"UltraTech to Acquire Kesoram Industries' Cement Business in All-Stock Deal"

Renowned industrialist Kumar Mangalam Birla is poised to take control of Kesoram Industries' cement business, a significant asset within the late B K Birla's business legacy. In a noteworthy development, UltraTech Cement and Kesoram Industries have unveiled plans for an all-stock deal, involving the demerger of Kesoram's cement business into UltraTech Cement, India's largest cement producer.

In separate statements, both Kesoram and UltraTech Cement confirmed the proposed deal, disclosing that Kesoram had initiated the demerger of its cement business and subsequently approached UltraTech Cement for collaboration.

UltraTech Cement's board of directors convened on Thursday to review Kesoram's proposal and approved a scheme of arrangement encompassing Kesoram, UltraTech Cement, and their respective shareholders and creditors.

Led by B K Birla's daughter, Manjushree Khaitan, Kesoram operates two integrated cement units in Sedam (Karnataka) and Basantnagar (Telangana), boasting a combined capacity of 10.75 million tonnes per year.

The enterprise value of the deal is estimated at Rs. 7,600 crore. UltraTech Cement is set to issue one equity share (face value Rs. 10) for every 52 equity shares of Kesoram (also face value Rs. 10). The deal values Kesoram at Rs. 173 per share, reflecting a 24% premium over the closing price on the BSE on Thursday.

Mangesh Bhadang, analyst at Centrum Broking, anticipates that UltraTech will elevate Kesoram's operations to its standards within six to nine months, leveraging its successful track record.

The transaction offers UltraTech an opportunity to expand its geographic reach in the competitive and rapidly growing western and southern markets of the country. The deal is subject to approval from shareholders, creditors, and regulatory authorities, including the National Company Law Tribunal and Competition Commission of India, and is anticipated to conclude in nine to twelve months.

As of March 31, 2023, Kesoram's cement business accounted for Rs. 3,517.45 crore, representing 99.54% of its turnover. The transfer of the business is expected to unlock value for shareholders and aid in deleveraging Kesoram's balance sheet, including debt reduction and interest outflow.

In a strategic move, non-convertible debentures of Kesoram listed on the BSE will be transferred to UltraTech, assisting in the company's effort to deleverage its stressed balance sheet with an outstanding debt of approximately Rs. 1,700 crore.

Kesoram, which had previously demerged its tyre business, will focus on its rayon, transparent paper, and chemicals businesses once the proposed scheme is implemented. India's cement demand is forecasted to grow by 8% in FY24.

BS