Reliance Infrastructure Ltd said on Thursday it has agreed to sell its cement unit to Birla Corp for Rs 4,800 crore ($710 million), as the company led by billionaire Anil Ambani-led strives to pare debt and shifts focus to the defence manufacturing business.
The deal for Reliance Cement Company Pvt Ltd comes after Birla Corp’s proposed acquisition of two cement plants of Lafarge India fell through due to regulatory issues.
Reliance Infra said in a statement it has signed the final binding agreement with the flagship company of the MP Birla Group for the unit.
Reliance Cement has an integrated cement capacity of 5.08 million tonnes at Maihar, Madhya Pradesh, and Kundanganj, Uttar Pradesh as well as a grinding unit of half a million tonnes capacity at Butibori, Maharashtra. The deal was struck at $140 a tonne, it said.
According to Reliance Cement’s website, the company is developing a plant at Wani in Maharashtra with annual capacity of 5 million tonnes and had planned to increase its capacity to 15 million tonnes a year.
Birla Corp has a total operational cement capacity of about 10 million tonnes a year with plants in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal.
The transaction is subject to approval of the Competition Commission of India and other applicable regulatory approvals.
Debt, defence business
Reliance Infra had said in October last year that it planned to sell the cement business as part of a strategy to divest non-core assets.
According to media reports at the time, about 10 companies including PE firms such as Blackstone, Carlyle and KKR were sounded out for the sale. In November, Reliance Infra said it had shortlisted seven bidders for its cement business. The company said also that it was looking to sell a stake in its road projects to cut debt and retune its focus on its defence business.
Reliance Infra's debt was Rs 26,253 crore at the end of March 31, 2015, according to its annual report.
Earlier this month, Birla Corp, Blackstone and PE firm Baring later emerged as the top contenders for the cement business.
To boost its defence business, Reliance Infra last year pipped several other business groups including Munjals of Hero Group and Mahindras to ink a deal with Nikhil Gandhi-promoted SKIL to buy management control of Pipavav Defence & Offshore Engineering Co.
The company has also set up unit Reliance Defence Ltd and 11 step-down subsidiaries to make advanced weapon platforms, equipment, systems and hardware for the armed forces, according to its website.