2024-11-05 05:45:01 :
Tamil Nadu-based Ramco Group is restructuring its corporate structure to eliminate cross-shareholdings and make it more attractive to foreign investors, a person directly familiar with the 90-year-old conglomerate’s plans said. Ramco Industries Ltd will become the holding company of the group after a multi-year effort comes to an end.
As a first step, Ramco Cement has sold its entire 16.23 per cent promoter stake in Ramco Industries to promoter entities Rajapalayam Mills and Ramco Management. Ramco Industries, through its subsidiaries, actually owns 24% of Ramco Cement.
“Ramco Industries will become a holding company. Not today but after some time,” the person said on condition of anonymity.
largest cement manufacturer in south india
Ramco cement has a production capacity of 25 tons/year and a market value of $At 22,000 crore rupees, it is the largest cement producer in southern India, while Indian cement giants Aditya Birla Group and Adani Group do not yet have a foothold in the region. Currently, the promoters’ stake in Ramco Cement is about 44%, of which Ramco Industries and Rajapalayam Mills together effectively hold nearly 37%.
“These things will be consolidated. Later, if we want to increase our stake in Ramco Cement, it will be done through the holding company. This is our plan for the next three to four years,” the person said.
Once Ramco Industries becomes a holding company, there will be more restructuring. “There may be a merger or demerger that results in a change in shareholding or promoter voting,” he said. The changes require regulatory and shareholder approval.
The Ramco Group has four listed companies: Ramco Cement, Ramco Industries, Ramco Systems and Rajapalayam Mills Ltd.
Rajapalayam Mills was established in 1938 and is now worth more than $The company invested Rs 4,000 crore and plowed part of the profits into Ramco Cement, the person said. “Similarly, Ramco Industries also invested in Ramco Cement. Ramco Cement, in turn, invested in Ramco Systems and Ramco Industries.” However, the market today does not value such cross-holdings, the person said, adding that the Groups have long sought to eliminate such cross-holdings, and foreign investors have shunned companies with large cross-holdings.
Ramco Cement holds 0.46% stake in Rajapalayam Mills, while Ramco Industries holds 1.73% stake.
The promoters will sell assets to obtain capital required to acquire stakes in Ramco Cement and other group companies until the promoter group consists only of Ramco Industries and founder PRV Raju’s family members, the person said.
Streamlined to help
Kavil Ramachandran, professor of entrepreneurship and family business at the Indian School of Business, said streamlining promoter shareholding will help the Ramco group. “Given the competitive landscape, the group must strengthen its structure and to do so, it is important to remove cross-shareholdings. Additionally, if the group makes any exit plans in the future, they must clean up their bases, especially if such a family-oriented business , streamlining promoter shareholdings will not only help attract more new investors, but also enhance its brand or image as a group.”
On October 29, Ramco Cement Company said it had sold non-core assets, mainly stocks, worth $376 crore since September. The company sold part of the compulsory convertible preference shares (CCPS) of Swiggy Ltd for $500 million, another one will be sold $Once Swiggy is listed, revenue will hit Rs 50 crore, the person said.
Ramco Cement says the company is expected to be put up for sale $Non-core assets worth Rs 1,000 crore. In a report on October 30, ICICI Securities Ltd termed the move as positive, adding that Ramco Cement will use the proceeds to reduce $5,026 crore as of June 2024.
While Raju’s family members hold around 52% stake in Rajapalayam Mills, other group entities Ramco Industries, The Ramaraju Surgical Cotton Mills Ltd, Sri Vishnu Shankar Mill Ltd, Sandhya Spinning Mill Ltd, Ramco Management and Ramco Cements also have stakes.
As of September-end, apart from family members in which Raju holds 26.3% stake, the promoters of Ramco Industries include Rajapalayam Mills, Ramco Cement, Ramco Management, Ramaraju Surgical Cotton Mills, Ramco Industrial and Technology Services Ltd, RCDC Securities and Investments Pvt Ltd , Ramco Pvt. Ltd. and Ramco Institutions Pte. Ltd. Ltd.
Meanwhile, the Raju family, Ramco Cement, Ramco Industries, Rajapalayam Mills and similar entities are the promoters of Ramco Systems. In Ramco Cement, the Raju family and similar shareholders formed the promoter group.
“So, if there is a cross-shareholding between two listed companies and one of the companies is on sale, then funds will flow into the selling company. If Ramco Cement sells Ramco Industries, funds equal to the value of the shares will go to Ramco Cement , which can be used to repay loans or expand, and the value of the shares has risen,” the person said.
Direct shareholding rises
The person explained that the promoter family’s direct shareholding in the group company was increased and cross-shareholdings were eliminated. “The promoters will raise capital and put it into the company so that these cross-holdings are eliminated. Part of it has already been done; so, it may take another 2-3 years,” the person said. Promoters and cement companies will raise funds by selling land assets and stakes held in non-core businesses. The family and the cement company will also sell land assets in the coming days.
“We have 150-200 acres in Kurnool available for sale among many other properties. We are waiting for a good value. It should get us around $2 billion rupees. We are selling another land bank next week. As such, we hope to sell other non-core assets and improve the balance sheet,” the person said.
There are three more steps to be completed, he said, adding that Ramco Cement’s stake in Ramco Systems will be purchased by other promoter entities after some time. The first is to restructure the promoter’s holdings in Ramco Systems and Rajapalalayam Mills; the second is to further consolidate the equity and reduce cross-shareholdings in other unlisted promoter group companies; and the third is to prepare Ramco Industries to become a group holding company.
The entire restructuring is aimed at improving shareholder value, he explained, adding that the Tata Group had undertaken a similar exercise earlier. However, he added that there were no talks between the Adani Group or any other entity to acquire Ramco’s cement business.
Improve ability
Ramco Cement has taken steps to increase production capacity by removing bottlenecks. Capacity expansion plans have gathered pace after Ultratech recently announced acquisition of India Cements Ltd and Adani Group announced acquisition of Penna Cement and Orient Cement Ltd. In just two years after the Adani Group entered the cement business, it has completed six consecutive acquisitions jointly engineered by Aditya Birla and the Adani Group.
The person rejected the hypothesis that overcapacity has led to low cement prices and unprofitable southern companies.
“When people say UltraTech’s acquisition of stake in the weak player (Indian Cements) in the South will change things, it is a way of saying that we are in a very strong position. It is better to compete against the strong players than against the weak ones. When I compete against the strong players The advantage I can build is huge, I just need to lower the price a little bit,” the person added.
Ramco Cement’s revenue for FY24 is $9,349.83 Crores. The company operates five integrated cement plants and six grinding plants. it has earmarked capital expenditures $1,200 crore in FY25, including maintenance capex. The company has spent Rs 281 crore in the June quarter.
The company is on track to achieve 30 tonnes/year cement production capacity by March 2026, which will be achieved mainly through more debottlenecking measures at existing plants and adding grinding units, the person said.
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