Anil Ambani’s Reliance Infrastructure (RInfra) on Thursday signed the agreement to sell its unlisted cement subsidiary, Reliance Cement Company, to Birla Corp for Rs 4,800 crore, a valuation analysts said was high.
In dollar terms, the acquisition by the MP Birla group flagship firm is pegged at about $140 a tonne, while the industry estimates the cost of building a new cement plant at less than $110 a tonne.
Reliance Cement has an integrated capacity of 5.08 million tonnes at Maihar in Madhya Pradesh and Kundanganj in Uttar Pradesh, and a grinding unit of 0.5 million tonnes at Butibori in Maharashtra.
“Under this transaction, Birla Corporation will acquire the 100% shareholding of RInfra in RCCPL. The transaction is subject to approval of the Competition Commission of India and other applicable regulatory approvals,” RInfra said in a statement.
The company had earlier said the cement plant sale would be used to partly reduce its consolidated debt of around Rs 21,500 crore.
SBI Capital Markets was the financial adviser to RInfra.
“It is an expensive transaction but this is the price at which deals will happen this year,” said Murtuza Arsiwala of Kotak Institutional Equities. “Once the revival in the economy happens, which many say is likely in a year’s time, then this price, too, would shoot up,” he added.
Birla Corp has interests in cement and jute, with cement constituting over 90% of the company’s revenue. The company has a total operational cement capacity of about 10 million tonnes with units in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal.
RInfra is one of the largest infrastructure companies developing projects through various special purpose vehicles in several high-growth sectors and has a strong presence in industries such as power, roads, metro rail, cement and defence.