In the dynamic world of business, companies often undergo transformations to adapt to changing market trends and optimize their operations. One such notable journey is that of Dalmia Bharat Refractories Limited (DBRL), which embarked on a series of corporate restructuring initiatives to streamline its operations and enhance shareholder value. Let’s delve into the details of DBRL’s corporate restructuring journey, breaking down complex terms into simple language for better understanding.
Formation of Dalmia Bharat Refractories Limited
Dalmia Bharat Refractories Limited was established through the amalgamation of the refractory business segments from three units of Dalmia-OCL –
- Dalmia Refractories Ltd
- Dalmia Cement Bharat Ltd
- Refractory Unit and GSB India.
This consolidation aimed to create a more cohesive and efficient entity in the Indian refractory industry.
Sale of Indian Refractory Business
Prior to the sale, the Indian business of DBRL reported revenue of INR 1,100 crore and expenses of INR 1,151 crore, indicating operational losses. However, despite this loss, the company proceeded with the sale of the business, valuing it based on 27 times DBRL EBIDTA.
| Financial performance of the Indian business of DBRL | FY23 (in cr.) |
| Revenue | 1100 |
| Expense | 1151 |
| Profit before exceptional item | -51 |
| Exceptional item | 26 |
| Profit after exceptional item | -25 |
Acquisition of Dalmia OCL by RHI Magnesita
Dalmia Bharat Refractories Limited consolidated its Indian refractory business into Dalmia OCL. Subsequently, RHI Magnesita acquired Dalmia OCL for an aggregate consideration of INR 2,213 crores. The consideration was partially disbursed in cash, approximately INR 505 crores, subject to adjustments as per the business transfer agreement. The remaining consideration was in the form of equity shares, consisting of 8.24 crores shares worth approximately INR 1,707 crores which represented a 13.27% stake in RHI Magnesita. The equity transfer occurred through a share swap agreement, resulting in RHI Magnesita obtaining complete ownership of Dalmia OCL.
The fair value of shares received as part of the sale of the Indian business to RHI Magnesita amounted to INR 1,707 crore, with an additional INR 484 crore received in cash. The net value of assets and liabilities transferred as part of the business amounted to approximately INR 400 crore. Consequently, the ultimate gain realized from the sale of the business amounted to INR 1,759 crore.
| Particulars | As on Jan 4th, 2023 ₹(in crores) |
| The fair value of shares received for Dalmia OCL Limited | 1707 |
| Cash Consideration | 393 |
| Cash Consideration for working capital | 91 |
| Total consideration | 2191 |
| Less: Carrying amount of net assets transferred (refer below) | -400 |
| Total Assets | 1038 |
| Total Liabilities | 638 |
| Less: expenses toward business transfer | 32 |
| Total Gain on disposal of refractory business | 1759 |
Expansion through Acquisition
Dalmia Bharat Refractories Limited expanded its portfolio by acquiring 100% of the issued share capital of Dalmia Mining and Services Private Limited. This strategic move aimed to strengthen Dalmia Bharat Refractories Limited’s presence in the mining and services sector, further diversifying its business operations.
Strategic Divestment
In alignment with its strategic goals, Dalmia Bharat Refractories Limited decided to divest its stake in Dalmia GSB Refractories GmbH, Germany. The company entered into a share purchase agreement with RHI Magnesita Deutschland AG for the sale of its entire shareholding in Dalmia GSB Refractories GmbH, marking a strategic exit from the German market.
Stake Sale to Sarvapriya Healthcare Solutions
Dalmia Cement (Bharat) Ltd, a part of the same promoter group as Dalmia Bharat Refractories Limited, sold its entire stake in DBRL to Sarvapriya Healthcare Solutions Private Limited. The sale involved the transfer of 42.36% of Dalmia Bharat Refractories Limited’s share capital, representing 1,87,23,743 Equity Shares, for a total consideration of Rs 800 crore. This transaction aimed to realign the group’s focus and optimize its investment portfolio.
Joint Resolution Plan with Himadri Speciality Chemicals
Dalmia Bharat Refractories Limited, along with Himadri Speciality Chemicals Limited, received approval from the National Company Law Tribunal (NCLT) for their joint resolution plan to acquire Kolkata-based Birla Tyres Limited through insolvency proceedings. This strategic move underscores Dalmia Bharat Refractories Limited’s commitment to growth and expansion in the Indian market.
Conclusion
Dalmia Bharat Refractories Limited’s corporate restructuring journey reflects its proactive approach to adapt to market dynamics and capitalize on growth opportunities. Through strategic acquisitions, divestments, and joint ventures, Dalmia Bharat Refractories Limited aims to strengthen its position in the refractory industry and create long-term value for its stakeholders.
Currently, the Dalmia Bharat Refractories Share Price is trading at around Rs. 170/share. CLICK HERE to Invest.
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