Kesoram Industries shares jump 5% on demerger of cement biz to UltraTech Cement

Shares of Kesoram Industries Ltd were locked at their 5 per cent upper circuit limit in Friday’s trade after the company demerged its cement division into UltraTech Cement, with its board approving a composite scheme of arrangement between the company and UltraTech Cement for the same.

Kesoram Industries shares rose 5 per cent to Rs 146.05 on BSE. Kesoram's cement business consisted of two integrated cement units, one at Karnataka and the other at Telangana, with a total capacity of 10.75 mtpa. Out of this total capacity, 8.50 mtpa was clinker-backed and 2.25 mtpa was a surplus grinding capacity. The cement business also had a 0.66 mtpa packing plant in Solapur, Maharashtra.

Under the demerger scheme, UltraTech Cement will issue 1 equity share of the face value of Rs 10 each for every 52 equity shares of Kesoram of face value Rs 10 each, as recommended by the valuers and accepted by the UltraTech board.

A total of 59,74,301 new equity shares of UltraTech Cement will be issued to the shareholders of Kesoram as on the record date.  Shares of UltraTech Cement were trading flat at Rs 9,005 on BSE.

"We believe this deal is structurally positive from long term perspective for Ultratech as the company has track record of turning around businesses to its standard (like Century, Binani etc) and will bring Kesoram’s cement business to its scale as the operations will be bolstered by economies of scale resulting from synergies in procurement, logistics and fixed costs," said InCred Equities.

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