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Blackstone, Temasek in Talks to Acquire 15-20% Wonder Cement Stake

November 10, 2018

Private equity investors Blackstone Group and Temasek Holdings are in separate discussions to acquire 15-20% in Wonder Cement, part of Rajasthan-based RK Group, for Rs 1,000 crore. Wonder Cement is one of the largest cement makers in north-western India. The deal is expected to value the company at $800-$900 million (Rs 6,000-6,600 crore). Investment bank JP Morgan has been hired to run the process. The proposed fund infusion will be used to increase the capacity from 6.75 million tonnes per annum (mtpa) to 11mtpa by FY19. Wonder Cement, part of Ashok Patni-led RK Group, is in the process of expanding capacity to 8.75 mtpa by setting up a grinding unit in Maharashtra with a capacity of 2 mtpa. Currently, markets like Rajasthan, Western Madhya Pradesh and North Gujarat contribute about 80% sales revenue of Wonder Cement. Group companies of RK Group include RK Marble and Jaipur based home financing company Wonder Home Finance. Jagdish Chandra Toshniwal, managing director, Wonder Cements, did not respond to queries. Blackstone and JP Morgan spokespersons declined comment. Mails sent to the Temasek spokesperson did not elicit any response till press time. Besides the unit in Maharashtra, the company plans to set up an additional unit in Madhya Pradesh. Wonder Cement, which requires Rs 2,500-3,000 crore for expansions, plans to raise Rs 1,000 crore from PE investors and the rest through internal accruals, said one of the persons cited above. According to analysts, cement prices, which were flat-to-marginally lower in September, are expected to move up in the coming months, setting a clean field for any new investor. “Rising capacity utilisation will lend pricing power to the industry. This along with moderating cost inflation gives us comfort on margin outlook. Historical analysis suggests that cement price hikes are higher than WPI (Wholesale Price Index) in periods of rising utilisation,” Morgan Stanley analysts Ashish Jain and Mukund Sarawogi wrote in a research note on September 20. “We stay constructive amid strong demand growth and slowing capacity addition resulting in rising utilisation. Pace of cost inflation will ease in the second half of the fiscal, which, coupled with rising utilisation, led price hike will drive solid earnings growth.”

 

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