BMM Cement Limited

completed

The investment under consideration (“the project”) is a long term debt investment of up to INR 2 billion (US$33 million equivalent) in BMM Cement Limited (“BCL” or the “company”). The proposed IFC investment is for refinancing BCL’s existing debt and supporting additional improvement capex and long term working capital requirements in the company. BCL owns and operates an integrated 0.95 million tons per annum (MTPA) cement plant at Gudipadu village, Yadiki Mandalam, 25 km from Tadipatri, in Anantpur district of the state of Andhra Pradesh, India (“the plant”). Construction of the plant commenced in 2009 and it was commissioned in January 2012. The plant has vertical roller mills for coal crushing and raw meal preparation, a rotary kiln with a 6-stage pre-heater and pre-calciner, horizontal grate cooler and a ball mill for clinker grinding. The plant also has 2 rotopacker lines and two bag loading machines. The plant also has a coal based captive power plant (CPP) of 25 MW, which was commissioned in August 2013. The staff and many of the workers stay in the colony adjacent to the plant.The shareholders of BCL have entered into an agreement for transfer of BCL’s ownership to Sagar Cements Limited (“Sagar” or the “Sponsor”), one of the cement manufacturing companies in South India with a capacity of about 2.75 MTPA, located in the state of Telangana. Sagar has; (a) 2.25 MTPA capacity integrated cement plant (with a captive limestone mine) in Mattampally village, in Nalgonda district of Telangana; and (b) 0.50 MTPA cement grinding plant (with a captive limestone mine) in Peddaveedu village in Nalgonda district of Andhra Pradesh. After the proposed change of ownership, BCL will become a subsidiary of Sagar. IFC financing will be subject to the transfer of ownership and completion of all regulatory formalities related to the transfer of ownership.BCL has applied for a limestone mining lease over an area of 1,123 acres located within 2 km from the plant boundary. The mining lease is currently in final stages of approval by the concerned government department. To date, the BCL plant has been operating intermittently, at less than 30% of the installed capacity with purchased limestone from nearby areas/mines and is manufacturing both Ordinary Portland Cement (OPC) and Blended cement. With the acquisition of the company by Sagar and granting of the mining lease, the situation is expected to see a turnaround and the plant is to operate at full installed capacity in the near future (subject to market demand and business needs). The plant and mine are both located in Gudipadu village, with the village being located at 2.2 km from the plant and 700 m from the mine boundary. There are two other cement plants in the same area (i.e. within 10 km), which are owned by Penna and Ultratech respectively. As the investment is for a defined use of proceeds i.e. refurbishment of the plant, increase in working capital and refinancing of existing debt, IFC’s environmental and social (E&S) appraisal as described in the following sections focuses on operations of the plant within the context of the broader approach by Sagar for E&S management by the sponsor.