Binani Cement de-listing

The floor price has been announced at Rs. 82 the market price is Rs. 84 speculated de listing price is Rs. 120 (see SP Tulsian’s analysis on the parent Binani Industries

most of the floating stock seems to with a few entities (one would speculate that they are promoter linked) and hence de listing should be successful

promoters hold close to 70% in the company

both the non promoter shareholders who hold around 25% in the company have voted in favorof delisting

Delisting may not happen only there is no agreement on the price

It is a 2-3 months investment which could potentially generate 30% return with a limited amount of risk


Despite the company slipping into the red in Q2FY11, this is an excellent pick for the next 6 months to bank on, purely based on the news that it will acquire the entire public shareholding of about 30% of Binani Cement. After assuming the debt of Rs.1,350 crore of Binani Cement, it is assumed that the delisting price, to be discovered through a reverse book-building process, would be at around Rs.120, as against the current market price of Rs.90/ share of Binani Cement.

The rationale for investing in Binani Industries makes more sense than Binani Cement as post completion of delisting, Binani Cement, will most certainly get sold to a strategic investor (an existing cement company), at an EV per tonne of atleast $175. Binani Group is considered to be quite conservative and they would not have initiated this corporate move, unless such sale is likely to happen in the near future. Binani Cement can fetch a value of even upwards of $ 180 per MT, as capacity of 15 MTPA is considered quite huge and respectable. Only 3 cement companies are seen with this kind of capacity in the country, viz. Shree Cements, India Cements and Madras Cements, who could be termed as potential takeover targets. Also, being a new and a state-of-art plant will fetch a premium valuation. Thus, Binani Cement could fetch Binani Industries anywhere between Rs.8,000 to Rs. 8,500 crore.

Even if other businesses of Binani Industries such as zinc, glass fibre and composites, are excluded for the time being, which generated revenues and net profit of over Rs. 450 crore and Rs. 34 crore respectively in FY10, the excess of Rs. 4,173 crore (Rs. 8,300 crore cement business value less expected EV of Binani Industries of Rs. 4,127 crore) will be gains for the shareholders of Binani Industries. On present equity of 29.62 crore, this leads to a value of close to Rs. 1,400 per share of Binani Industries. Even if we take half of this residual value, it works out to be about Rs. 700 per share. Thus, the delisting of Binani Cement is a calculated and well-structured move on part of Binani Industries, so as to reap a bounty from the corporate actions.

We had recommended the stock on 8th Oct at Rs.168. It is targeted to move to Rs. 225 in 6 months (it inched close to this target on 15th Oct itself when it scaled a new 52-week high at Rs.246) and to Rs. 350 in 12 months, as the completion of delisting and strategic sale unfolds during this time period.

The whole premise of investing in binani cement is based on binani finding some worthy suitor for binani cement at an EV valuation of 180$ per ton. Now looking at other smaller cement companies like jk lakshmi cement and mangalam cement, these are available at an EV valuation of around 45-50 $ per MT.

So I find the fact difficult to digest that binani inds is going to find a buyer paying price as high as 175$ per ton for binani cement.

Plus, something like shree cement which is the classiest player in cement cant be compared with binani cement in terms of valuation bcos the former has revenues coming in also from power division.

Anybody with detailed knowledge of cement companies and their valuation is requested to put in some more insights.



Exactly, Hitesh ji

sorry for confusing the post by posting details about Binani Industries

I was talking about Binani cement and not Binani Industries

where there is an open offer and therefore an arbitrage opportunity