Century Textile to demerge its cement division
Century Textiles Industries (CTIL) announced to demerge its cement business and merge it with UltraTech for debt reduction and to march aggressively on its real estate business. The company aims at unlocking the value of cement business for the shareholders and also deleveraging of the balance sheet.
The board approved the swap ratio of 8:1 for every eight fully paid-up equity shares of Rs10 each held in CTIL, one fully paid-up equity shares of Rs10 each of UltraTech Cement would be issued. So one share of UltraTechwill be received by the shareholders with 8 shares of CTIL. This can also be termed as a step for value unlocking.
Earlier it had entered into an arrangement with Grasim Industries (parent of UltraTech) to manage & operate its Viscose Filament Yarn (VFY) business for a period of 15 years. CTIL has four divisions i.e. cement, textiles, pulp & paper and real estate. The company requires significant capital as the current leverage and cash flow profile constrains this growth. Hence, the company has approved the demerger of its cement division along with associated liabilities which would bring down CTIL’s leverage by a meaningful amount, from net debt/EBITDA of 3.1x to 1.6x.