Dalmia Bharat, OCL India plan merger to create cement giant

NEW DELHI: The boards of Dalmia Bharat Limited and OCL India Ltd (OCL) have decided to merge the two entities, a move that will create the fourth largest cement maker in the country with an installed capacity of 25 million tonnes per annum and annual revenues of about Rs 10,000 crore.
Dalmia Bharat, the flagship company of Dalmia Bharat Group, and OCL are the two listed companies engaged in the cement manufacturing. Dalmia Bharat owns 75 per cent stake in OCL while the group promoters own 57.4 per cent equity stake in Dalmia Bharat.

OCL will merge with Dalmia Bharat Limited, which will issue fresh shares for the public shareholders in lieu of their ownership in OCL. Public shareholding in OCL is a little over 25 per cent.

Dalmia Bharat will not issue any fresh shares against its own 74.9 per cent stake in OCL. “We are simplifying the ownership in a transparent manner,” said Puneet Dalmia, managing director of Dalmia Bharat Group.

“The merger will simplify the holding structure, and create further consolidation in the cement sector,” he said.

Currently, promoters’ holding in OCL is through Dalmia Bharat, so new shares that will be issue to Dalmia Bharat will be cancelled. The share swap ratio for the merger will be 2:1 for OCL.

This means that for every two shares of OCL, one share of Dalmia Bharat will be issued. As result, postmerger, Dalmia Bharat Limited will issue only 71.45 lakh fresh equity shares.

The promoters’ stake in the merged entity will come down to 53.2 per cent from the present level of 57.4 per cent. Current OCL India has a market capitalisation of Rs 5,300 crore and Dalmia Bharat Limited has the market cap of Rs 17,600 crore, based on the closing price on BSE on Friday.

“This action further strengthens our position as one of the leading cement players in India, uniquely placed to support India’s economic growth, and demonstrates our commitment towards achieving simplification and consolidation,” Dalmia said.

Dalmia Bharat Group has rapidly built size and scale in recent years. It is now time for consolidation, Puneet Dalmia. “Currently we are operating at 58 per cent capacity utilisation and we are looking at increasing the capacity utilisation that will bolster profit margin,” he said.

At operating profit margin of Rs 1,258 per tonne per annum, Dalmia Bharat’s cement operation is the most efficient in the industry. Going forward, it will further consolidate as demands picks up and capacity utilisation improves, Dalmia said.