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Reclaiming the asset, Central market entry

Dalmia Bharat (DALBHARA) has executed a business transfer agreement with Jaiprakash Associates Ltd (JAL; acquired by Adani Group under IBC) & Adani Infra (India) Ltd for acquisition of 5.2mtpa cement assets in Central India at an EV of INR28.5bn. After pursuing the JAL assets over 3.5 years, DALBHARA has finally carved out deal from the assets acquired by Adani group under IBC. This transaction includes 5.2mtpa cement capacity, 3.3mtpa clinker capacity, 99MW thermal power capacity & railway siding infrastructure across Rewa (MP), Chunar, Churk and Sadwa (UP). The acquired assets also provide debottlenecking opportunity of ~1.5-2mtpa cement and ~0.5-0.7mtpa clinker over time. Post acquisition, DALBHARA’s cement capacity will increase to 54.7mtpa from c. 49.5mtpa and further to 66.7mtpa by Q3FY28 led by ongoing expansions at Belgaum, Pune and Kadapa. Mgmt. highlighted that the assets are well known to Dalmia due to the earlier tolling arrangement with JAL, which should support faster integration and ramp-up. However, earlier in FY24 during tolling, the ramp up was limited & profitability was low.

We believe that this acquisition is long term positive for DALBHARA as it accelerates its journey towards 75mtpa capacity target by FY28 and provides direct access to the new growing Central region at lucrative valuations. However, mgmt. would need to spend ~Rs5.5bn for refurbishment and efficiency improvement over next two years which would increase leverage (within mgmt’s stated threshold of 2x). The acquisition should aid market share gains and provide boost to volume growth, while also improving regional diversification into a relatively better pricing market. We increase our FY27/28E EBITDA by 1.5%/5.2% incorporating higher volumes and expect 13% EBITDA CAGR over FY26-28E. At CMP, the stock is trading at 11.4x/9.1x EV of FY27/28E EBITDA. Maintain ‘BUY’ with revised TP of INR2,235 (earlier INR2,287) valuing at same 11x EV of Mar’28E EBITDA due to higher capex and debt levels.

Entry into Central markets:

DALBHARA is acquiring 5.2mtpa cement capacity and 3.3mtpa clinker capacity from Jaiprakash Associates Ltd (acquired by Adani Group under IBC) at an EV of INR28.5bn. Assets include Rewa, MP integrated unit (1.1mtpa cement + 3.3mtpa clinker), Chunar, UP grinding unit (2.5mtpa), Churk, UP grinding unit (1mtpa) and Sadwa, UP blending unit (0.6mtpa). The transaction also includes 99MW (Rewa 62MW & Chunar 37MW) thermal power capacity and railway siding infrastructure at Rewa, Chunar and Churk. The acquired assets provide additional debottlenecking opportunity of ~1.5- 2mtpa cement and ~0.5-0.7mtpa clinker over time.

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