KKR investment to de-leverage Dalmia’s cement business

KKR investment to de-leverage Dalmia’s cement business
Published: 10 May 2010

Private equity firm Kohlberg Kravis Roberts’ (KKR) move to invest up to INR50 crore in the cement business of Dalmia Cement (Bharat) Ltd (DCBL) will de-leverage the balance sheet, even as the group consolidates cement operations under one entity.

KKR will invest in DCBL’s wholly-owned subsidiary Avnija Properties, to fund its 10Mta cement expansion. Of the estimated project cost of INR4,250 crore, DCBL has tied up debt of INR3,250 crore.

KKR’s investment will de-leverage the balance sheet through the 15-20% equity dilution.

In the December quarter, DCBL had net debt outstanding of INR1547 crore. Of this, company executives state that around INR1060 crore is associated with the cement business. After the restructuring and capital infusion, analysts expect the debt to equity ratio to come down from 1:8 to around 1:1. Meanwhile, the promoters, too, will invest Rs250 crore through the equity route.

A few months ago DCBL had decided to spin off its cement and sugar business into separate entities. Post-restructuring, while DCBL will have the sugar business, a new entity Dalmia Bharat Enterprises Ltd (DEBL), through Avnija, will house all the cement activities. It will also have the refractory and power business.