UltraTech Cement Limited, a major market player in India’s cement market, is in the final stage of selling its stake in Emirates Cement Bangladesh that produces cement under the brand name of ‘UltraTech Cement’.
UltraTech Cement Middle East Investments Limited, a subsidiary of UltraTech Cement Limited, owns the cement maker in Bangladesh.
The move of the entity has come within nine years of acquiring Emirates Cement Bangladesh amid extensive business competition along with rising operation cost in the country.
To this end, UltraTech, a concern of Indian business conglomerate Aditya Birla Group, has started a process of finalising deal with another multinational Germany-based HeidelbergCement Group’s subsidiary in Bangladeash — HeidelbergCement Bangladesh Limited.
Both the parties — UltraTech and HeidelbergCement, publicly listed companies — have already started taking regulatory approval in this regard but are yet to make any public announcement.
As part of the regulatory requirement, UltraTech Cement Middle East Investments Limited has already sought approval from Bangladesh Bank to sell its stake in Emirates Cement to HeidelbergCement Bangladesh, BB sources said.
UltraTech has sought approval from the Bangladesh’s central bank as the transaction would be completed in Bangladesh and the entity would repatriate sell proceeds from Bangladesh.
HeidelbergCement would clear the entire sell proceeds in Bangladesh to UltraTech, sources said.
Approached for comments, both the companies denied making any comment on the issue.
As per the BB sources, UltraTech has proposed selling shares at Tk 17.09 each, setting the total sales value of its stake in Emirates Cement Bangladesh at Tk 271 crore.
The central bank has been scrutinising the proposal and would finalise its decision soon, BB officials said.
As per the financial statement of UltraTech, Emirates made highest Tk 46.47 crore in profit after tax with around Tk 2.74 earnings per shares of Tk 10 each in the fiscal year of 2018-2019 since its operation was taken over by UltraTech in 2010.
With the equity investments of Tk 158.93 crore, Emirates incurred losses in five years out of nine years since 2010 and made profits in the rest four years.
In the fiscal years from 2010-2011 to 2018-2019, the company posted highest Tk 286.49 crore in net turnover in FY18 and lowest Tk 136.81 crore in FY11.
At the end of FY19, its reserve and surplus was Tk 56.69 crore negative. It had reached its peak in FY16 Tk 107.62 crore negative.
In the period, Emirates never managed to enter into a positive reserve and surplus zone.
Since acquisition, UltraTech Cement Middle East Investments is yet to receive any dividend from Emirates Bangladesh.
On the other hand, Heidelberg, an entity with Tk 565.04 crore paid-up capital, posted Tk 80.98 crore in profit with an EPS of Tk 14.33 in the year 2018.
Its net profit and EPS were Tk 150.79 crore and Tk 26.69 respectively in 2016.
Asked about the probable cause of the UltraTech’s move, Crown Cement Group chief adviser to the board Masud Khan told New Age that the country’s cement manufacturers had excess production capacity against the market demand and it had become a major problem for the industry.
The total market demand for cement was 31 million tonnes against the production capacity of 58 million tonnes in last year, leaving manufacturers in severe competition and forcing sales of cement at a very low margin, said Masud, also a former chief financial officer of multinational company Lafarge Surma Cement.
At present, there are 75 cement producers in the country and around 35 of them are active in business.
Masud also said that the latest budgetary measures that slapped 5 per cent source tax on turnover had become another burden for the sector along with the apprehension of increasing freight costs.
In 2005, ETA Star Cement established Emirates Cement in Bangladesh, a market attained global focus with it rapid growth.
Later in 2010, UltraTech’s wholly-owned subsidiary UltraTech Cement Middle East Investments Limited acquired the Dubai-based ETA Star Cement.
The acquisition of ETA included operation in Bangladesh along with UAE and Bahrain.
According to the market insiders, the country’s cement market would expand at the rate of around 10 per cent in 2019 riding on the heavy government expenditure for infrastructure development projects like Padma Multipurpose Bridge.
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