Andhra Pradesh Congressmen exiting cement ventures

In what could be a trend of Congress leaders monetising their cement assets, yet another cement company based in Andhra Pradesh is set to change hands.

Cemex, the Mexican cement giant, is close to taking over privately held Penna Cements owned by P Prathap Reddy, an active Congressman in Andhra Pradesh.

Recently, YS Jagan Mohan Reddy, Congress MP from Cuddapah in Andhra Pradesh and son of the late chief minister YS Rajasekhara Reddy, sold his 51% stake in Bharathi Cements.

Though Prathap Reddy’s sell-off plans are yet to be concluded officially, sources in banking circles said the deal had been struck at $150-160 per tonne, which is less than what French cement major Vicat paid for Bharathi, which was close to $200 per tonne.

Reddy, however, told DNA, “Nothing has been finalised yet and all that is being talked about is mere speculation.”

Meanwhile, sources tracking the developments asserted that Cemex, which is reeling under debt obligations, is in the final stages of closing the deal with Penna Cements. Penna, based in Hyderabad, has a capacity of five million tonnes and caters to markets in Karnataka, Andhra Pradesh, Tamil Nadu, and Goa.

“The deal will be announced in the next few weeks. It was stuck on valuation issues,” a source said.

It is said that Reddy was keen on a higher valuation while the buyers were looking at the depreciated value. “The age of the plant makes a difference. Bharathi’s price at $200 was well within the range since it is a new plant. Penna’s plants are comparatively old and would not get a price on a par with Bharathi,” the source said.

The way Congressmen are selling off assets makes for an interesting trend. “It is too early to say if they are preparing for elections in 2014, but there are indications of a trend. These deals are worth Rs2,000-2,500 crore each. It’s absolute white money," the source said.

"Many politicians are rumoured to have made more money than this, but all that would not be in white,” a Congressman-turned-businessman said when asked for a comment.