India Cements puts off AP units sale plan

India Cements puts off AP units sale plan
Published: 24 February 2005

Buoyed by a heavy dose of funds from overseas investor Asia Debt Management, India Cements, South India’s largest cement manufacturer, has decided to shelve the plan to sell its Andhra Pradesh-based manufacturing units - Raasi Cement and Vishaka Cement - which have a combined capacity of 3.4Mt The ailing Chennai-based India Cements, which struck a deal late last year to raise Rs 655 crore through a mix of debt and equity by privately placing different financial instruments with the Hong Kong-based Asia Debt Management, says there won’t be any need to take up "harsh" measures as the company’s financials will receive a big boost in the coming months.

"There is absolutely no question of selling any assets. We had considered such measures when there were no alternatives before the company. But things today are very different," India Cements vice-chairman and managing director N Srinivasan told reporterts.

India Cements’ decision to abandon its asset-sale plans may come as a setback for cement majors, including the world’s largest players Lafarge and Cemex, which will now have to turn to buying relatively smaller capacities to take on the might of Holcim. The Swiss cement giant recently teamed up with Gujarat Ambuja Cements to take control of ACC and Ambuja Cement Eastern, which will give it control of around 20Mt or one-sixth of India’s total cement output.

India Cements, with a capacity of over 9Mt, had earlier agreed to take up measures, including divestment of its two cement units - Raasi Cement and Vishaka Cement - and sale of its non-core businesses as part of a corporate debt restructuring plan. However, India Cements is now in a position to breathe easy as the fresh fund infusion would substantially reduce its debt burden, which had shot up to over Rs 1,850 crore. The company is now targeting to slash its debt-equity ratio from the current level of 5:1 to 2:1.

India Cements, which had been on an aggressive acquisition spree a few years ago, had slipped into the red in recent years, unable to cope with its large interest outgo arising out of its debt component. Lacklustre demand and unstable prices in the South did not help matters either. However, in recent months, the demand situation in the South is recovering, and realisations have been improving. India Cements’ gross sales realisation during the first three quarters improved to Rs 2257 per tonne, up from Rs 2129 a tonne in the corresponding period of the previous year. "We expect the prices to improve further in the coming months," said Mr Srinivasan.