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SUBMITTED BY
JAKANATHAN SYED MOHAMMAD FAIZAN GOPINATH VIGNESHWARAN ARUNAGIRI SENTHIL
RAASI CEMENT
Raasi cement promoted by B.V.Raju and N P K Raju in 1978. Main Industry is located in Hyderabad. Raasi owned 39.5% stake on sri Vishnu cement Ltd. (SVCL) Raasi had a Bailout Takeover on SVCL and Raasi is nurturing SVCL. Raasi's cement division had a capacity of 1.60 mtpa and it is a low cost cement producer. Other than cement, the group also had interests in ceramics and paper B.V.Raju vice chairman of Raasi cement.
Opportunities :
Growth in housing sector key demand driver
Weakness :
Weak marketing Set-up. NO sons, only sons-in-law. one of them may sell share to others.
Threats :
Close to a weak colleague always dangerous. Government intervention to adjust cement prices.
Weakness :
Cement Industry is highly Fragmented. Low value commodity makes transportation over long distances uneconomical
Threats :
Raw material prices climbing up Pakistan and north Indian competitors.
Takeover
Takeover is a transaction whereby a person (individual, group of individuals or company) acquires control over the assets of the company either: - directly by becoming the owner of those assets; or - indirectly by obtaining control of the management of the company Take Over taking over the control of management. Takeover bids may be classified as under: 1) 2) 3) Hostile takeover Friendly takeover Bailout takeover
Cont.,
Hostile takeover The method of trying to take the control of the company without the knowledge of the existing management is known as Hostile takeover. Bailout takeover Taking over of the management of such weak companies for nurturing them back in normal activities by a company having expertise and resources is known as Bailout takeover. Friendly takeover A friendly corporate body or group of companies may come to the rescue by buying shares of the company in the open market and/or by pumping resources to help the management.
Cont.,
On March 1, 1998, the state-owned APIDC sold its 2.13% stake in Raasi to ICL. Chennai-based stockbroker, Valampuri & Co., cornered 1.40 % of Raasi's equity from the market for Srinivasan, taking ICL's stake in Raasi to 21.56%. If it gets share from V.p. Babaria stake will increase to 28.56 % and it will become the Vito-power to the company. After Negotiation ICL team bought Raasi shares for Rs. 286 a share, i.e.,) Rs. 1.49 billion
Threats : Raasi had sold 39.5% share of SVCL to some promoter's group companies, is SEBI,BIFR helps to get back ?
Cont.,
Burden of debt due to acquisition is very high seen from rising debt equity ratio. Profitability of the merged firm has gone down from 8% to 4% in 2001 leads to lack of realization in synergy. In order to realize the synergy the leverage should be brought down and cash flow should be generated. Existing distribution infrastructure of Raasi helps ICL to leverage this to reduce the freight and other costs.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (MELTDOWN)
16399 17155 18037 22226 33195 37682 39304 44343 51030 45441 49882 48256 117751 72814
conclusion
The whole company currently has a production capacity of 9.1Mt/year. ICL with subsidiary Raasi cement is going well, so the takeover is valuable. A source said that ICL sells about 90% of its production in Kerala, Andra pradesh and Tamil Nadu, all this is due to capacity improved by acquisition of cement companies like Raasi cements.