Highlights-

• Dalmia Cement Bharat (DCBL), and Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, "KKR") signed a definitive agreement under which KKR has agreed to invest up to Rs 750 crores in DCBL's wholly owned unlisted subsidiary Avnija Properties, which will house post restructuring DCBL's 9 million metric tonnes cement manufacturing capacity.
• KKR will invest in DCBL's wholly-owned subsidiary Avnija Properties, to fund its 10 million metric tonne per annum cement expansion. Of the estimated project cost of Rs 4,250 crore, DCBL has tied up debt of Rs 3,250 crore. The proposed investment will de-leverage the balance sheet of Avnija through the 15-20% equity dilution.
• DCBL had a net debt of Rs 1,547 crore. The debt in the cement business is around Rs 1,060 crore. After the restructuring and capital infusion, the debt to equity ratio is expected to come down.
• The company requires additional Rs 500- Rs 600 crore for setting up captive power plant for the 10 million cement plant.
• The promoters will invest Rs 250 crore through the equity route.
• Additional capital expenditure would be funded through operational cash flows in the next 2-3 years.
• DCBL is planning to invest Rs 4,250 crore for the fresh 10 million metric tonne capacity addition to be done over a period of next three years. The investment would be done in tranches and the capacity addition would be done in phases instead of the earlier plan of accelerated expansion.
• The company had earlier announced the restructuring of its operation in order to provide operational flexibility and seamlessness.
• As per the restructuring plan the company's board had approved a scheme of arrangement to transfer its cement, power and other businesses from DCBL into Dalmia Bharat Enterprises Limited (DBEL).
• DCBL will de-merge the cement undertaking, refractory undertaking, thermal power undertaking and certain other business into Dalmia Bharat Enterprises (DBEL), which at present is a wholly owned subsidiary of DCBL.
• The new entity will get listed on the stock exchange by the end of the current year.
• Post restructuring, DCBL will become a sugar company and will be renamed.
• Further, the cement and thermal power business will be housed under DBEL as two wholly-owned subsidiaries viz- Avnija Properties and DCB Power Ventures. DBEL will become a public listed holding firm of cement and power businesses.
• This transaction with KKR would provide a foundation of a long term relationship and will enable DCBL to enhance its capacity and market share through organic as well as inorganic routes, while benefiting from KKR's global network and proven value creation capabilities.
• The outlook for the cement industry in the southern market where the company has its major operations continues to remain bleak, although the cement prices have improved by Rs 15 to Rs 25 per 50 kg bag since January 2010.
• Of the Rs 750 crore proposed investment, Rs 500 crore will be available for immediate drawing, while the rest will be available in the next 18 months.
• Now that the required capital expenditure fund is being raised the company will focus on execution of the capacity expansions.
• Going ahead the power business will pursue its own fund raising activity.