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Emami in talks with UltraTech, KKR, Temasek to sell stake in cement biz

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The Emami Group is in exploratory talks with investors such as UltraTech Cement and private equity funds including KKR and Temasek Holdings to sell stakes in the cement business, valuing it at Rs 5,000-5,500 crore, said people aware of the matter.

The Kolkata-based group is trying to reduce debt and focus on its core consumer business. The Emami management hasn’t yet decided on whether it should exit fully or partially or undertake asset-level disposals of mines and plants.

Emami Ltd shot up by 9.3 per cent to end at Rs 317.95 on Wednesday.

It has however dropped 12 per cent in the past month compared with little change in the broader Sensex. The cement business recently received regulatory clearance for an initial public offer (IPO).

It’s looking to raise about Rs 1,000 crore through the proposed IPO, which included new shares worth Rs 500 crore, and the rest as an offer for sale from existing promoters. Investment bank Nomura, also one of the advisors to the IPO, has been roped in for negotiations on a sale. Earlier in the week, the promoters of the diversified Emami Group — with interests in fastmoving consumer goods (FMCG), paper, real estate and cement — sold an additional 10 per cent stake to raise Rs 1,230 crore and pare debt.

In February, the promoters offloaded the first tranche of 10 per cent for Rs 1,600 crore.

With the latest sale, the promoters' stake in Emami has dropped to 52.73 per cent, having divested 45.4 million shares in total. Company executives told ET that the stake sale was primarily to reduce the debt at the promoter level, which now stands at Rs 2,200 crore. “Currently, our primary objective and endeavour is to pare the promoter debt to almost zero in six-eight months.

There will not be any further dilution of stake in Emami Ltd,” said Mohan Goenka, director, Emami Group.

“We are a diverse group and have many assets of value which can be monetised.

We are exploring all options, including strategic divestment, initial public offering or stake sale in group assets within the next six-eight months with an effort to meet our objective of debt reduction.” KKR, UltraTech and Temasek declined to comment. Emami Cement currently operates three manufacturing facilities at Risda in Madhya Pradesh, Panagrah in West Bengal and Bhabua in Bihar with a total capacity of 5.6 million tonnes.

In addition, the firm has mining assets in Guntur in Andhra and near Jaipur in Rajasthan. Emami started its cement business in 2007 and markets the product under the Double Bull brand.

The company’s primary market encompasses West Bengal, Chhattisgarh, Odisha, Jharkhand, Bihar, Maharashtra and Madhya Pradesh. The group has a distribution network of more than 2,200 dealers and over 5,000 retailers in 160 districts, according to its prospectus.

In addition, it has set up 110 warehouse-cum-sale depots at various locations to ensure efficient distribution. Founded in 1974 by RS Agarwal and RS Goenka, Emami owns businesses in sectors ranging from FMCG and personal care to healthcare, cement, newsprint and paperboard, biodiesel and edible oil, real estate, solar power, writing instruments and pharmacy retail. UltraTech, part of the Aditya Birla Group, has been consolidating through large acquisitions.

It acquired part of JP Associates’ cement business in 2017. KKR and Temasek have been looking at cement assets in the country.

KKR bought Dalmia Cements and sold it in 2017 at a 150 per cent return in less than two years.

KKR has also invested in south India-based Bhavya Cements through a structured credit deal.

The PE firm was also in discussions with the Kolkataheadquartered group for a Rs 1,000 crore structured funding line, ET reported in February 15, but that did not materialise. Temasek, among others, was eyeing a stake of up to 20 per cent in Wonder Cement, though the talks are yet to be concluded.




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