Reliance Infrastructure in focus on Debt restructure plan

Reliance Infrastructure an ADAG Group company decided to exit the cement business by putting privately held Reliance Cements up for sale. The company had divested its stakes in non-core businesses including cement to bring down the debt. Cement companies Heidelberg, India Cement, Shree Cement, Birla Corp and JK Cement, besides bulge bracket private equity players Blackstone, Carlyle and KKR, are in the the race to acquire Reliance Cement.

Reliance Group has recently mandated Morgan Stanley and SBI Caps to find potential buyers as the group has decided to focus on new growth areas like defence. Earlier, the company had plans to monetise the cement operations by roping in a joint venture partner and using that cash to fund the acquisition of Pipavav Defence and Offshore Engineering, but this did not generate sufficient interest.

Reliance Cement is a fully owned subsidiary of Reliance Infrastructure started in 2007. The cement foray was originally linked to the growth of its power business with fly ash generated from its Sasan power project being used as a key raw material. The company is expecting an enterprise valuation of its cement business at Rs 5500 to Rs 6000 crore for the business.

The company has a total installed capacity of 5.8 million tonnes per annum (MTPA). Out of the total capacity, 2.8 MTPA is at the flagship unit in Maihar, Madhya Pradesh that was commissioned last year. The remaining 2 MTPA are in Kundanganj, Uttar Pradesh and Butiburi in Maharashtra. It  also has lease to extract limestone in Madhya Pradesh, Karnataka, Uttarakhand, Chhattisgarh, Himachal Pradesh and Rajasthan. Reliance Cements is sold in UP, MP, Jharkhand, West Bengal and in select cities of Maharashtra.

Reliance Infrastructure's original plan was to scale up operations to 15 MTPA over the next 3-5 years with integrated units in MP and Maharashtra, but the capital intensive plans were put on hold as the group got stressed with high debt in the recent years. Reliance Infrastructure's total debt stood at Rs 25766 crore as of FY15.

The shareholding pattern of Reliance Infrastructure indicates that FII holdings contracted by 131 basis points to 18.31 per cent and DII holdings expanded by 55 basis points to 17.81 per cent during June 2015 quarter. The share price of the company increased by 1.78 per cent on BSE in early trades and is trading at Rs 363.55 on intraday basis.

Reliance Infrastructure is in the business of generation, transmission, distribution and trading of electricity. The Company operates in the engineering, procurement and construction (EPC) segment of the power and infrastructure sectors. It is also engaged in implementation, operation and maintenance of several projects through special purpose vehicles in various infrastructural areas. It operates through two segments viz. Electrical Energy and Engineering, Procurement, Construction (EPC) & Contracts.