Kohlberg Kravis Roberts will invest up to INR7.5 billion (€128.5 million $166 million) in a wholly-owned cement-focused subsidiary of Dalmia Cement (Bharat), a Delhi-headquartered company with interests in cement and sugar, for an undisclosed stake.
The transaction is subject to necessary regulatory approvals.
Post restructuring, the subsidiary will own Damia Cement’s 9 million tons per annum cement manufacturing capacity, its stake in OCL India, which has a capacity of 5.3 million tons per annum, and upcoming green field projects with a capacity of 10 million tons per annum across India.
The global private equity firm’s investment is the largest private equity investment in India’s cement industry and will help form the largest private cement company in the country, KKR and Dalmia Cement said in a joint statement.
“While the cement industry by nature is cyclical, this is a long-term investment in a great family business, its management team and in India’s economy. This is a way to invest behind and contribute to the continued development of India’s residential, commercial, and public sector infrastructure,” Sanjay Nayar
, CEO of KKR India, said in a statement.
Cement companies in emerging markets have been attractive plays for private equity firms. Cairo-based Citadel Capital owns ASEC Holding, which controls cement production, construction and engineering assets operating throughout the Middle East and Africa; Global Investment House owns a Tunisian quarry and site on which it planned to develop a cement plant; China's Sichuan Zhiquan Special Cement received a $40 million investment in 2008 from firms including Merrill Lynch, Lunar Capital and Eos. Brazilian private equity firms GP Investments and Gavea have also owned assets servicing the cement industry.
Established in 1939, Dalmia Cement has cement plants located at Dalmiapuram and Ariyalur in Tamil Nadu and Kadapa in Andhra Pradesh with a capacity of 9 million tons per annum. The company manufactures specialty cements used in oil wells, railway sleepers and air strips. It also produces about 160MW of power through thermal and renewable energy.
“When we realigned our businesses in March 2010, one of our goals was to create separate pure play entities that could thrive on their own and have flexibility to raise capital,” Puneet Dalmia, managing director of Dalmia Cement, said in a statement.
KKR’s investment will enable the company to enhance its company and market share through organic as well as inorganic growth, Dalmia added.
In March, a KKR-led consortium including Standard Chartered Private Equity and New Silk Route Partners invested INR9.6 billion in India’s Coffee Day Holdings, which is engaged in coffee procurement, processing and retailing, and operates Café Coffee Day, India’s largest coffee house chain.
KKR’s other Indian portfolio companies include Aricent (earlier known as Flextronics Software Systems); Bharti Infratel, a telecom tower company; and Max India, a multi-business corporate providing healthcare and life insurance services.
The firm has invested more than $1.1 billion in India since 2006.