My Home Industries Ltd (MHIL), an equal equity joint venture between Irish building materials major CRH and Hyderabad-based My Home Group, has struck a deal to buy Sree Jayajothi Cements Ltd (SJCL) at an enterprise value of Rs 1,400 crore ($230 million), as per a company statement.
SJCL is majority-owned by Chennai-based Shriram Group firm Shriram EPC Ltd while its original promoters hold the remaining stake. The firm was part of the Jayajothi Group based in Rajapalayam in Tamil Nadu and promoted by TR Kannan and his family.
Early last year, PE-backed engineering procurement and construction firm Shriram EPC acquired majority stake in Andhra Pradesh-based SJCL in a unique deal through conversion of debt into equity. The cement firm could not pay for the services provided by Shriram EPC to build the cement unit’s assets.
SJCL, which has a 3.2 million tonne cement plant at Kurnool in Andhra Pradesh, owed Shriram EPC around Rs 500 crore, of which the convertible option was around Rs 300 crore.
The firm was looking for buyers for the cement unit, which was not a part of its core business. It had previously held talks with several PE firms including Blackstone.
Shriram EPC will use the money from the stake sale primarily for debt reduction in line with its goal of improving its financial profile and strengthening its core business. It will also result in the release of debt on ITS book, which was undertaken on behalf of SJCL.
MAPE Advisory acted as the advisor to Shriram EPC for the deal.
Shriram EPC scrip shot up over 8 per cent and was quoting at Rs 47.4 a share on the BSE in mid-day trades in a strong Mumbai market on Monday.
“Cement was a non-core business for SEPC and by virtue of its vast experience in the cement industry, MHIL can bring its managerial and financial expertise on board and rapidly & profitably expand SJCL’s business,” said T Shivaraman, MD and CEO of Shriram EPC.
Shriram EPC provides engineering solutions such as multi-disciplinary design, EPC (engineering, procurement and construction) and project management services. The company focuses on providing turnkey solutions for ferrous and non-ferrous, cement, aluminium, copper and thermal power plants, water treatment & transmission, renewable energy, cooling towers and material handling. It is backed by names like New Vernon and Bessemer Venture Partners.
As for MHIL, the deal will strengthen its position as a mid-sized cement firm in the country. It is paying around Rs 4,375 a tonne for the deal, which is higher than what Dalmia Cement paid to buy two small cement firms in the eastern region of the country last year. This could be for building a stronger position in southern India where the bulk of its current operational presence is located. Cement is a largely localised & regional business, and consumption is mostly driven by production in the region.
“This acquisition will allow us to further expand our market base and achieve our targeted growth plans, taking our total cement capacity to 8.4 million tonnes annually. The strategic location of the plant, along with My Home’s technical and financial strength, will help us achieve significant synergies and economies of scale,” said Rameswar Rao J, chairman of MHIL.
Founded in 1984, MHIL is a 50:50 JV between Ireland’s CRH Plc and Hyderabad-based My Home Group. CRH had picked up 50 per cent stake in the privately held cement firm a few years ago and that initiative also marked its entry into the Indian market, dominated by its global rival Holcim and local giant UltraTech.
(Edited by Sanghamitra Mandal)
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