Dalmia Bharat stock drops 5% post deal to acquire cement assets of Jaypee Group

Shares of Dalmia Bharat tumbled 5% in early trade on Tuesday after it proposed to acquire the cement business of Jaypee Group’s flagship company Jaiprakash Associates and its associate firms. The cement producer's wholly-owned subsidiary, Dalmia Cement (Bharat) Limited (DCBL), has signed an agreement for the acquisition of clinker, cement, and power plants from Jaiprakash Associates at an enterprise value of ₹5,666 crore. The acquired plants are situated in Madhya Pradesh, Uttar Pradesh, and Chhattisgarh.

Reacting to the news, Dalmia Bharat share price opened 1% higher at ₹1,925.70, against the previous closing price of ₹1,905.70 on the Bombay Stock Exchange (BSE). However, the stock soon pared its gains and dropped as much as 5% to hit a low of ₹1,807, while the market capitalisation slipped to ₹34,174 crore.

Dalmia Bharat shares hit a 52-week high of ₹2,102.80 on January 17, 2022, while it touched a 52-week low of ₹1,212.60 on June 20, 2022. The stock has risen nearly 50% from its 52-week low, while it has jumped 44% in the past six months. Despite a strong rally in the last six months, the counter has delivered a negative return of 3% in the calendar year 2022. The share price has climbed 8% in a month, while it has dropped 2% in a week.

Dalmia Bharat in an exchange filing on Monday said the acquisition will enable the company to expand its footprint into the central region and will represent a significant step towards realisation of its vision to emerge as a pan India cement company with a capacity of 75 million tones (MnT) by FY27 and 110‐130 MnT by FY31.

The transaction is subject to due‐diligence, requisite approvals from lenders/JV partner of Jaiprakash Associates Limited and regulatory authorities, it added.

Meanwhile, the Jaypee group has sold its assets to reduce its debt burden. "Jaiprakash Associates ltd. (JAL), the flagship company has been taking steps to reduce its debt and repay to lenders and meet its commitments on pro active basis. In this regard, JAL had divested more than 20 MTPA cement capacity in favour of MIs. UltraTech Cement Limited during 2014 and 2017, while selling its controlling stake of more than 2 MTPA cement capacity to Dalmia Group in 2015,” says Manoj Gaur, executive chairman, Jaiprakash Associates.

Recently, the Adani family forayed into the cement industry by buying out Holcim's stake in Ambuja Cements and ACC. The value for the Holcim stake and open offer for Ambuja Cements and ACC was around $10.5 billion, making it the largest-ever acquisition by Adani Group. The country’s cement sector witnessed further consolidation in October when India Cements sold its entire stake in Springway Mining Private Ltd to JSW Cement for ₹477 crore.