Shriram to foray into cement via Jayajothi takeover

The Shriram Group is set to enter the cement manufacturing industry by acquiring a majority stake in Andhra Pradesh-based cement manufacturer Sree Jayajothi Cements Ltd by converting part of its outstanding dues into equity.

Shriram EPC, an arm of the group, informed the Bombay Stock Exchange on Monday that it will seek shareholders' approval to make a ''significant investment in the equity share capital of Sree Jayajothi Cements Ltd'' directly or through its associates by converting part of its unpaid dues.

Shriram EPC is the engineering, procurement and construction contractor for Sree Jayajothi's modern 3.2 million-tonne cement plant near Banaganapalli in Kurnool district.

It is unusual in India for a company to use this route to take control of another company. Reports suggest this could be the first time a vendor would seize control of a company for delayed repayment.

T Shivaraman, managing director and chief executive officer of Shriram EPC, said in a statement, ''Sree Jayajothi had a large outstanding with us and we had an option of converting part of that outstanding amount into equity if they delayed the payment beyond a point. Since they have been delaying the payment for a long time now, we decided to convert the outstanding to equity. The dues are mainly receivables on an EPC contract.''