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My Home Industries (MHI) will rapidly expand capacity following its Rs 1,400 crore acquisition of Sree Jayajothi Cements, according to Ranjit Rao, Managing Director, My Home Industries.
MHI, which acquired Sree Jayajothi from Shriram EPC, hopes to expand the market for its ‘Maha Shakthi’ brand of cement in the South and East through the acquisition.
Sree Jayajothi has a cement plant with 3.2 million tonnes annual capacity in Kurnool, Andhra Pradesh.
MHI has about five million tonnes of capacity in Nalgonda, northern Andhra Pradesh.
Logistics account for more than one-third of cement costs. The acquisition in southern Andhra Pradesh gives MHI reach into Tamil Nadu, Kerala and Karnataka.
Scaling up
Though the Sree Jayajothi cement plant is operating at less than 40 per cent of its capacity, Rao is confident of scaling up production as the constraints to higher capacity utilisation were primarily finance and power availability.
MHI is surplus on both fronts, he said.
The company, an equal joint venture between the My Home group of Hyderabad and CRH Plc of Ireland, is zero-debt and has a cash surplus.
The partners will bring in over Rs 700 crore of additional equity to fund the deal, with the balance as debt, he said. The Hyderabad-based company has over 75 MW of captive power within the group, which is adequate to meet the needs of the acquired production facility.
With “a bit of debottlenecking”, the capacity utilisation can go up 75-80 per cent, he said.
Also, the capital plans are in place to set up grinding units and blending units to reach the targeted markets.
Relief for Shriram
The deal brings significant relief to Shriram EPC, which had acquired Sree Jayajothi from the original promoters, the Rajapalayam-based Jayajothi Group, in 2012.
The engineering-procurement-construction company had acquired the cement plant in lieu of its EPC contract dues T. Shivaraman, Managing Director and CEO, Shriram EPC, said the deal would help bring down the company’s debt even if it takes a hit from its exposure, which is well over Rs 700 crore.
Sree Jayajothi had been “cash negative the whole of last year”, he added.
Once Shriram EPC completely exits Sree Jayajothi, it will concentrate on the EPC business.
Its order backlog is over Rs 4,000 crore with new orders of about Rs 200 crore received during the first quarter of the current year.
It is the lowest bidder, L1, in a “reasonable number of orders”, said Shivaraman.
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