Kotak’s investment fund pumps Rs 500 crore to help Nuvoco acquire Emami Cement; eyes future listing

Emami Group had yesterday informed the bourses that it has successfully divested its 100% equity stake in Emami Cements to Nuvoco Corporation Limited.k

Kotak Special Situations Fund, an alternative investment fund run by Kotak Investment Advisors Limited (KIAL) today announced an investment of Rs 500 crore into Nuvoco Limited to finance the acquisition of Emami Cements. The investment from Kotak Special Situations Fund will help Nuvoco, a construction material manufacturer, in completing the acquisition of Emami Cements at an enterprise value of Rs 5,500 crore. “This financing is a timely investment for achieving financial closure for Nuvoco to consummate the acquisition and consolidate its position as a leading cement manufacturer in Eastern India,” KIAL said. 

Emami Group had yesterday informed the bourses that it has successfully divested its 100% equity stake in Emami Cements to Nuvoco Corporation Limited. KIAL’s investment is with an aim to strengthen the consolidated cement manufacturing business of Nuvoco, eventually foraying into the primary capital markets. Kotak Special Situations Fund manages a $ 1 billion fund with a mandate to invest in special situations, credit and distressed space in India. This Investment is an apt example of a Special Situation, said Srini Sriniwasan, MD, Kotak Investment Advisors. “Given the lockdown due to COVID-19 and with the credit markets frozen, the situation required special effort in working remotely and closing an important acquisition financing, which is otherwise not available in the market,” he added.

The deal between Emami and Novoco for the cement manufacturing business of the former has already been approved by the competition commission of India. According to analysts at Edelweiss, with this sale promoter pledge would come down from 90% to 40%. “With the sale of non-core assets, further reduction will happen. All this will help in bringing the pledge rate to NIL. Will be able to bring pledge to NIL by March 2021. This can be through sale of land or other non-core assets,” Edelweiss has said in a note on June 30. 

Listing of Nuvoco Limited on the stock exchange in the future would add a 12th player to an already competitive market. However, with prices rising upwards in the cement sector on quarter basis and crude oil prices likely to stay low in the medium-term the outlook for the cement sector is not as bad some other sectors in the post coronavirus world.