Cement-to-textiles Ramco Group plans makeover, create holdco, reshuffle ownership

Tamil Nadu-based Ramco Group is reworking its corporate structure to eliminate cross-holdings and enhance its appeal for foreign investors, a person directly familiar with the 90-year-old conglomerate's plans said. At the end of a multi-year exercise, Ramco Industries Ltd will emerge as the group's holding company.

As the first step, The Ramco Cements has sold its entire 16.23% promoter stake in Ramco Industries to promoter entities Rajapalayam Mills and Ramco Management. Ramco Industries, through subsidiaries, effectively owns 24% in Ramco cement.

"Ramco Industries will become the holding company. Not today; after some time," the person said on the condition of anonymity.

Largest cement maker in south India

Ramco Cements, which has 25 mtpa capacity and a market value of ₹22,000 crore, is the largest cement maker in South India, a region where India's cement giants Aditya Birla group and Adani group still do not have a foothold. At present, the promoter holding in Ramco Cements is around 44%, of which Ramco Industries and Rajapalayam Mills jointly hold almost 37% effectively.

"These things will be consolidated. And after that, if we want to increase our holding in Ramco Cements, it will be done through the holding company. This is our plan over next three to four years," said the person.

Once Ramco Industries becomes the holding company, there will be more restructuring. "There could be a merger or demerger that may lead to change in the shareholding or promoters' voting," he said. The changes will need approval from the regulators and shareholders.

The Ramco Group has four listed companies—Ramco Cements, Ramco Industries, Ramco Systems and Rajapalayam Mills Ltd.

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Rajapalayam Mills, founded in 1938, is now worth over ₹4,000 crore, and invested some of its profits in The Ramco Cement long ago, the person said. "Similarly, Ramco Industries also invested in Ramco Cement. And in turn, Ramco Cement invested in Ramco Systems and Ramco Industries." However, today's market does not value such cross-holdings, the person said, adding the group has been looking to remove them for a long time, and foreign investors avoid companies with many cross-holdings.

While The Ramco Cement holds 0.46% in Rajapalayam Mills, Ramco Industries holds 1.73%.

Promoters will sell assets to bring in the capital required to acquire stakes held by Ramco Cements and other group firms among each other, until the promoter group includes only Ramco Industries and founder P.R.V. Raju's family members, the person said.

Streamlining to help

Kavil Ramachandran, professor of entrepreneurship and family business at the Indian School of Business, said streamlining promoter holdings will help the Ramco Group. "The group has to fortify its structure considering the competitive landscape, and for that, this removal of cross-holding is important. Also, if the group gets into any exit plans in future, they have to clear the ground, especially if it is such a family-oriented business. Streamlining the promoter holding may not only help getting more new investors but also will enhance their brand or image as a group," he said.

On 29 October, Ramco Cements said it has sold non-core assets, primarily shares, worth ₹376 crore since September. The company, which sold part of its compulsorily convertible preference shares (CCPS) of Swiggy Ltd for ₹50 crore, will sell another ₹50 crore once Swiggy is listed, said the person.

Ramco Cements has said it is on track to sell ₹1,000 crore worth of non-core assets. In a 30 October note, ICICI Securities Ltd termed this move positive, adding Ramco Cements will use the proceeds to bring down debt that stood at ₹5,026 crore as of June 2024.

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While Raju's family members hold around 52% in Rajapalayam Mills, other group entities Ramco Industries, The Ramaraju Surgical Cotton Mills Ltd, Sri Vishnu Shankar Mill Ltd, Sandhya Spinning Mill Ltd, Ramco Management and Ramco Cements also own shares.

As of September end, Ramco Industries' promoters, apart from Raju's family members holding 26.3%, included Rajapalayam Mills, Ramco Cements, Ramco Management, Ramaraju Surgical Cotton Mills, Ramco Industrial and Technology Services Ltd, RCDC Securities and Investments Pvt Ltd, Ramco Pvt. Ltd, and Ramco Agencies Pvt. Ltd.

Meanwhile, Raju's family, Ramco Cements, Ramco Industries, Rajapalayam Mills and a similar set of entities are promoters of Ramco Systems. In Ramco Cements too, Raju's family and a similar set of shareholders form the promoter group.

"So, if there is a cross-holding between two listed companies and one is selling, the money goes into the selling company. If Ramco Cements sells Ramco Industries, the money equivalent to the value of the shares comes to Ramco Cements, which can be used to repay the loans or for expansion. And the value of the shares has gone up," the person said.

Direct holding rises

The promoter family's direct holding in the group companies goes up cross-holdings are removed, explained the person. "The promoters will generate money and put it in the companies so that these cross-holdings can be removed. One part is done; so, it may take another 2-3 years," the person said. The capital will be created by the promoters and the cement firm by selling land assets and shares held in non-core businesses. The family and the cement firm will also sell land assets in the coming days.

"Out of many other properties, we have 150-200 acres land available for sale in Kurnool. We are waiting for a good value. It should fetch us around ₹200 crore. There is another land bank we are going to sell next week. Like that, other non core assets we want to sell and improve the balance sheet," said the person.

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There are three more steps to be done, he said, adding the shares held by Ramco Cements in Ramco Systems will be bought by other promoter entities after some time. One is to rework promoter holdings in Ramco Systems and Rajayapalayam Mills; the second is to further consolidate shareholdings to reduce the cross-ownerships by other unlisted promoter group firms; and the third is to prepare Ramco Industries to be the group holding company.

The entire restructuring is aimed to enhance shareholder value, he explained, adding the Tata group had undertaken a similar exercise earlier. However, neither Adani Group nor any other entity is in talks to buy Ramco's cement business, he added.

Raising capacity

Ramco Cements has taken measures to increase capacity by removing bottlenecks. Capacity expansion plans gained pace after Ultratech recently announced acquisition of India Cements Ltd and the Adani Group announced the acquisition of Penna Cement and Orient Cement Ltd. In just two years after Adani Group entered the cement business there have been six acquisition deals closed in quick succession by Aditya Birla and Adani group in total.

The person rejected the assumption that overcapacity has kept cement prices low and business unprofitable in the South.

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"When people say that UltraTech buying out a weak player in the South (India Cements) will change the equation, it is a way to indicate that we are in a very strong position. It's better to compete with a strong player rather than weak players. When I compete with strong players, the advantages I can build up is immense. I just need to drop the price a bit," added the person.

Ramco Cements revenue in FY24 was ₹9,349.83 crore. The company operates five integrated cement units and six grinding units. It has earmarked a capex of ₹1,200 crore for FY25, including maintenance capex. The company has already spent Rs281 crore in the June quarter.

The person said by March 2026, the company is on the track to achieve cement capacity of 30 mtpa, which will be done primarily by more debottlenecking moves in existing plants and adding grinding units.