UltraTech Cement sees no CCI hurdle in Binani Cement deal

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UltraTech Cement, which has placed a bid of ₹7,000 crore for the stressed Binani Cement asset, is not expecting any hurdle in getting the Competition Commission of India’s approval for the deal.

Atul Daga, Chief Financial Officer, UltraTech Cement, said even after the acquisition, UltraTech will have only 14 million tonne per annum (mtpa) capacity in Rajasthan, while Shree Cement will reach 19 mtpa with its ongoing capacity addition of 2 mt.

“We may have a problem in getting the CCI approval, if we acquire a stressed asset in north Karnataka were we are very strong, but in Rajasthan, we still have room even after Binani acquisition,” he added.

According to Binani Cement’s website, it has a global manufacturing capacity of 11.25 mtpa with a domestic capacity of 6.25 mtpa and an integrated plant in China and grinding units in Dubai.

UltraTech Cement has agreed to pay ₹6,000 crore upfront and the rest in equity.

Internal study

This means that the banks will get over and above ₹6,000 crore they are trying to recover from the sale of stressed Binani Cement asset. Ashok Gupta, Director (Legal Services), Aditya Birla Management Corporation, said the Group has done enough analysis and internal study on the market before placing the bid for Binani Cement and there should not be any problem in getting the Competition Commission’s approval if UltraTech Cement emerges as the top bidder.

There are about 15 cement companies in the (northern) region where Binani Cement plant is located and even after the acquisition UltraTech Cement market share will be closer to 20 per cent, while the CCI is comfortable with one company having market share of 25 to 40 per cent, he added.

On the issue of price cartelisation by the government on the cement industry, Gupta said this allegation is there since the sector was liberalised in 1969 and earlier cases were filed almost every month.

Given the huge competition among 60-70 companies and different cost structure for each companies, it is impossible for cement manufacturers to indulge in cartelisation.

Cement prices are rising because of various factors including the increase in cost of land and mines acquisition, transportation expenses have gone up in the last few years, he said.

Asked on the strategy of cement companies to lower production to keep prices high, Gupta said companies cannot keep on producing cement just because they have the capacity as they have to recover fixed cost and operation expenses to stay profitable.

Source: THE HINDU BUSINESSLINE