Dalmia Bharat Enterprises Ltd (DBEL), the demerged cement and power business of Dalmia Bharat Sugar & Industries (formerly Dalmia Cement Bharat) swung between valuation of Rs 860 crore and Rs 1,950 crore on its debut and is trading at Rs 213 in early morning hours on day 1.

Dalmia Bharat Sugar & Industries, that has become a pure play sugar firm now, was up 4% on Thursday valuing the firm at around Rs 370 crore. Given the 1:1 share issue in the demerger, the combined value of the demerged company and the original firm is around the same as value of Dalmia Cement Bharat in March when the demerger was announced.

The cement business (housed under Avnija Properties, a subsidiary of the demerged entity) is backed by buyout giant KKR that said it is investing Rs 750 crore for an undisclosed stake last year, marking the largest private equity deal in the cement industry in India. This was soon after KKR announced a deal worth $75-million in Coffee Day Resorts, operator of the Café Coffee Day chain of cafes in India.

Avnija has 9 MTPA (million tonne per annum) cement manufacturing capacity besides the original firm’s stake in OCL India Ltd (that has 5.3MTPA capacity) along with the upcoming green field projects of 10MTPA across the country. The money raised from KKR was to be used for both organic/inorganic growth besides de-leveraging.

As a part of the demerger, DBEL issued one share of Rs 2 for every one share of the same amount owned by an investor in Dalmia Cement Bharat Ltd. While the cement business is housed under Avnija Properties, the thermal power business is under DCB Power Ventures. This has made DBEL a public listed holding firm of cement and power businesses.

The demerger opened up opportunities for raising fresh capital for disparate businesses. On the one hand, it has also got a commitment from KKR for the cement business, it could well look at fresh funds to expand the capital intensive power business.

Dalmia Cement Bharat had raised around Rs 115-120 crore from Actis in early 2006. Actis continues to hold on to these shares and as per the demerger holds around 5.6% in both Dalmia Bharat Sugar & Industries and DBEL. Its cost of acquisition almost five years ago is pegged almost equal to the combined value of its stake in the two companies at present.

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