How Dalmia Bharat benefited from acquiring Jaypee’s ₹5,663 crore property

At around 10.52 am Mohd. Dalmia India traded on 1,832.80 on the BSE, down 3.83%. Shares fell at least 5.1% with intraday lows 1,807 nieces in early deals. Its market cap is over 34,361 crores.

Similarly, shares of JP Associates traded 4.77% down on BSE at 11.18 pm, while Jaypee Power shares underperformed 8.03 each less 3.25%. So far on BSE, shares of Jaypee Associates have declined by about 6% and shares of Jaypee Power have fallen by about 5% on BSE.

According to a regulatory filing on Monday, Dalmia Bharat’s wholly owned subsidiary Dalmia cement (India) signed a binding framework agreement for the acquisition of clinker, cement and power plants from Jaiprakash Associates, the flagship company of the Jaypee Group and its affiliates. The acquisition will have a total cement capacity of 9.4 million tonnes (with clinker capacity of 6.7MnT and a thermal power plant of 280MW). These assets are located in the states of Madhya Pradesh, Uttar Pradesh and Chhattisgarh.

Dalmia Bharat to acquire cement assets from Jaypee at enterprise value 5,666 crores.

In its filing, Dalmiya said the acquisition will enable the company to expand its footprint in the central region and towards realizing its vision of emerging as a pan India cement company with a capacity of 75 million tonnes by FY27. would represent an important step forward. 110-130 MnT by FY31.

Presently, the transaction is subject to due diligence, requisite approvals from the lenders/JV partner of Jaiprakash Associates and regulatory authorities.

How will Dalmia Bharat benefit from this acquisition?

Motilal Oswal in its report said that Dalmia Bharat will enter central India with the acquisition of cement assets from Jaypee. It added, “The management had earlier indicated its target to reach grinding capacity of 70-75mtpa by FY27E. The completion of this acquisition will give the company a material capacity share of ~10% in Central India (over current installed ) potential in central India) and a step ahead towards becoming a pan India player.”

According to the Motilal report, Central India is an attractive market with favorable demand-supply. The region has the lowest per capita cement consumption in the entire country at ~170 kg v/s industry average of ~250 kg. Central India’s cement demand (~54mt) accounts for ~15% of the country’s total cement demand.

Also, merger and acquisition activities in the region have increased consolidation in central India. Currently, the sector is dominated by the top five players with a capacity share of around ~76% (FY23E). Currently the capacity utilization of the sector is around ~75%.

In recent times, new players such as SGC, JK Cement, and JK Lakshmi Cement have also entered this sector. Also, recently JSW Cement also acquired limestone reserves from ICEM and announced its plans to set up a grinding capacity of 5mtpa.

Motilal estimates that central India will register an effective supply additional CAGR of ~9% over FY 22-25E, while demand CAGR is expected to be 7-8% over the same period.

Further, Motilal’s note states that post the announced expansion and completion of the acquisition, Dalmia India’s grinding capacity will increase to ~59mtpa by FY24E (third largest player in the country, based on expansion plans announced by industry players). Feather).

On Dalmia Bharat’s valuation, Motilal’s note said, “The stock trades at 13x/10.4x FY24E/FY25 EV/EBITDA and EV/t USD89/86, respectively. It trades at an average EV/EBITDA of 10.4x/t.” 9.3 times in last 5/10 years. We reiterate our Buy rating on the stock with TP 2,000.”

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.