International Finance Corporation (IFC), the private sector lending arm of the World Bank, may lend up to Rs 200 crore ($31.3 million) to Andhra Pradesh-based BMM Cements Ltd (BCL). BCL, currently a loss-making subsidiary of Rs 2,000 crore Bharat Mines & Minerals group (BMM group), is being acquired by Sagar Cements Ltd.
Incorporated in 2007, BCL manufactures and markets portland cement, portland blast furnace slag cement and portland pozzolana cement.
The company established a 0.95 million metric tonnes per annum (MTPA) cement manufacturing unit at Anantapur in 2012 but was unable to ramp up capacity utilisation and has been incurring losses.
Last November, Hyderabad-based Sagar Cements had entered into an agreement to buy BCL at an enterprise value of Rs 540 crore ($84 million).
Sagar Cements aims to improve the operational efficiency of BCL's plant by refurbishing it.
The total project cost is estimated at $104 million which is planned to be funded through an equity contribution of $ 47.5 million, working capital loans of $6.5 million and long-term debt of $50 million. IFC is to pitch in with long-term debt finance in BCL.
Sagar Cements manufactures and sells cement under the brand name Sagar. Its plant is located in Nalgonda district in Telangana. Reddy family holds 56.9 per cent share in Sagar Cements; 18.6 per cent is held by AvH Resources India Pvt Ltd, the Indian subsidiary of Belgium-based global conglomerate Ackermans & Van Haaren; and 24.5 per cent is held by institutions and the public.
For IFC, this would be the second investment commitment in India within a month. Last month, it said it would invest up to $25 million in Kotak India Private Equity Fund - III (Kotak III).