A V Birla group against hostile bids

The Birlas on Saturday announced the takeover of Trichy-based Dharani Cements at a cost of Rs 32 crore and additional liabilities of Rs 20 crore. In fact, this is the second acquisition by the 30-year old Kumar Mangalam who stepped into the shoes of his late fatherAditya Birla two years ago. The Birlas had acquired a pulp mill in Canada three months ago.

Kumar Mangalam and his close associate M C Bagrodia, who is the group executive president, said they were looking at several proposals for takeover in the cement industry. “But we haven’t earmarked any funds for takeovers,” Kumar Mangalam said. Shri Digvijay Cement is another company which has been targetted by the Birlas for takeover.

The AV Birla group is the second largest producer of cement in the country after ACC. As much as 19 per cent of the turnover of the group is from cement (with production amounting to 7.80 million tonnes this year).

He said the group was looking at the option of bringing all cement units under one roof. As of now, major companies in the group — Grasim and Indian Rayon — are operating independent cement units. “This is not possible in the short-term. It is a long-term plan,” he said. Besides, Century Textiles and Kesoram Industries, currently run by Kumar Mangalam’s grandfatherB K Birla, are also operating cement plants. The firms (with a sales turnover of over Rs 4,500 crore) are expected to come to the AV Birla stable at a later stage.

With the acquisition of Dharani, the group will start having a prensence in the South India market. Grasim, with an annual capacity of 5.2 million tonnes, has cement plants in Rajasthan and Madhya Pradesh. These three plants cater to the northern, western and eastern regions. Grasim will now seek shareholders approval through an extra ordianry general meeting to be held on May 25.

"The acquistion makes sense for Grasim as it would give a strong base in the fast growing markets of Kerala and Tamil Nadu,” Kumar Mangalam added. Other strategic advantages for Grasim would be DCL’s low operational cost due to its proximity to lignite sources and also sales tax incentives offered by the Tamil Nadu government.

Dharani Cement has an installed capacity of 200 tonnes per day, which is slated to go up by 0.83 million tonnes after the commissioning ofits Rs 237 crore greenfield project at Trichy.

Kumar Mangalam said the acquisition will provide Grasim with 750 acres of limestone-bearing land with a total capacity of 92 million tonnes of high-quality limestone. This reserve will meet the company’s limestone requirements for the next 65 years, Birla said. “Infrastructure is one area where we need to gear up and cement has an attractive future,” Birla said.