Grasim Industries, a leading cement-maker with an annual capacity of 5.2 million tonnes, is acquiring Dharani Cement's total paid-up equity of 29.86 lakh shares including liabilities to the tune of Rs 20 crore. Dharani Cement has an installed capacity of 200 tonnes per day, which is slated to go up by 0.83 million tonnes after the commissioning of its Rs 237-crore greenfield project at Trichy.

The gross consideration, which include Rs 32 crore for buyout of the entire equity (except 500 shares) and a liability of Rs 20 crore, is based on a valuation done by DSP Merrill Lynch.

The company will seek the shareholders approval through an extra ordinary general meeting (EGM) to be held on May 25.

Aditya Birla group chairman Kumarmangalam Birla said: "The acquisition isin line with our group's strategy to sharpen focus on core areas where it can maintain its dominant position and create shareholder value."

"The acquisition makes sense for Grasim as it would give a strong base in the fast-growing markets of Kerala and Tamil Nadu," he added. Other strategic advantages for Grasim would come from Dharani Cement's low operational cost owing to its proximity to lignite sources and also sales-tax incentives offered in Tamil Nadu.

Dharani Cements is a closely-held company with non-resident Indian (NRI) promoters holding 70 per cent of the Rs 2.98 crore equity, while the remaining shares are held by `residents.'

With this acquisition, Grasim will emerge as a `national player' and be in a position to cater to the cement deficit areas of Tamil Nadu and Kerala. The southern states have traditionally been a cement deficit area, enjoying higher price realisation, with Tamil Nadu and Kerala leading the pack.

According to estimates, Tamil Nadu is likely to have a deficit of 1.46million tonnes in 1998-99. Similarly, Kerala is likely to end 1999 with a cement deficit of 4.24 million tonnes, which may go up to 4.97 million tonnes by the turn of the century.

Grasim, with a capacity of 5.2 mt per annum of cement, currently has three plants located in Madhya Pradesh and Rajasthan which cater to the northern, western and eastern regions.

In addition to providing a foothold in the south, the acquisition will provide Grasim with 750 acres of limestone-bearing land having a total capacity of 92 million tonnes of high-quality limestone. This reserve will meet the company's limestone requirements for the next 65 years, Grasim officials said.

Dharani Cements also has a captive windmill with a 1.125-mw capacity. However, a granite quarry which passes on to Grasim through this acquisition, will be divested at a later stage.

"Infrastructure is one area where we need to gear up and cement has an attractive future, Birla said. The group was closely looking at growth in this sector throughacquisitions, he added.

This is the group's second acquisition announced within three months, the fist one being the Altholville Pulp Mill in Canada.

The Rs 237-crore greenfield cement project, under implementation to hike the installed capacity by 0.83 million tonnes, is likely to commence production within 18 months. The total acquisition outlay and project cost add to Rs 290 crore for 0.9 million tonne capacity.