Anupam Rasayan to acquire stake in Tanfac Industries from Birla Group

2 Feb 2022 , 12:29 PM

Anupam Rasayan India Ltd. (ARIL) announced that its Board of Directors has approved the acquisition of 24.96% of the total equity shareholding of and joint control of Tanfac Industries Limited (“TIL”) from Birla Group Holdings Private Limited (“BGH”), (a promoter company which is part of Aditya Birla Group) and few other promoter group of TIL (“Sellers”) and the launching of an open offer under the Securities Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011 to acquire a further 26% shareholding from the public shareholders of TIL.

ARIL has also executed an amendment agreement to the joint venture agreement dated 4 October 1980 between Tamil Nadu Industrial Development Corporation (“TIDCO”) and Birla GroupHoldings Private Limited pursuant to which ARIL will replace BGH as the joint venture partner of TIDCO in TIL, subject to compliance with the Securities Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011.

The consideration for the acquisition of shares from the Sellers is Rs148.14 crores and the open offer (assuming full acceptance) is Rs154.31 crores which will be funded through debt. Pursuant to the acquisition, ARIL will become a promoter and will have joint control in TIL along with TIDCO.

Incorporated in 1972, TIL is a specialty fluorides chemical manufacturer. The company is also a leading producer of Hydrofluoric Acid and is engaged in manufacturing other organic and inorganic fluorine-based products such as Aluminium Fluoride, Sodium Silico Fluoride, Potassium Fluoride. In addition to that, Sulphuric Acid and Oleum are key products of the company. The company has one manufacturing unit at Cuddalore, Tamil Nadu, spread across 60 acres and strategically located adjacent to the Cuddalore Port. TIL posted revenue of Rs253 crores, EBITDA of Rs65 crores and PAT of Rs46 crores till Q3 of FY2022. The deal is taking place at P/E multiple of ~13 times considering PAT of trailing four quarters.

This acquisition is a strategic decision to expand the product series under the fluorination chemistry of ARIL. It brings synergies by way of backward integration initially as ARIL is one of the largest consumers of Potassium Fluoride in India which would be supplied by TIL. With access to these basic fluoro compounds and the expertise of ARIL’s core R&D team we will be able to introduce niche value adding fluorine derivatives in the coming years. ARIL will also strengthen the TIL’s team by adding highly experienced professionals in its R&D and plant level.

Speaking about the Acquisition, Anand Desai, Managing Director of ARIL, said, “We are very pleased to announce our investment in Tanfac industries. Tanfac is strategically fit for our fluorination chemistry business. This will not only reduce our import dependence but will also let us launch new derivatives under this chemistry which was not possible earlier. We will add niche fluoro derivatives which will have application in Crop protection, Pharma intermediates and Polymers such as Fluoro Elastomers and Fluoro Electrolytes and other Polymers which have application in Polyamide and Semiconductors. We will also expand the speciality chemical business of TIL, thereby improving existing margins of TIL. This business will be EPS accretive from day one. We aim to unlock the full potential of the Tanfac Industries and drive significant value creation through synergies between Anupam and Tanfac.”

Singhi Advisors is the financial advisor for this transaction. Edelweiss Financial Services Limited acted as manager to the open offer and Shardul Amarchand Mangaldas & Co., Advocates and Solicitors as the legal advisor to the transaction.