Economy & Market
Orient Refractories’merger may boost shareholder value
Published
7 years agoon
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Post-merger, the combined entity will have operating revenue of Rs 1236 crore on proforma basis, two production facilities and over 700 employees.
The BSE-listed Orient Refractories has announced merger of its two unlisted subsidiaries – RHI India and RHI Clasil – with itself for better operational efficiency and simplify holding structure. The merger through the proposed scheme is expected to be completed over the next 9-12 months. Orient Refractories is the leading manufacturer and supplier of special refractory products, systems and services. Post the merger, the shareholding of RHI Magnesita, through Dutch US Holding BV and other group companies, in the combined company is likely to be 70 per cent, said Orient Refractories early in August 2018. Furthermore, about 5 per cent of the shareholding will be held by certain individual shareholders of RHI Clasil who are not part of the RHI Magnesita group, the world’s largest refractory player. All three companies are part of the London Stock Exchange listed RHI Magnesita, a leading global supplier of high-grade refractory products, systems and services.
Parmod Sagar, Managing Director, Orient Refractories, said the merger will strengthen operations, significantly expand product offerings and sales platform to access a much larger client base and allow for a pooling of resources and know-how. ”We believe that this will act as a strong platform from which we can embark on the next phase of our growth and unlock significant value for the shareholders.’
As part of the merger, Orient Refractories will issue 7,044 equity shares (with face value of Rs 1 each) for every 100 equity shares of RHI India (Rs 10 face value each) and 908 equity shares for every 1,000 equity shares of RHI Clasil (Rs 10 face value each). Pursuant to the scheme, share base of Orient Refractories will increase from 120.1 million to about 161 million.
Orient Refractories is 69.6 per cent owned by RHI Magnesita. RHI India, takes care of sales and offers full range of refractories and related services while RHI Clasil, which is 53.7 per cent owned by RHI Magnesita, manufacturer and supplier of mainly Alumina-based refractories for the steel and cement industries.
RHI Magnesita is a global refractory supplier, with revenue of 2.7 billion euros in 2017. It has more than 14,000 employees in 35 main production sites and more than 70 sales offices. Refractory products are used in high-temperature industrial processes like production of steel, cement, glass, etc.
In India, the combined company is estimated to have operating revenue of Rs 1,235.6 crore as against the Rs 626.8 crore posted by Orient Refractories in fiscal 2018 ended in March 2018. It will have two production facilities with over 700 employees. After the completion of the merger, Orient Refractories is proposed to be renamed RHI Magnesita India.
In order to strengthen its position in India, RHI Magnesita had acquired 43.6 per cent of Orient Refractories in 2013. After a mandatory open offer that followed the deal, it currently holds a 69.6 per cent stake. RHI India, a wholly owned subsidiary of the parent, is the Indian sales company of the RHI Magnesita group. RHI Clasil is a manufacturer and supplier of mainly alumina-based refractories for the steel and cement industries and is 53.7 per cent-owned by RHI Magnesita.
"The merger marks an important milestone towards expanding RHI Magnesitas market leadership in the refractory market of India. We are convinced that one strong entity, organisation and management in India will increase long term value for all stakeholders," said Stefan Borgas, CEO, RHI Magnesita. This merger significantly enhances the profile of RHI Magnesita in India and creates a stable umbrella under which the immense growth potential we see in the Indian market can be tapped more effectively and efficiently.
”We believe, the proposed merger will create significant value for shareholders. The combined entity will have operating revenue of Rs 12,356 million, EBITDA of Rs 2,322 million, PAT of Rs 1,406 million (on FY18 proforma basis) and outstanding shares of 161 million (versus approximately 120 million in ORL). This implies FY18 proforma EPS of about Rs 8.7, indicating approximately 22 per cent accretion over ORL’s FY18 EPS of Rs 7.1. RHI Magnesita will hold about 70 per cent of the combined entity and ORL’s minority shareholders will hold about 23 per cent," said Shradha Sheth, Edelweiss Research in a note after the merger announcement. Orient Refractories’Q1FY19 revenue grew a strong 23 per cent year-on-year (YoY) and PAT jumped approximately 34 per cent YoY.
”This merger is part of RHI Magnesita’s strategic pillar "markets" which focuses on building a global presence with strong local organisations and solid market positions. India’s growth prospects in the refractory market derive primarily from the steel sector, which is by far RHI Magnesita’s largest customer industry (74% of 2017 pro-forma revenues)… With one strong and integrated local organisation, the industry’s most comprehensive product portfolio and proven supply and sales capabilities RHI Magnesita India will be optimally positioned to leverage the positive local market developments in India," RHI Magnesita said in its global announcement.
