Rise & Fall Of Binani Cement

Rise
• Binani Cement is the flagship subsidiary of Binani Industries started
by Brij Binani an entrepreneurin 1997, in Sirohi District, Rajasthan
with a 1.65 MTPA integrated cement facility and a 25 MW captive
power plant.
• The capacity was raised to 2.25 MTPA in 2005 through advanced in-
house R&D, In 2008, a split-grinding unit at Neem Ka Thana was
commissioned, boosting the capacity in India to 6.25 MTPA.
• The Company built plants in China and Dubai to fought a price with
Birla's, ACC and Ambuja & reached a capacity of11.25 MTPA.
Fall
• Building plants worldwide was the beginning of troubles for the company, the company
expanded at a pace which was beyond its control and capabilities.
• The company's goal to expand in China at just the time when Indian construction slowed
and the financial markets crashed was a major setback.
• The Company tried to cut its operations cut but the infrastructure slowdown was too
severe, so company was not able to fully utilize its capacity.
• The company had huge dept pilled up, By 2013 Binani Industries had been forced to sell a
40 per cent stake in Binani Cement to raise capital, However, India’s market slowdown
was the final blow to Binani Cement. It soon fell into discussions in February 2015 to sell
its 1.2Mta Neen Ka Thana grinding unit in Rajasthan to further reduce its debt.
• In August 2016 Binani Cement was also among 11 companies to have penalties imposed
after the Competition Commission of India market price fixing allegations were
investigated. The fine ran to 50 per cent of the company’s net profits in 2009-11.
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• All of Binani Industries' equity shares in the company were pledged to
lenders as security for the loans to lenders. In all, as per the
company's estimates, it has a total of between Rs. 5,600-6,000 crore
as debt from lenders and other liabilities. As the company's
aggressive expansion plans failed and Indian Infrastructure saw a
slowdown in growth, the company finally ran into trouble.
Bankruptcy Proceedings
• In fiscal year 2016-17, Binani Cement registered a net loss of Rs349.31
crore on revenue of Rs1,534.62 crore, according to the auditor of its
holding company. Binani Industries’ net consolidated loss was Rs468.37
crore, and its consolidated liabilities exceeded its assets by Rs1,525.32
crore.
• In July 2017, Bank of Baroda has filed a petition against Binani Cement Ltd
with the National Company Law Tribunal’s (NCLT) Kolkata bench, seeking to
recover Rs97 crore in an outstanding loan under the new Insolvency and
Bankruptcy Code after the firm failed to come up with a restructuring plan
to clear its dues.
• The NCLT’s Kolkata bench had admitted the insolvency petition against
Binani Cement, after it failed to repay around Rs100 crore, following which
Vijaykumar V. Iyer of Deloitte India was appointed as the IRP.
Why it made sense for company’s to acquire
Binani’s assets
Some compelling reasons for established cement players to be interested buying in Binani Cements'
assets are:
• it would be profitable for a key cement player to acquire operational units of Binani than set up new
plants.
• It has 6.25 MT capacity as far as operations in India are concerned.
• Additionally, due to challenges in land acquisition, the time taken to set up a greenfield cement plant
has gone up by two times to six years. Besides, the cost of setting up a cement plant has become
prohibitively expensive.
• to cover capital costs required to set up a one-million-tonnes plant, cement prices should trade close to
Rs 350 per 50 kg bag or above it, as against the existing average of anything between Rs 306 and Rs
324.
• Analysts also say that the locations of Binani's plants are quite strategic. For example, Binani has
cement plants in southern Rajasthan, which provides it access to the Gujarat market as well. Demand
in the northern and western region is stable and capacity utilisation is close to 80 per cent.
• Binani is a big cement brand. The company has invested in its advertising and marketing quite well by
roping actor Amitabh Bachchan as the brand ambassador. It has decent brand presence outside the
regions in which it operates.
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• The cement capacity of Binani Cement is 11.25Mta and it operates integrated
cement plants in India and China as well as a grinding unit in Dubai, UAE.
• The combination of its export potential and considerable raw material reserves
and mines near its plant location in Rajasthan are key considerations in a possible
take-over.
• Binani Cement has export potential due to presence in the Middle East along with
substantial mine reserves at the plant location which would result in reduced
manufacturing costs and hence make the assets attractive to any serious
domestic cement player