Bangur family-owned Shree Cement is in non-binding talks to acquire between 40% and 72% stake in Sanghi Cement for and enterprise value (EV) of Rs 6,000 crore. Indicative commercial terms have been shared. The talks are not exclusive and other parties could also be simultaneously discussing a deal. Due diligence has not started.
Commercial terms could vary depending on the outcome of due diligence. The talks could end up being inconclusive. The EV of Rs 6,000 crore includes debt of Rs 1,800 crore. This places the equity value being discussed at Rs 4,200 crore. At this valuation, Shree Cement could fork out between Rs 1,680 crore and Rs 3,024 crore for the quantum of equity stake being discussed if a deal were to work out, not including the cost of an open offer.
In the past rivals such as Ultra Tech, Dalmia Bharat and JSW Cement are also said to have engaged in informal discussions for a potential acquisition but no deals took place.
Sanghi Cement posted a loss of Rs 221 crore on revenue of Rs 720 crore for the first nine months of 2022-23. It is yet to report its fourth quarter results. Sanghi Cement has a production capacity of 6.1 mn metric tonnes per annum. It caters to the western Indian Market of Gujarat, Rajasthan, Maharashtra and Madhya Pradesh. It also owns two terminals strategically located near the coast which facilitates transportation of raw material. The company owns a 143 MW captive power plant.
