MUMBAI: The Aditya Birla group’s move to buy Kanoria Chemicals will help its flagship Hindalco to consolidate the supply of caustic soda which is the main feedstock for alumina that is used to produce aluminium. Aditya Birla Chemicals (India ) (ABCIL) will take over Kanoria’s chloro chemicals pision for Rs 830 crore. “

At 9:45 am, shares of Kanoria Chemicals were trading 19.93% up at Rs 49.35 and shares of Hindalco were trading 0.93% up at Rs 211.85 on the Bombay Stock Exchange.

Kanoria’s plant is located close to Hindalco’s manufacturing unit at Renukoot in Uttar Pradesh. After meeting the captive requirements, we will sell the rest to units in eastern India where major aluminium capacities are coming up,” said Lalit Naik, business head (chemicals ), Aditya Birla group. Out of the total caustic soda capacity of 115,000 tpa, Kanoria will supply 90,000 tpa to Hindalco.

The acquisition of Kanoria will help the group to boost its chloro chemicals capacity to 5.40 lakh tpa from 4.25 lakh tpa. ABCIL will increase its capacity to 220,000 tpa. Kanoria Chemicals will use the money received from the pestment to persify into newer areas.

“The funds to be realised from the transaction will be used to repay the debt, aggregating Rs 320 crore. Part of the proceeds will be used to venture into new areas, particularly in the high-end technology space,” said RV Kanoria, CMD, Kanoria Chemicals. Analysts feel the deal was done at a hefty valuation as revenues for Kanoria’s chloro chemicals pision was at Rs 303 crore for the year ended on March 31.

“We have followed the asset pricing model to arrive at valuations . Considering the fact that the replacement value would be in the region of Rs 900 crore, our current valuation is justified. Assets include a captive power plant and 900 acres of leasehold land,” said Naik.