Birla Corp shares fall 3% after Reliance Cement acquisition

"Birla Corp's expansion potential will also be significantly enhanced by valuable mineral concessions in several states, in addition to Madhya Pradesh," the company said in a statement about the deal.

Birla Corp shares fall 3% after Reliance Cement acquisition
Investors went on a selling spree, sending the stock of Birla Corp tumbling 3% or Rs 21 to Rs 660.60 a piece a day after the annoucement. Photo: Pixabay
By ZeeBiz WebTeam
Updated: Tue, Aug 23, 2016
12:17 pm
Mumbai , ZeeBiz WebDesk
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It seems like Birla Corp's investors aren't too happy about the company buying 100% in Reliance Cement, in a deal that was closed on Monday.

On Monday evening, the Anil Ambani-led Reliance Infrastructure sold 100% shareholding in Reliance Cement Company, to Birla Corporation. The deal was done for Rs 4,800 crore at a valuation of $140 a tonne.

While the deal will boost Birla Corp's capacity from 10 MTPA currently to 15.5 MTPA, it will help Reliance Infra to pare debt.

However, investors went on a selling spree, sending the stock tumbling 3% or Rs 21 to Rs 660.60 a piece a day after the annoucement. The completion of the deal was announced on Monday after market hours.

The stock had opened at Rs 688 higher from its previous closing of Rs 680.95.

"Birla Corp's expansion potential will also be significantly enhanced by valuable mineral concessions in several states, in addition to Madhya Pradesh," the company said in a statement about the deal.

Birla Corp chairman Harsh V Lodha said,"Reliance plants add a lot of strategic value to the existing cement business of Birla Corp. We have got not only modern and efficient plants but also excellent opportunity of synergizing the business of Birla Corp and Reliance Cement to gain maximum advantage in the region we operate in and increase our share in the rapidly growing cement market."

With this deal, Birla Corp plans to gain a sizeable presence in the profitable western market by expanding the Mukutban operations. The mining lease at Mukutban will let Reliance cement set up a clinkerisation unit of 3 million tonnes in the foreseeable future.

The deal was first announced in February this year.

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