Bessemer Venture Partners and New Vernon PE-backed engineering procurement and construction firm Shriram EPC has acquired majority stake in Andhra Pradesh-based Sree Jaya Jothi Cements Ltd (SJJCL) in a unique deal through converssion of debt into equity. The cement firm could not pay for the services provided by Shriram EPC to build the cement unit’s assets.
SJJCL owed Shriram EPC around Rs 500 crore, of which the convertible option was around Rs 300 crore. After the conversion, Shriram EPC has acquired 51 per cent stake in SJJCL.
Shriram EPC scrip rose 1.7 per cent to close at Rs 98.45 a share on the BSE in a strong Mumbai market on Tuesday.
It has also approved a significant investment by the Shriram Group in the equity share capital of SJJCL through equity or convertible instruments, directly or through its associates.
SJJCL has been looking for a buyer for last two years. One sources privy to the development said, “The first to look at Jaya Jyothi was Ambuja Cements, but it backed out due to some limestone issues. Last April, Anil Dhirubhai Ambani Group’s cement subsidiary Reliance Cement, headed by veteran Sumit Banerjee, was in talks with the company for a possible buyout. But SJJCL was seeking a valuation on the basis of capacity utilisation of 6000 tonnes per day and even though its grinding capacity is 3.2 million tonnes its production was far less. Thus the deal did not work out on valuation tussle.”
When contacted, T Shrinivasan, managing director of Shriram EPC, said that he was in a board meeting and could not comment on the development. Calls to SJJCL also went unanswered.
As Reliance Cement walked out of the deal, SJJCL started courting Portugal-headquartered Cimpor for a possible purchase. Cimpor is one of the world’s top 10 cement companies and has interest in India through its Gujarat-based firm Digvijay Cement, which it had acquired in 2008 from Grasim Industries. An e-mail query sent to Cimpor did not elicit any response till the time of publishing this article.
Although Jaya Jothi’s core business is textiles, it has presence in other sectors which include transportation, education and power & energy management. Its cement unit in Andhra Pradesh was set up in 2006. The company owns a 3.2 million tonne greenfield cement plant and a 2 million tonne clinker facility in the Kurnool district.
Shriram EPC Group is part of the $8 billion Shriram Group, which has diverse interests across financial services, IT, project engineering & construction, property development, life insurance and general insurance. Shriram EPC is a $ 290 million company.