Century Textiles and Industries Ltd (CTIL) is focusing on growing its real estate business post its proposed divestment of cement division to Aditya Birla Group firm UltraTech. The company is envisaging capital requirement of Rs 2,000 crore to grow real estate venture and expecting the offloading of cement division to help cut debt and provide firepower to invest into real estate and paper business.
"Demerger of the cement business will result in deleveraging the balance sheet reduction of net debt to EBITDA to 1.6x (times), giving firepower to invest in real estate and paper business," CTIL said in an investors presentation.
While the cement business demanded intense capital investment to maintain market position, the company said its next phase of growth will come mainly from real estate, pulp and paper, and textiles.
"With a strong brand equity and national presence, Birla Estates is poised to capitalise on immense opportunities and focusing on becoming a significant player in the next 5 – 10 years," it said.
Given the large potential in real estate and its relatively marginal position in the cement business, it has been decided to demerge the cement business along with debt of Rs 3,000 crore, the company added.
In the real estate business, the development plan of 25 million square feet in five years will require loan of Rs 2,000 crore, it added.
It has a portfolio of land parcels of 30.8 acres at Worli and 132.4 acres at Kalyan in Mumbai and 45 acres at Talegaon in pune, totalling 208.2 acres.
Factors such as rise in per capita income, reducing mortgage rates, rapid urbanisation, smart city project and focus on affordable housing projects are favouring real estate business, according to CTIL.
On the other hand, the BK Birla Group company further said, said that its cement plants were old and require investment up to Rs 3,000 crore to upgrade and given the situation of its balance sheet, it was not able to do that.
"Rs 2,500 core of capex is required to add capacity to maintain capacity share and Rs 350 crore required to upgrade/ modernise the existing plants at all locations, " it said, adding "given stretched balance sheet at CTIL, the company is not in a position to invest in this business".
According to the company, it was "marginal player in the cement industry" with 3.25 percent capacity share.
Moreover, the average age of plants is 24 years and are comparatively older plants.
CTIL had on May 20 announced to merge its cement business through a 8:1 share swap deal with UltraTech. The deal included transferring of debt of Rs 3,000 crore to UltraTech and is expected to be completed in six to nine months.
The company has three integrated cement units situated in Madhya Pradesh, Chhattisgarh and Maharashtra with a total capacity of 11.4 mtpa (million tonnes per annum) and a grinding unit in West Bengal of 2.0 mtpa.
UltraTech, which is a leader in the segment, has an installed capacity of 96.5 mtpa of grey cement and upon completion of it will go up to 109.9 mtpa.
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