The shares of this leading cement manufacturer fell by nearly 14% after the company’s board announced plans to delist from the stock exchange by merging with its parent company.
With a market capitalization of Rs 2,118 crore. On Thursday, Udaipur Cement Works Ltd shares were trading at Rs 37.80 per share, down 13.22 percent from the previous close price of Rs 43.56.
What Happened: JK Lakshmi Cement Ltd, the parent company, announced through an exchange filing that its board had approved a corporate restructuring plan. The plan includes merging three of its subsidiaries: Udaipur Cement Works Ltd (UCWL), Hansdeep Industries and Trading Co., and Hidrive Developers into JK Lakshmi Cement Ltd.
As part of the merger, JK Lakshmi Cement will issue 4 equity shares with a face value of ₹5 each for every 100 equity shares with a face value of ₹4 each held by the shareholders of Udaipur Cement Works (excluding JKLC), based on a fair value swap ratio.
Requirement of Merger: The strategic merger aims to consolidate the cement operations within the JK Group to enhance efficiency and market competitiveness.
This move will generate synergies in manufacturing, distribution, and logistics, reducing time to market and benefiting customers. Additionally, the merger will help reduce fixed costs and leverage economies of scale, such as common procurement.
Currently, the cement assets are divided among four entities: JK Lakshmi, Udaipur Cement, Hansdeep, and Hidrive. The merger plan consolidates these assets into a single, focused listed entity, resulting in a stronger balance sheet.
Furthermore, the merger includes the absorption of Hansdeep and Hidrive into JK Lakshmi. As both Hansdeep and Hidrive are wholly owned subsidiaries of JK Lakshmi, no new shares will be issued by JK Lakshmi to itself or to any nominee shareholders.
Following the merger, JK Lakshmi Cement Limited’s cement capacity will increase to 16.4 MT. The promoter group will hold a 45.12% stake, while retail investors will hold 54.88%. Udaipur Cement Works Ltd will be delisted from the National Stock Exchange (NSE) after the merger.
In the most recent shareholding pattern, JK Lakshmi Cement Limited holds a majority stake of 71.12% in Udaipur Cement Works Ltd, with retail investors holding 24.86%.
About the company: JK Lakshmi Cement Ltd (JKLC) operates primarily in the cement industry, focusing on the manufacturing, selling, and trading of clinker and cement.
The company has manufacturing facilities and immovable properties in Rajasthan, Chhattisgarh, Gujarat, Haryana, and Odisha. JKLC operates two integrated plants, one in Sirohi, Rajasthan, and the other in Durg, Chhattisgarh, along with split grinding units in Haryana, Gujarat, and Odisha. Its total capacity is 11.7 million tonnes for cement and 7.0 million tonnes for clinker.
Udaipur Cement Works Ltd is also involved in the cement business, with a single integrated plant in Rajasthan. This plant has a capacity of 4.7 million tonnes for cement and 3.0 million tonnes for clinker.
Financials: Udaipur Cement Works Ltd reported a 13% year-on-year increase in revenue, rising from ₹1,031 crore in FY 22-23 to ₹1,164 crore in FY 23-24. The company’s net profit surged by 69%, climbing from ₹36 crore to ₹61 crore over the same period. Udaipur Cement Works Ltd has a net worth of ₹876 crore.
In the past 12 months, Udaipur Cement Works Ltd shares have risen by 49%, while JK Lakshmi Cement Ltd shares have increased by 41%.
Written by Omkar Chitnis
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
