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HeidelbergCement set to acquire Gujarat Sidhee

As a precursor to the deal, GSCL has decided to increase its authorised capital to about three times from the current Rs 170 crore, reports Arun Kumar.

india Updated: Dec 24, 2006 21:41 IST
Arun Kumar

In a manner identical to a previous deal in which HeidelbergCement AG acquired Mysore Cement, the German major is close to acquiring the controlling stake in Gujarat Sidhee Cement Ltd (GSCL).

As a precursor to the deal, GSCL has decided to increase its authorised capital to about three times from the current Rs 170 crore, involving 17 crore equity shares of Rs 10 each, to Rs 500 crore comprising 50 crore equity shares of Rs 10 each. The company has already issued notices to the stock exchanges and holding an extraordinary general meeting (EGM) of shareholders on January 9.

According to sources close to the deal, GSCL, which has a paid-up capital of Rs 144.62 crore comprising 14.46 crore-equity shares, is expected to issue fresh shares to HeidelbergCement to give the foreign company a majority stake. In addition, HeidelbergCement would acquire marginal stakes from the existing promoters - the Mehta Group.

Sources in investment banking said under the deal, GSCL will issue fresh shares to HeidelbergCement and raise fresh capital that will help in meeting its future requirements. The Mehta Group would only sell part of their holdings and would divest the balance in the future in the secondary market. Since a substantial part of the acquisition will be invested in the company's capital (through fresh share issues), HeidelbergCement would prefer to pay a premium for the shares.

GSCL has a production capacity of about 1.2 million tonne per annum (mtpa), which can be scaled up to 1.5 mtpa with a marginal investment. The company's valuation is likely to be based at around $100 to $120 per tonne of cement, resulting in an enterprise value of around Rs 700 to Rs 800 crore. GSCL's share closed at Rs 24 on Friday.

Because of an ongoing litigation in the Securities and Exchange Board of India (SEBI) involving the German company, the GSCL transaction had been delayed, the sources said.

Last month, SEBI issued a directive to HeidelbergCement saying that the payment of non-compete fees to the promoters of Mysore Cements did not seem justified.

SEBI said, HeidelbergCement needs to pay Rs 72.50 per share to minority shareholders of Mysore Cement in its mandatory open offer for 20 per cent after acquiring controlling stakes from the promoters.

Under this deal, Mysore Cement had issued 6.65 crore-equity shares at Rs 54 each to HeidelbergCement. In addition, the German major had acquired 1.34 crore-equity shares from the promoters at Rs 72.50 per shares including a premium of Rs 14.50 towards a non-compete agreement.

However, the open offer was made at Rs 58 per share. SEBI in its order had stated that the open offer should be made at Rs 72.50 per share.
HeidelbergCement may move the Securities Appellate Tribunal to challenge SEBI's order.

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First Published: Dec 24, 2006 21:41 IST