‘Jaypee acquisition led by desire to straddle entire country’

Fifteen months after announcing the acquisition of 21.2 mtpa of cement capacity from Jaiprakash Associates, the Aditya Birla Group’s UltraTech Cement on Thursday completed the transaction valued at ~16,189 crore. UltraTech is now the fourth-largest private cement company in the world. Aditya Birla Group Chairman KUMAR MANGALAM BIRLA, 50, tells Dev Chatterjee how the acquisition will help his company increase market share and why Premji Invest decided to pump money into his soon-to-be-listed financial services business. Edited excerpts:

What excites you about this acquisition and how will this add value for UltraTech’s shareholders?

The acquisition fills a gap in our geographical presence. For example, it gives us a presence in the high-growth markets of Satna (Madhya Pradesh), Uttarakhand, east Uttar Pradesh, and coastal Andhra Pradesh. The acquisition was driven by our desire of straddling the entire country. It also reduces our logistics costs. Our mission is to grow aggressively. Though there is no target of a 100-mtpa capacity, I am sure we will grow beyond that.

The immediate focus will be to upgrade Jaypee plants to the quality standards of UltraTech in the next two months. We are taking over part of Jaypee’s debt. Even then, our debt-to-equity ratio will be 0.6 and our debt-toEbitda (earnings before interest, tax, depreciation and amortisation) ratio will be 2.6.

Despite undertaking such a large expansion, our financial ratios will remain healthy. Financially, the acquisition will not make much difference to our gearing levels. In fact, it will add ~600 per tonne to our Ebitda after four quarters. It will be accretive in eight quarters, typical of any large acquisition.

What’s next for UltraTech? Will you expand overseas?

The action is in India, and hence this is our sole focus. Though we have a 4-mtpa capacity in West Asia, we have no plans to invest overseas.

How will the goods and services tax (GST) impact your companies?

The GST is a very good move and fundamentally changes the economy. We are ready for the roll-out across the group. Though it will not significantly impact our businesses such as cement, it will be positive for our retail business.

What does Premji Invest’s picking up a stake in your financial services business mean to you?

Premji Invest is investing in our financial services business at an enterprise valuation of ~32,000 crore before we list it, after the merger of Aditya Birla Nuvo and Grasim. We are very happy with a highquality investor like Premji.

What is your view on Indian telecom companies seeking government help to reduce spectrum fees or give fresh incentives?

I don’t think Idea Cellular has made any pitch to the government seeking incentives. We are not looking at any acquisition of companies facing a debt crisis.

Will you be looking at any of the high-debt companies where lenders would be looking at new investors, especially in a sector like textiles where you have synergies?

No, we are not looking at any of these companies. In fact, in the coming years, we will reduce our presence in the textiles business, which is a low-margin one. We will continue to remain in the garments business.