With this deal, Aditya Birla Group will become India's largest producer of chlor-alkali. The group's chairman Kumar Mangalam Birla said, "It is a critical input in the aluminium sector." He further added, "Given our large expansion plans for our aluminium business, this serves as an excellent sourcing point for both growth in revenues and earnings."
The acquisition will boost supply of feedstock caustic soda used to make alumina, which is further refined to produce aluminium. There is also the consideration of strategic location. Hindalco has an aluminium producing unit at Renukoot in Uttar Pradesh and in the press release it was stated "Kanoria's plant is located close to Hindalco's unit in Renukoot.
"After meeting the captive requirements, we will sell the rest to units in eastern India which is fast emerging as a growing market for aluminium production," said Lalit Naik, business head chemicals.
The Aditya Birla Group, which has its presence from aluminum-to-retail, stated that the acquisition will be funded mainly by securing debts from financial institutions. Where as Kanoria Chemicals will utilise the money received from the deal in order to diversify into newer areas.
ABCIL was formerly known as Bihar Caustic and Chemicals, it was one of the leading chlor-alkali companies in eastern India. ABCIL was commissioned in 1984. Today the caustic soda capacity stands at 1,05,000 tons per annum. In pursuit of value addition and effective utilisation of chlorine, the company manufactures aluminium chloride and stable bleaching powder. And with ABCIL's current acquisition, the total caustic soda capacity will increase from 1,05,000 tons to 2,20,000 tons per annum.
KCIL hit the upper limit after racing 20% on BSE and NSE today. Buoyed by the sale of segment, the scrip surged to Rs 49.35 registering an increase of 19.93% a piece on the BSE. Aditya Birla Chemicals (India) also jumped up by 7.12% on heavy buying and touched a monthly high of Rs 144.35.
On the NSE, KCIL advanced by 20.02% to hit its upper limit of Rs 49.45, while Aditya Birla Chemicals" scrip surged by 6.72% to Rs 144.40 a piece.