Shriram EPC expects to induct an equity partner in Sree Jayajothi Cements, in which it has a majority stake, by December.
The partner, a private equity fund, is likely to infuse over Rs 400 crore, which will help improve liquidity for Shriram EPC, fund the establishment of a captive power plant in the cement plant, and to pay the erstwhile promoters of the cement unit, according to T. Shivaraman, Managing Director.
In an informal interaction with mediapersons following the company’s AGM, he said discussions are at an advanced stage and the deal is likely to be finalised before December.
This will be a significant relief for Shriram EPC, which acquired the 3.2-million-tonne a year cement plant in Kurnool district, as compensation for dues the cement company owed it for EPC contract it undertook. The total outstanding was about Rs 563 crore as on December last year. Shriram EPC took a 19 per cent stake directly and a 49 per cent stake through an associate company, Spark Environmental Technology Ltd.
Shivaraman said the facility has stabilised well over the last one year it has been in operation. The capacity utilisation is around 45 per cent with power supply being the major constraint. With the establishment of a captive power plant, capacity utilisation is bound to improve. There is provision to significantly expand the production.
The cement plant has mining clearance in areas with reserves of about 80 million tonnes of limestone with additional approvals in process for about 180 million tonnes. Once the cement demand picks up with a turnaround in the overall economic scenario, Sree Jayajothi will be a valued asset.
According to the annual report for 2011-12, Shriram EPC will be coming out with a rights issue in the current year. The structure of this move to hike capital is being worked out.