Dalmia Bharat on Friday said it has inked a pact with KKR to acquire the global private equity giant's 15% stake in its subsidiary Dalmia Cement Bharat Ltd for over Rs 1,218 crore in a cash and stock deal. The deal has earned the private equity player a return of 2.4 times on its investment of Rs 500 crore that it made in September 2010.
"Dalmia Bharat Ltd (DBL) signed a definitive agreement with KKR, under which it will acquire KKR's 15% stake in DCBL in return of KKR getting 8.5% stake in DBL as well as Rs 600 crore in cash," Dalmia Bharat Group Managing Director Punit Dalmia told PTI.
This will not only simplify DCBL's shareholding structure, but will also make the cement maker a wholly-owned subsidiary of DBL, he added.
According to a regulatory filing by DBL, the firm will make a preferential issue of 7.5 million shares to KKR at Rs 825 a share and pay KKR Rs 600 crore ($89 million) in cash for its around 15% stake (about 3.79 crore shares) in DCBL. The DBL board also approved the deal.
Reacting to the announcement, shares of DBL fell by 4.8% at the BSE during the day. Later, the stock pared some of losses to close down by 0.94% at Rs 780.70.
"It has been a great partnership in the five years. We have been benefited tremendously from KKR's network, strategic expertise and experience in value creation. Our capacity increased from 9 million tonnes (MT) to 25 MT," Dalmia said.
After KKR's investment, the firm did four acquisitions, greenfield expansions among others. DBL now has presence in South, East, North-East and Western India, he added.
When asked if DBL purchased the stake in its cement arm eying the opportunities arising from the proposed amendment to the MMDR Act, Dalmia said the firm will concentrate on ramping up volumes and cost optmisation in the short term.
"DBL is open to opportunities that come, but for now we will work on consolidating operations and work on increasing our market share," he added.
KKR India CEO Sanjay Nayar said: "We believe that Indian macroeconomic growth and infrastructure story is poised for a significant uptick in coming years and the consolidation in cement industry is likely to happen."
Post the agreement, KKR will be the largest institutional shareholder in DBL.
This is the first major deal in the cement sector after the government last week sought views from public on amending the Mines and Minerals (Development & Regulation) Act, 2015 to include provisions allowing transfer of captive mines granted through procedures other than auction.
The amendment will allow M&As worth billions of dollars in the domestic market, especially in the cement sector where several deals are stuck like those of Jaiprakash Associates and Lafarge. It will also open the route for cement companies to sell stake to raise funds for expansion.
