Sunday, July 14, 2024

Adani, ArcelorMittal, and JSW Cement Enter Bidding War for Vadraj Cement Amid IBC Proceedings

In a significant development, entities affiliated with the Adani Group, JSW Cement led by Sajjan Jindal, and the ArcelorMittal Group have emerged as key contenders in the ongoing bid to acquire Vadraj Cement. The cement company, which is part of the ABG Shipyard group, is currently undergoing the Insolvency and Bankruptcy Code (IBC) process, as per sources familiar with the matter.

The genesis of this situation dates back to August 2018 when the Bombay High Court issued an order for the winding up of Vadraj Cement. This decision came in response to a plea by a trade creditor, Beumer Technology India, seeking the court’s intervention for the recovery of outstanding dues. Frustrated by the sluggish pace of asset sales, the court eventually approved the transfer of the debt resolution process of Vadraj Cement to the National Company Law Tribunal (NCLT) on September 4, 2018, based on a petition from a banking institution.

While the bidding process unfolds, lenders overseeing the proceedings have recommended Pulkit Gupta, backed by Ernst & Young (EY), as the interim resolution professional for Vadraj Cement’s bankruptcy resolution.

As for the potential financial considerations, sources suggest that interested buyers are expected to submit bids ranging between ₹2,000 crore and ₹2,500 crore. This valuation is against the backdrop of Vadraj Cement carrying a debt burden of ₹7,000 crore. The lending consortium comprises prominent banks such as Punjab National Bank, Union Bank of India, Central Bank of India, Indian Overseas Bank, Bank of India, Bank of Baroda, UCO Bank, and Yes Bank.

Vadraj Cement’s infrastructure assets include an integrated cement manufacturing facility, featuring a 10,000 TPD (tonnes per day) clinker unit located in Kutch and a 6-million-tonne (mt) cement grinding unit situated in Surat, Gujarat. Despite these substantial facilities, both cement units remain non-operational due to the sale of captive power plants that supplied fuel to the cement plants, a move prompted by a loan default.

The company’s complex also encompasses limestone mining rights and a captive jetty in Kutch. Notably, the cement industry’s entry into Vadraj Cement’s fold could mark a strategic move for ArcelorMittal, particularly given its proximity to the steel plant acquired from Essar Steel. The symbiotic relationship between the steel and cement sectors arises from the advantageous properties of steel slag, which can be blended with clinker to reduce costs and the clinker factor.

While Adani and JSW Cement have publicly expressed plans to augment their manufacturing capacities over the next five years, with Adani proposing an increase to 140 mt and JSW Cement aiming for a production hike to 60 mt, the Vadraj Cement acquisition remains a pivotal move in the competitive landscape of the cement industry. The outcome of the bidding process, especially in the context of potential entrant ArcelorMittal, adds an intriguing dimension to the evolving dynamics of the sector.

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