Leading foreign funds such as Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund and Emerging Market Fund have together bought around 7.5% in India’s third-largest cement firm India Cements (ICL) for Rs 592 crore (US$150m)
These funds have bought the shares in a placement done by the company to qualified institutional buyers (QIBs). ICL issued 20.78 million shares at Rs 285 per share, including premium, to these QIBs.
ABN Amro Securities (India) and Deutsche Equities India were the joint global coordinators for ICL QIB issue. After allotment, the paid-up capital of ICL has increased to Rs 281.16 crore from Rs 260.37 crore. The promoter holding in ICL has been reduced by 2% to 28.42%.
"We are in the process of raising capital to fund a Rs 1,450-crore expansion plan that would double its cement production capacity to 18 million tonnes over the next two years, and to set up a 40-50 MW captive power project and buy two ships for coal transport. The QIB issue is a part of that," ICL joint president (corporate finance) VM Mohan told India’s Economic Times.
ICL is setting up two cement plants in Rajasthan and Himachal Pradesh with a total capacity of 3.5-4 million tonnes a year. The company has several mining leases in these two states and is looking to buy leases in Madhya Pradesh. Work on the greenfield projects will start in March 2008 with production expected by January 2010. ICL’s ongoing expansion is expected to be completed by mid-2008, taking the production capacity to 14Mta from the present 9Mta.
India Cements is also strengthening its coal supply chain through the purchase of two 40,000-tonne capacity ships to cap the cost of coal freight. The company imports over 900,000 tonnes of coal every year from Indonesia.
Increased construction activity due to government’s initiative in infrastructure development and a booming real estate market have created strong demand for cement over the past few years. Many foreign firms have either entered or have been trying to enter the domestic cement market for the past three years. The latest entrant was Portuguese cement-maker Cimpor, which paid Rs 322 crore for Grasim Industries’ 53.63% stake in Shree Digvijay Cement. Economic Times of India