UltraTech to acquire Century Textiles' cement business

MUMBAI: Aditya Birla Group-owned UltraTech on Sunday approved the reorganisation of the cement business of Century Textiles and Industries and its absorption into UltraTech, giving itself the leadership in all regional markets in a deal that has long been in the works involving Kumar Mangalam Birla and his grandfather BK Birla.

With the planned reorganisation, UltraTech will get ready ownership of 13.4 MT capacity spread across Madhya Pradesh, Chhattisgarh and Maharashtra, helping the land-endowed Century to focus more on its real estate business and pare debt of about Rs 3,000 crore. UltraTech plans to take the entire debt on its books.

The demerger will involve issuance of equity shares to the existing shareholders of Century. For every eight equity shares of Century, the shareholders will get one equity share of UltraTech of a face value of Rs 10 per share.

UltraTech will issue 14 million new equity shares to the shareholders, increasing its equity capital to Rs 288.58 crore that will be divided into 288.6 million equity shares of Rs 10 each. The acquisition will contribute positively to the company's earnings, UltraTech said in a statement.

Besides, with this planned scaling-up of capacities in the eastern and central markets, India's largest cement maker will become the market leader in all possible regional markets in the country. It was already a market leader in the north, south and west. However, the company still has to secure the approval of the competition regulator. Other approvals from shareholders, creditors, stock exchanges and the NCLT are also pending. The transaction will take 6-9 months to complete and will be effective from January, 2019.

"UltraTech is in a growth phase and the acquisition will give us ready capacities in markets in which we want to grow," managing director of UltraTech KK Maheshwari told ET. With the addition of Century's cement plants, UltraTech will become the "undisputed leader in all regions of the country," he said.

After taking on Century's debt, UltraTech will have net debt of Rs 17,000 crore, with a net debt to EBITDA ratio of 2.35x. Maheshwari said that with the company generating cash every year, the leverage is within its comfort limits.

UltraTech has been on an acquisition spree. Last year, UltraTech acquired Jaypee Associates' six integrated plants of 21.2 MT and has also put in a bid of Rs 7,840 crore for the debt-stricken 6.25 MT Binani Cement.

If its plan for Binani is accepted and it edges out the Dalmia Bharat-led consortium, UltraTech will have a capacity of 116 MT. With the Century acquisition now finalized, UltraTech’s capacity is 110 MT.

Century Textiles and Industries comes under the parent group of Aditya Birla Group and is chaired by the 97-year old patriarch BK Birla, father of Aditya Birla and grandfather of Kumar Mangalam Birla. KM Birla also sits as the vice chairman of the company. Apart from cement, the company has interest in businesses as diverse as textiles, paper and real estate.

The cement business consists of three integrated cement plant units in Madhya Pradesh, Chhattisgarh and Maharashtra, with a total capacity of 11.4 MT, and a grinding unit in West Bengal of 2 MTPA. For the year ended March, 2018, it had reported revenues of Rs 4,306 crore and EBITDA of Rs 492 crore.