Moneycontrol Bureau
Shares of Shree Cements gained as much as 1.8 percent intraday Tuesday after the cement maker decided to buy cement grinding unit of Jaiprakash Associates that has been in debt-reduction spree and is selling most of its cement assets to reduce its debt.
"The board of directors accorded its consent to acquire 1.50 million tonne per annum (MTPA) cement grinding unit of Jaiprakash Associates situated at Panipat in the State of Haryana on going concern basis for consideration of approximately Rs 360 crore subject to adjustment for any financial indebtedness and net working capital taken over as of the closing date," said the company in its filing.
Managing director HM Bangur expects the due diligence process to be completed in two weeks. "Shortage of grinding unit led to the decision for this acquisition. We expect the Indian cement market to grow at 8 percent. To prepare for growth in cement industry, we have decided on this acquisition," he said.
CLSA maintains buy rating on the stock with a revised target price of Rs 9,500 apiece. The brokerage believes a small acquisition (JPA grinding unit) and on-going expansions are set to raise Shree’s capacity to 24 million tonnes (MT) in next 2-3 years (versus current 15 MT) making it one of the fastest growing firms in the industry.
The brokerage house also said the fourth quarter results of Shree Cements were above its estimates. "With 19-86 percent higher unit cement EBITDA than the peers, Shree Cements displayed its cost leadership with a unit EBITDA of Rs 1,170 per tonne during June-14 quarter (Q4FY14). The market conditions of course were also supportive as volumes and realisations rose strongly," it explained.
At 11:47 hours IST, the stock was quoting at Rs 7,941, up Rs 79, or 1 percent on the BSE.
Posted by Sunil Shankar Matkar
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