JK Lakshmi Cement to Merge with Three Subsidiaries in Corporate Restructuring

On July 31, JK Lakshmi Cement Ltd. announced its board’s approval of a scheme of arrangement to merge three of its subsidiaries: Udaipur Cement Works Ltd., Hansdeep Industries and Trading Co., and Hidrive Developers and Industries Pvt. This strategic move is aimed at optimizing the company’s operational efficiency and increasing shareholder value.

Details of the Merger Scheme

The merger involves several key considerations. Shareholders of Udaipur Cement Works Ltd. (UCWL) will receive four shares of JK Lakshmi Cement for every 100 shares they hold in UCWL. In contrast, no new shares will be issued for the mergers of Hansdeep Industries and Hidrive Developers, as JK Lakshmi Cement already owns all shares of these companies.

Post-merger, JK Lakshmi Cement will have two remaining subsidiaries. The company will maintain a 100% stake in Hansdeep Industries’ subsidiary, Ramkanta Properties, and continue holding an 85% stake in Agrani Cements. The Scheme of Arrangement is anticipated to become effective in the second half of the calendar year.

Capacity Details

JK Lakshmi Cement boasts a significant manufacturing footprint across several states, including Rajasthan, Chhattisgarh, Gujarat, Haryana, and Odisha. The company operates two integrated plants in Rajasthan and Chhattisgarh and has split grinding units in Haryana, Gujarat, and Odisha. As of Q1 FY25, JK Lakshmi Cement’s total capacity is 11.7 million tonnes, with a clinker capacity of 7 million tonnes.

Udaipur Cement Works, one of the merging entities, operates a single integrated plant in Rajasthan, with a cement capacity of 4.7 million tonnes and a clinker capacity of 3 million tonnes. Hidrive Developers owns an industrial plot adjacent to the Surat Grinding unit, while Hansdeep Industries is a preferred bidder for limestone mines in Nagaur, Rajasthan.

Reasons for the Merger

The primary reason behind this merger is to achieve increased synergical benefits in manufacturing, distribution processes, and logistics alignment. By consolidating these operations, JK Lakshmi Cement aims to reduce time to market, thereby providing better service to its customers.

Currently, the company’s cement assets are fragmented across four entities. This merger will consolidate these assets into a single, business-focused listed entity, enhancing operational efficiency and simplifying the corporate structure.

Conclusion: The approval of this merger scheme by JK Lakshmi Cement Ltd. represents a strategic effort to enhance operational efficiency and shareholder value through consolidation. By integrating Udaipur Cement Works Ltd., Hansdeep Industries, and Hidrive Developers, the company aims to create a more cohesive and competitive entity in the cement industry. The merger, set to take effect on April 1, 2024, is expected to bring significant benefits in terms of operational synergies, market presence, and overall corporate structure.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.