The Hindu Business Line : Sagar Cements, Vicat of France plan joint venture

Vicat picture
Sales of euro 2.1 billon; presence in nine countries
Global cement capacity of 21 m.t,
Readymix concrete capacity of 9.7 million cu m
21 m.t. of aggregates (sand and gravel)
Sagar Cements screen
2007-08 turnover of Rs 275 crore
Plant in Nalgonda district, Andhra Pradesh
Capacity being expanded to 2.5 m.t a year.
Subsidiary company operates a 8.5-MW hydel power plant

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Hyderabad, June 24 Sagar Cements Ltd and Vicat S.A. of France will together set up a 5.5-million-tonne a year cement plant at a cost of Rs 2,500 crore in Gulbarga, Karnataka.

Vicat will also pick up a 6.67 per cent stake in Sagar Cements for a consideration of Rs 70 crore.

The proposed joint venture, Vicat-Sagar Cements, will also explore opportunities for holding assets overseas, Sagar Cements informed the stock exchanges today. This venture gives Vicat an entry into the Indian market while for Sagar Cements it offers them an opportunity to tap overseas markets.

The joint venture will have an equity capital of Rs 720 crore, of which Sagar Cements’ share will be Rs 196 crore and Vicat’s Rs 524 crore. The balance will come as debt, for which Vicat will be responsible, according to the statement.

The Gulbarga plant will have a 5.5-million-tonne a year cement grinding unit, a 4-million-tonne clinker facility and a 60-MW captive power plant. Operations are slated to commence in four years.

Sagar Cements said it would make a preferential allotment of one million shares of Rs 10 each at a premium of Rs 690 a share to Vicat for the French company to pick up a 6.67 per cent stake. This would expand the fully diluted equity share capital of Sagar Cements from Rs 14 crore to Rs 15 crore.

Apart from this, the joint venture also planned to set up a cement plant in Oman in collaboration with a local partner.

The Vicat group will have four representatives on the board of the joint venture and Sagar Cements three; Sagar Cements will propose the chairman and Vicat the chief executive officer.

Commenting on the agreement, Dr Anand Reddy, Joint Managing Director, Sagar Cements said, ``We look forward to leverage on Vicat’s high degree of experience and expertise in fields like waste fuel and product development.”

According to Mr Guy Sidos, Chief Executive Officer of Vicat S.A, the agreement illustrated the international expansion strategy of the group which aimed to expand its presence in high potential markets. ``We are confident about the growth momentum of our markets in Asia and India,” he said.

Recently, Belgium-based Ackermans & Van Haaren (AvH), an independent, €2.1-billion diversified group picked up a 14.3 per cent stake in Sagar through open market.

When asked on the impact of the JV on AvH’s stake, Mr Srikant Reddy, Director, Sagar Cements, told Business Line that there was no relation between them. ``However, after the issue of preferential shares to Vicat, the holding of alls share holders will decrease correspondingly, he said.

As on date, the promoters hold 45 per cent stake in Sagar Cements.

Sagar Cements’ shares closed on the NSE today at Rs 390.70, up 3.5 per cent from yesterday’s closing price.

Our Chennai bureau adds: In response to an email, Mr Piet Bevernage, member of the executive committee of AvH, told Business Line over telephone from Belgium that AvH had no intention of selling its stake in Sagar Cements. AvH had decided to focus a bit more on the minerals sector and found the minerals and infrastructure boom in India a sound combination for investing.

AvH also did not intend increasing its stake as it was aware that crossing the 15 per cent threshold would trigger an open offer to the shareholders. “We look forward to working with the Reddy family (the promoters) as they have made a good impression on us,” Mr Bevernage said.

More Stories on : Cement | Alliances & Joint Ventures | Mergers & Acquisitions

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