Actis-backed Dalmia Bharat Enterprises Ltd (DBEL) is expanding its cement business with its subsidiary Dalmia Cement (Bharat) Ltd, striking a deal to acquire up to 50 per cent of Kolkata-based Calcom Cement India Ltd, for an aggregate investment amount of Rs 238 crore ($46 million).
Dalmia Bharat’s cement business is separately backed by private equity giant KKR.
The investment for acquiring Calcom Cement stake would be rolled over in multiple tranches, through a combination of fresh issue of shares and acquisition of existing shares of the privately held firm.
Calcom is a manufacturer of OPC and PPC cement and is currently expanding its consolidated cement manufacturing capacity to 2.1 million tonnes per annum.
The deal values Calcom Cement at Rs 576 crore. This translates into a valuation of around Rs 2,743 per tonne (given its immediate project capacity) or Rs 3,388 a tonne (based on its initial capacity of 1.7 million tonne). This is about half of the valuation commanded by the country’s largest cement maker Ultratech and that of another giant ACC, but around the same valuation level of a few other small and mid-sized cement firms.
For the year ended March 2011, Calcom Cement had total revenues of Rs 40 crore and reported a net loss of Rs 59 crore, according to VCCedge, the financial research platform of VCCircle.
The company was started by its chairman Binod Kumar Bawri who had been involved with businesses in north-east India. Also, Assam state government’s industrial development unit has around 10 per cent stake in Calcom Cement, which is also backed by Dutch and German development financial institutions.
The firm sells its product under the brand Calcom Cement. While the bulk of its sales are targeted at the north-east region market where the demand is pegged at over 5 million tonnes a year (around half of which is catered by cement plants in other regions), the firm has plans to expand to other parts of the country and also export to Bangladesh.
Dalmia Bharat has been eyeing cement firms in southern and eastern regions of the country, which have recently set up or are setting up capacities but facing issues in running operations, given subdued demand and high costs of production. The deal appears to be a consolidation play for the PE-backed firm.
DBEL is the demerged cement and power business of Dalmia Bharat Sugar & Industries (formerly Dalmia Cement Bharat). The cement subsidiary is backed by buyout giant KKR, which invested Rs 750 crore for an undisclosed stake two years ago, in the largest private equity deal in the cement industry in India. The fund raised was to be used for both organic/inorganic growth and de-leveraging.
Around six years ago, Dalmia Cement Bharat had raised around Rs 115-120 crore from Actis. Actis continues to hold on to these shares and post-demerger, holds around 5.6 per cent in both Dalmia Bharat Sugar & Industries and DBEL.