Among the India’s top five cement makers, Dalmia Bharat is expecting to complete the acquisition of Jaypee Cement – a part of Jaiprakash Associates – by the end of this fiscal year. The deal is taking “more time, than expected” since some clearances are “still awaited”, primarily from the lenders.

According to Puneet Dalmia, Managing Director and CEO, Dalmia Bharat Ltd, clearances should come over the next “couple of months” with the deal “expected to be consummated by the end of this fiscal”.

The deal’s cash out-flow earmarked is around ₹3,300 crore.

Jaypee Cement’s contribution to Dalmia Bharat’s volume in Q3FY24 (quarter ending December 31) was 0.4 million tonnes (mt).

“....we need a couple of more third-party approvals....mostly lenders, so (closing the Jaypee deal) is taking more time than expected. Hopefully, by the end of this quarter, we will look at consummating the deal,” Dalmia said during the post-results investors’ call.

Dalmia Bharat had in 2022 announced signing a definitive agreement with Jaiprakash Associates to acquire the latter’s cement plants in Uttar Pradesh, Madhya Pradesh and Chattisgarh at a cost of over ₹5,500 crore. No timeline had been announced for the completion of the deal.

The acquisition is expected to give Dalmia Bharat a strong foothold in Central India, which accounts for 15 per cent of the country’s cement demand.

Post-acquisition, Dalmia Bharat’s capacity mix will be more diversified, with 52 per cent in the East, 26 per cent in the South, 16 per cent in the central region and 6 per cent in the West, as against its current capacity mix, which is spread at 59 per cent in the East, 33 per cent in the South and 8 per cent in the West.

High-Cost Plant

According to him, Jaypee Cement’s plants “need more investments”.

A road map for investment and the way ahead is being prepared. Capacity utilisation continues to be low, considering dealers were previously “not very confident” in working with the brand. The plants are expected to be in an “investment phase” over 18-24 months.

“We have inherited high-cost plants. And it needs investments. We still do not have full control (of Jaypee Cement’s assets) to bring them under the same cost structure or pattern of Dalmia Bharat,” he said.

“We have spent one year learning (since the deal was announced) and we are getting the full plan ready (including investment details)... we will take some time stabilising the operations (too),” Dalmia added.

Investment apart from capex will also include branding.

“Dealers needed some confidence to work with the brand (Jaypee). So we are investing towards it” he said.

Volume-growth in ‘mid-teens’

Apart from price weaknesses, which continue to be seen for the December quarter to early January period, Dalmia expects cement volume growth to be in the “mid-teens” for both Q4 (January–March) and FY25 too.

The first two quarters saw muted volume growth, with recoveries being witnessed in Q3. The Jan – Mar period is seen as a historically strong quarter for cement-makers.

“There have been some price volatility with Jan, with exit prices being the same as Sept-qtr. But, we do see volume growth in the mid-teens (around 15-16 per cent). Long term prospects for the sector remain good, and price increases are expected to be in a moderate 1.5- 2 per cent CAGR,” he said.