Economy & Market
Standalone cement firms look for exit in south
Two years of flat growth in south India has pushed standalone cement firms to the brink with many of them opting for the exit route. After news of Sree Jayajothi Cements looking for buyers, it is learnt that the promoter of Bhavya Cements is also scouting for investment/buyers.
South India is reeling under excess capacity and cement manufacturers are operating their plants at only 70-75 per cent of the rated capacity. With growth languishing in lower single digits, standalone cement companies are unable to hold on.
The promoter of Bhavya Cements, V Ananda Prasad, has decided to exit from the cement business. The process to find potential suitors is on. The promoter is expecting around Rs 900 crore or roughly $160 a tonne, which is slightly on the higher side, sources said.
Bhavya has mandated Ernst & Young to find buyers for the 1.4 million tonne per annum cement plant that it operates in Thangeda, near Dachepalli in Guntur district of Andhra Pradesh. The company has approvals to expand capacities from 1.4 million tonne to 5 million tonne.
The sources said that the limestone reserves are very good. It is a very good asset, provided there is a slight scale down in valuation expectation.
However, E Venkat Rao, Director on the board of Bhavya Cements, dismissed talks of a sale. He said the company is not selling or looking for external funding since it already has investment interest from Wayzata Investment Partners, Rao said, adding the company ended the previous fiscal with Rs 435 crore revenues and a net profit of Rs 30 crore.