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As cement producers look to extract efficiency gains beyond the plant gate, real-time visibility and data-driven logistics are becoming critical levers of competitiveness. In this interview with Jean-Jacques Bois, President, Nanolike, we discover how the company is helping cement brands optimise delivery planning by digitally connecting RMC silos, improving fleet utilisation and reducing overall logistics costs.
How does SiloConnect enable cement plants to optimise delivery planning and logistics in real time?
In simple terms, SiloConnect is a solution developed to help cement suppliers optimise their logistics by connecting RMC silos in real time, ensuring that the right cement is delivered at the right time and to the right location. The core objective is to provide real-time visibility of silo levels at RMC plants, allowing cement producers to better plan deliveries.
SiloConnect connects all the silos of RMC plants in real time and transmits this data remotely to the logistics teams of cement suppliers. With this information, they can decide when to dispatch trucks, how to prioritise customers, and how to optimise fleet utilisation. The biggest savings we see today are in logistics efficiency. Our customers are able to sell and ship more cement using the same fleet. This is achieved by increasing truck rotation, optimising delivery routes, and ultimately delivering the same volumes at a lower overall logistics cost.
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How does your non-exclusive sensor design perform in the dusty, high-temperature, and harsh operating conditions typical of cement plants?
Harsh operating conditions such as high temperatures, heavy dust, extreme cold in some regions, and even heavy rainfall are all factored into the product design. These environmental challenges are considered from the very beginning of the development process.
Today, we have thousands of sensors operating reliably across a wide range of geographies, from northern Canada to Latin America, as well as in regions with heavy rainfall and extremely high temperatures, such as southern Europe. This extensive field experience demonstrates that, by design, the SiloConnect solution is highly robust and well-suited for demanding cement plant environments.
Have you initiated any pilot projects in India, and what outcomes do you expect from them?
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What are your long-term plans and strategic approach for working with Indian cement manufacturers?
For India, our strategy is to establish strong and reliable local partnerships, which will allow us to scale the technology effectively. We believe that on-site service, local presence, and customer support are critical to delivering long-term value to cement producers.
Ideally, our plan is to establish an Indian entity within the next 24 months. This will enable us to serve customers more closely, provide faster support and contribute meaningfully to the digital transformation of logistics and supply chain management in the Indian cement industry.
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Pankaj Kejriwal, Whole Time Director and COO, Star Cement, on driving efficiency today and designing sustainability for tomorrow.
In an era where the cement industry is under growing pressure to decarbonise while scaling capacity, Star Cement is charting a pragmatic yet forward-looking path. In this conversation, Pankaj Kejriwal, Whole Time Director and COO, Star Cement, shares how the company is leveraging waste heat recovery, alternative fuels, low-carbon products and clean energy innovations to balance operational efficiency with long-term sustainability.
How has your Lumshnong plant implemented the 24.8 MW Waste Heat Recovery System (WHRS), and what impact has it had on thermal substitution and energy costs?
Earlier, the cost of coal in the Northeast was quite reasonable, but over the past few years, global price increases have also impacted the region. We implemented the WHRS project about five years ago, and it has resulted in significant savings by reducing our overall power costs.
That is why we first installed WHRS in our older kilns, and now it has also been incorporated into our new projects. Going forward, WHRS will be essential for any cement plant. We are also working on utilising the waste gases exiting the WHRS, which are still at around 100 degrees Celsius. To harness this residual heat, we are exploring systems based on the Organic Rankine Cycle, which will allow us to extract additional power from the same process.
With the launch of Star Smart Building Solutions and AAC blocks, how are you positioning yourself in the low-carbon construction materials segment?
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This move is clearly supporting our transition towards products with lower carbon intensity and aligns with our broader sustainability roadmap.
With a diverse product portfolio, what are the key USPs that enable you to support India’s ongoing infrastructure projects across sectors?
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How are you managing biomass usage, circularity, and waste reduction across
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As Star Cement expands, what are the key logistical and raw material challenges you face in scaling operations?
Fly ash availability in the Northeast is a constraint, as there are no major thermal power plants in the region. We currently source fly ash from Bihar and West Bengal, which adds significant logistics costs. However, supportive railway policies have helped us manage this challenge effectively.
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With increasing carbon regulations alongside capacity expansion, how do you balance compliance while sustaining growth?
Compliance and growth go hand in hand for us. On the product side, we are working on LC3 cement and other low-carbon formulations. Within our existing product portfolio, we are optimising operations by increasing the use of green fuels and improving energy efficiency to reduce our carbon footprint.
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Looking ahead to 2030 and 2050, what are the key innovation and sustainability priorities for Star Cement?
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