Binani to relist zinc arm, get strategic investor in cement

Got your eyes on the two delisted Binani firms? You may get to have a foot in the door at one in a couple of years.

The diversified commodity player plans to relist Binani Zinc in about two years and also bring in a foreign strategic investor into the recently delisted Binani Cement around that time to fund further expansion, group chairman and promoter Braj Binani told DNA.

Binani Cement got delisted from the bourses on May 30, while Binani Zinc was delisted way back in the late 90s following a complex corporate restructuring exercise. The original Binani Zinc was renamed as Binani Industry (the only entity of the group which remains listed and acts as a holding company). Later, the zinc and cement businesses were demerged as Binani Zinc and Binani Cement.

The group aims to turn around Binani Zinc, a low-margin zinc processor, into an integrated player owning zinc mines before it can be relisted.

“So far, Binani Zinc was not listed as there was little case for diluting promoters’ stake unless it had a business plan that made sense. It has a small smelter and margins are thin as we buy raw materials from traders while the cost of power has gone up substantially. I think in the next two years shareholders should be anticipating that the company consolidates its holding in terms of the mines and expansion of the smelter with continued source of power from Binani Energy. This is when the process of dilution and listing will come into place,” said Binani.

Binani Zinc is following a combination of strategies of trying to take stake in mining companies, involving in exploration and also entering into off-take agreements for raw material security, said Binani.

The company had earlier made an investment in Australia, buying 19% stake for an off-take agreement with a listed entity, Meridian Minerals Ltd, which is developing zinc and gold mines. The group might exit that investment following a takeover attempt by Chinese investors, Binani said. “We are in the process of working out a solution. But in all likelihood, we would sell out.”

The cement play, on the other hand, is unlikely to be listed anytime soon, though it has major capacity expansion plans lined up and will need at least a strategic investor.

“Eventually, when Binani Cement would be going for the expansion, we would be making a dilution. We have no intent to bring the cement subsidiary back to capital market but we would be looking at international markets for dilution because the company is expanding overseas,” said Binani.

Binani Cement has a domestic capacity of 6.25 million tonne. Overseas, it has a 2 million tonne capacity in Dubai and will have an effective capacity of 2.5 million tonne in China in six weeks from now, which will take the total capacity to about 11 million tonne. A further 10 million tonne capacity is to come up in Gujarat, Mauritius and China, taking the total to 21 million tonne in 3-4 years.

“As we expand, there will be increased borrowings and then we will eventually dilute our holding and cash on the valuation at that time. That would lead to good gains for the company,” said Binani.   

“When it will be done? It all depends upon how well we progress on our projects. We have huge investment plans: something like 12 million tonne capacities on hand, to be built over the next three years. We also have plans to increase power generation, to be firmed up as we progress with the projects. All these would be funded partly by debt and partly by equity. We would be monitoring the cashflows and we would have to see to what extent we can hold on to our debt and to what extent we need the dilution,” he said.

In Mauritius, Binani has got land allotment for its 1 million tonne project in the free trade zone and construction was started recently, but Binani said it has been put on hold. “There’s an issue between the government and two large multinationals who have served notice to the government. Following this, we have put construction on hold. After getting the final clearance, it would need about 15 months to complete the construction.”

The company’s Dubai operations suffered severely during the 2010-11 following a slowdown in the economy of the United Arab Emirates, but Binani expects the plant to perform well by catering to export markets of east Africa. “Markets of Emirates have almost dried up due to slowdown in the economy and we are in the process of creating marketing set up in East Africa. We expect that from October-November, operations would break even with the start of exports,” said Binani.

The group also plans to acquire coal mines overseas to secure energy requirement for its enhanced cement capacity.

“Over the next one-and-a-half years we are going to consolidate that to very large capacities so that we can start generating substantially more power for the group in tune with our expansion plans. We also have a lignite deposit in Rajasthan, which is under development now. Over the next three years, we will also generate some power from lignite.”