The Amravati bench of the National Company Law Tribunal (NCLT) has approved a proposal of Sagar Cements to acquire Andhra Cements for Rs 922 crore; the Jaypee Group cement manufacturer currently undergoing insolvency proceedings will continue to be listed on the bourses.
The Sagar Cements board on February 16 approved a plan to nearly double the capacity of Andhra Cements to 3 million tonnes a year, involving a capital outlay of Rs 468 crore.
Of the Rs 922 crore of the proposed acquisition cost, Sagar Cements plans to raise a debt of Rs 600 crore and equity of Rs 322 crore.
The acquisition enables Sagar Cements to have a 95 percent stake in Andhra Cements with the public holding the balance five percent stake.
Clarifying that Andhra Cements will continue to remain listed, Sagar Cements said it will reduce its holding to 90 percent within 12 months and further to 75 percent within 36 months from the date of approval from the NCLT.
Andhra Cements currently has two manufacturing facilities in Andhra Pradesh, an integrated unit with clinker, cement and captive power at Dachepalli in Guntur district and the other grinding unit at Visakhapatnam, which also has around 107 acres of prime land in the city limits. The Jaypee Group entity also has four limestone mines with total reserves of over 200 million tonnes.
The board of Hyderabad-headquartered Sagar Cements on February 16 decided to discontinue the operations at the Visakhapatnam unit of Andhra Cements “due to the constraints resulting from the plant’s proximity to Vizag city”. Currently, both the units of Andhra Cements are under shutdown.
On the rationale for the acquisition, Sagar Cements said it helps further consolidation of the company’s position in the Southern markets, primarily in Andhra Pradesh and Telangana. It can also leverage its existing network and brand of Sagar, making the company one of the leading players in the Southern markets. Further, the company said the current acquisition cost of around $56 a tonne works to be favourable compared to Greenfield implementation cost of around $100 a tonne.
After acquiring Andhra Cements, the installed capacity of the Sagar Cements group will reach 11.25 million tonnes. Sagar Cements hopes the capacity expansion at Andhra Cements’ Dachepalli unit to be completed during the second half of FY25.
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