UltraTech Cement divests entire equity in Chinese cement maker for $120 million

Cement manufacturer UltraTech Cement has announced it will divesting its entire 92.5 percent stake in China's Shandong Binani Rongan Cement Co.

"Krishna Holdings Pte. Ltd, ("Krishna"), incorporated in Singapore and a subsidiary of the Company's wholly-owned subsidiary UltraTech Nathdwara Cement Ltd. has informed that it has entered into a binding agreement for divesting its entire equity shareholding of 92.5 percent in Shandong Binani Rongan Cement Co. Ltd," the company said in a statement to the Bombay Stock Exchange.

"In terms of the agreement, Krishna will divest its entire shareholding at an enterprise value of RMB 845 Mn +/- working capital adjustments on closing, equivalent of approx. $ 120 Mn subject to customary closing conditions and regulatory approvals in compliance with the local laws."

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The Chinese firm was founded as a joint venture between India's Binani Cement and Rizhao Rongan Construction Materials Co in 2007 with a 70:30 equity structure. It has a 2 million tonne per annum clinker and a 0.3 million tonne per annum cement capacity in the Shandong province. The joint venture became part of UltraTech's portfolio after it acquired Binani Cement in November 2018 for Rs 7,950 crore.

UltraTech has an overall capacity of 102.5 million tonne per annum of grey cement with 20 integrated plants, 1 clinkerisation plant, 26 grinding units and 7 bulk materials. While the presence of Indian manufacturing companies in China is relatively small, UltraTech's operation was one of the biggest manufacturing footprints in China for an Indian firm.

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The Indian cement major first shared plans to wrap up operations in China in its financial results for the quarter and fiscal ended March 31, 2019, released on April 24, 2019. The company is in the process of selling the non-core assets acquired in UAE/China, the sale proceeds of which will be used to deleverage the balance sheet, UltraTech had said in its statement back then.

During an earnings call on January 24, 2020, Atul Daga - Executive Director and Chief Financial Officer, UltraTech Cement had revealed that the company will finalise the matter in March after the Chinese New Year.

"We have appointed merchant bankers for China and non-binding bids have been received. We will take action post Chinese New Year. Chinese New Year holidays begin from today and the country shuts down completely for 15 days. But now I will have to wait for this new virus issue which has come up. I don't want to travel to China. So we will look at the next steps on China in the month of March," Daga had said back then.

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