Regional cement companies like Dalmia Bharat, Heidelberg and JSW will be keenly looking to acquire this asset, independent expert Rakesh Arora said. It would help them expand and give a foothold in the north, which has a limited availability of limestone, he added.
The company’s plant in Rajasthan has a capacity of 6.25 million tonnes a year and a captive power plant of 70 megawatts. It has a well-established brand in the north and markets its product in Rajasthan and neighbouring Gujarat, Maharashtra and cement-deficit states of Uttar Pradesh, Bihar, Punjab, Haryana and Delhi.
Binani Cement also has a 2 MTPA plant in China and a 3 MTPA plant in Jebel Ali, Dubai in the United Arab Emirates.