Dalmia- Jaypee deal: Lack of clarity overshadows cheap valuations

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Dalmia Bharat was trading in the red on December 13 despite clocking the cheapest deal in the cement space over the last five years. At 2:25pm the scrip quoted Rs 1856.00 apiece on the BSE, down 2.61 percent, while the benchmark Sensex was at 62,397.40, up 266.83 points or 0.43 percent. The company has acquired Jaiprakash Associates’ cement assets for enterprise value/ tonne of $73/ tonne – the cheapest preliminary valuation witnessed in nearly five years.

The last cheapest deal in the cement sector was witnessed between Emami-Nirma/ Nuvoco in 2020.

However, absence of clarity in following aspects led to some beating for the counter. The key concerns include:

- No detailed timeline for completion of acquisition

- Current capacity utilisation of JPA plants

- Additional capex requirement to make inoperative capacity usable, if any and timelines

- Brand launching costs for Dalmia in the central region

- Limestone reserves, expansion possibilities and when limestone licenses are due for renewal