On the recent deal with Shiva Cement, Anil Kumar Pillai, Director and CEO of JSW Cement, said that along with acquiring 35.6 percent of promoters' stake JSW will also take over the Rs 65 crore debt of the company.
In an interview with CNBC-TV18 he said that JSW will use a part of Shiva Cement's clinker for its Salboni unit and this acquisition will help in leveraging grinding operations in the eastern region.
Listing the company's future outlook, Pillai said that they will look to list JSW Cement in the next 2 years and plans to reach 30 metric tonne capacity by 2020.
Below is the verbatim transcript of Anil Kumar Pillai’s interview to Nigel D’Souza and Reema Tendulkar on CNBC-TV18.
Nigel: Let us talk about the consideration that you are paying, we are aware that you are going to be buying out the promoter stake, we are also told that you will be launching an open offer and ACC could be tendering that open offer. Could you tell us how much of debt will you be taking on to your books in this particular transaction?
A: As you know that we have concluded a deal yesterday for taking over the management shares of Shiva Cement. Management of Shiva Cement has tendered in 35.6 percent of their shares. We are paying Rs 14 per share -- that is what we are paying. We are also launching an open offer for 32 percent shares at Rs 14 and the current debt of the company is around Rs 65 crore.
Nigel: So you are taking the full Rs 65 crore on to your books?
A: Full Rs 65 crore of the debt has been taken over by us.
Reema: Shiva Cement has also planned some sort of an expansion. Could you tell us how that will be funded and what the incremental capex requirement will be for JSW Cement to pay out?
A: The current capacity of Shiva Cement is 0.2 million tonne of cement. They have a clinkerising capacity of 1.2 lakh metric tonne per annum. Now, going forward, what we intend to do is that we intend to put up a new plant of 1 million tonne clinkerising unit and for this clinkerising unit we feel that we need to make an investment of close to around of Rs 450 crore. So, of the Rs 450 crore, around 70 percent of it would be by means of debt and 30 percent would be by means of an equity.
Nigel: Why are you hiking clinker so much, from a smaller amount you are taking it all the way to around 1 million tonne, is there any plans to ship part of that clinker to your West Bengal unit, I believe you have a grinding unit over there, is that part of the plan and the limestone reserves available over here, it is sufficient to take care of all your expansion plans?
A: I will come to limestone reserves, around 60-80 million tonne of mineable limestone is available in the mine and as you correctly said, we have a expansion going on in the East, JSW Cemen’s thrust is in the East. 2.4 million tonne grinding unit is been put up at Salboni in West Bengal and as we speak, the commissioning of this plant should be taking place by March-April of the current financial year. So, it is in an advance stage.
Our original proposal was to use imported limestone, imported clinker for this particular grinding unit. Now, by taking over Shiva Cement and implementing an expansion at Shiva Cement, part of the clinker would be utilised from Shiva Cement for meeting the requirements of the grinding units which we have put up at Salboni. We are also going to put up a grinding unit in Odisha which would come up at Jajpur. So, this particular unit would cater to the clinker needs of these three grinding units.
Reema: The total payout by JSW Cement, Rs 180 crore roughly to acquire that Rs 66-67 crore, plus you will be taking on debt of Rs 65 crore, plus a Rs 450 crore clinker expansion, that will be an additional capex, what is the kind of benefit that you hope to derive from this particular acquisition because the amount that you are going to be paying out is quite considerable and secondly could this be a way that you would look at listing JSW Cement?
A: As you rightly said, we are looking to foray into the East. This particular acquisition would help us to leverage our cement grinding operations in the East basically which is the West Bengal, Odisha, Jharkhand and Bihar market which has got tremendous growth potential, that is number one.
Number two is we would also like to use this particular acquisition to enter, as you rightly said JSW is not a listed company, we would look at a listing somewhere close to in the year 2018 onwards, 2019 onwards. So, that would surely be one of our considerations.
Nigel: Could you tell us by 2018-2019 what will your total capacity be and from now till then what kind of a capex plan do you have because currently only 2,00,000 is functioning of this unit. We had RP Gupta who told us that it is making a negative EBITDA number as well this year. So, if you could help us out with those details?
A: Our plans are that by 2018 we should be having a capacity of 18 million tonne of cement and we also have a plan that by 2020, Parth Jindal, our Managing Director wants us to reach a capacity of 30 million tonne by 2020 which means that we will have to practically double our capacity from 18 million tonne to 20million tonne if we have to be at 30 million tonne.
Nigel: Plenty of inorganic growth?
A: We are looking at all sorts of opportunities and Shiva Cement becomes one of the opportunities which we have realised in the short period of time. With respect to your second question as to what would be our investment for putting up this clinkerising unit, as I had said, we shall be investing close to around Rs 450 crore for this particular expansion of Shiva Cement for putting up this 1 million tonne clinkerising unit.
Nigel: With Shiva Cement what is your capacity currently, 10 million tonne?
A: We are talking Shiva Cement capacity would be with respect to clinker. So, for every 1 tonne of clinker, we shall be adding 2.5 tonne of cement. So, this fits into our overall scheme of things because we were working on a principle of using imported clinker. So, this helps us to offset the imported clinker by using indigenous clinker.