Orient Cement promoter and Industrialist CK Birla has reportedly approached billionaire Gautam Adani to sell his promoter stake in the listed cement company. This move comes after Birla turned down initial offers from domestic players that did not meet his valuation expectations.
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Additionally, senior management representatives from both sides have convened to explore the possibility of a deal, particularly for the Adani Group, which presently possesses India's second-largest cement capacity, sources were quoted as saying by The Economic Times.
Earlier, it was reported that JP Morgan was roped in by Birla to find a buyer. The promoter family holds 37.9% stake in the cement company with a market valuation of Rs 3,878 crore.
Over the past three months, the stock has surged by 29% in anticipation of a sale. The upcoming transition will activate an open offer, as per takeover regulations. This requirement stipulates that any incoming promoter or controlling entity must purchase an additional 26% stake from the existing minority investors.
In recent years, Orient faced challenges in its growth trajectory primarily due to its focus on deleveraging the balance sheet. Nevertheless, it achieved a remarkable 80% reduction in its gross debt from FY18 to Q1FY24.
During FY23, the company's revenues displayed an 8% increase, reaching Rs 2,949 crore. Capacity utilization saw a 300 basis point rise, but the operating profit (Ebitda) witnessed a 37% year-on-year decline, settling at Rs 376 crore. This decline was primarily attributed to "unprecedented cost inflation throughout the year, particularly in energy sources." Additionally, increased demand from the B2B segment after November 2022, resulting in higher sales of Ordinary Portland Cement (OPC), impacted profitability adversely.