UltraTech Cement Ltd, India’s largest producer of the building material, will sell its entire stake in a Chinese unit for an enterprise value of $120 million (about Rs 900 crore at current exchange rates).
The Mumbai-based company said in a stock-exchange filing on Tuesday it has entered into a binding agreement to divest its 92.5% stake in Shandong Binani Rongan Cement Co. Ltd. It didn’t identify the buyer.
UltraTech, led by billionaire Kumar Mangalam Birla, said the deal value would be adjusted based on working capital.
The company didn’t divulge the reason for the sale. It didn’t respond to an email seeking comment till the time of filing this article.
The development comes at a time when relationships between India and China have touched a new low after a border clash last month left 20 Indian soldiers dead. In response, India has tightened scrutiny of Chinese investments, banned 59 popular Chinese apps and moved to curb imports of Chinese power equipment.
However, UltraTech’s decision to sell the Chinese unit is unlikely to be connected to the bilateral tensions.
The company had inherited the Chinese unit and a few other global assets after its acquisition of debt-laden Binani Cement Ltd in 2018.
Binani Cement had been undergoing insolvency proceedings since July 2017. In February 2018, UltraTech and a consortium of Dalmia Bharat and Bain-Piramal’s India Resurgence Fund had separately bid for the company.
The Dalmia consortium initially emerged as the preferred bidder with an offer of Rs 6,300 crore. However, UltraTech shelled out Rs 7,266 crore ($1.01 billion then) to acquire Binani Cement.
Last year, The Hindu Business Line newspaper reported that UltraTech planned to sell global loss-making units and joint venture businesses it inherited after the Binani acquisition. These units included Binani 3B, a fibreglass company with plants in Europe and Goa; the cement unit in China and a grinding unit in the UAE in which Binani owned 49%. It also reported that UltraTech would be able to recover half the amount it paid for the Binani acquisition through these sales.
Binani Cement owed more than Rs 3,900 crore to a group of lenders that include Edelweiss Asset Reconstruction Company, State Bank of India, Canara Bank and Bank of Baroda.
Binani Cement, along with its subsidiaries, had a global cement capacity of 11.25 million tonnes. Its India capacity is about 6.25 million tonnes.
The Indian operations comprised a 4.8-million-tonne integrated plant and a 1.4-million-tonne split grinding unit, both in Rajasthan. Its overseas operations included a 2-million-tonne grinding unit in Dubai and a 3-million-tonne clinker facility in China.