Mangalam Timber merges with Mangalam Cement

The BK Birla group-controlled Mangalam Cement Ltd and Mangalam Timber Products Ltd have been merged to attain value of scale. The consolidation will help in efficient utilization of their resources, reduction in overheads and other expenses and improvement in other parameters.

Mangalam Timber Products Limited (MTPL), a listed company primarily engaged in the manufacture of Medium Density Fibre Board (MDF) and sells its products under the brand name “DURATUFF”. MDF is used in making furniture, Particle board, Doors and all kind of carpentry all kinds of carpentry work.

Mangalam Cement Limited (MCL), a listed company having registered office in Kota Rajasthan. A well-established cement manufacturing company having two cement manufacturing plants located at Morak, Rajasthan and Aligarh, Uttar Pradesh producing Ordinary Portland Cement (OPC) and Portland Pozzolana Cement (PPC) and marketed under the brand name of "Birla Uttam". MCL has also set up two Captive Thermal Power Plants of 17.5 MW each. Apart from this, MCL also owns 13 (Thirteen) Wind Mills at Jaisalmer, Rajasthan with an aggregate capacity of 13.65 MW generation per day. Recently, the Company has invested approximately Rs.100 Crores in a Waste Heat Recovery unit (WHR) with a capacity of 11 MW at Morak plant which is scheduled to be commissioned in October 2019.

MCL holds 3.55% equity stake & all 7.5% Non-Cumulative preference shares of MTPL worth INR 25.96 crores since February 2012. Both MTPL & MCL are part of BK Birla Group companies and hence are under common management.

The Transaction:

With the appointed date for the same is 1^st April 2019, subject to regulatory approvals, MTPL will merge with MCL.

Rationale of the Scheme:

1. As both companies are part of same group so integrating, interlinking and combining the business activities undertaken by both the Companies will be beneficial to the growing requirements in the housing sector, amongst other things and in order to utilize the resources available with each other for better functioning and operating in their respective spheres, under a single entity.
2. The amalgamation will enable appropriate consolidation and integration of the activities more efficient utilization of their resources, reduction in overheads and other expenses and improvement in other parameters.
3. The amalgamation will enable both the companies to pool their financial, managerial, technical and other resources in order to meet the global challenges and competitive market conditions.

It is imperative to note that as mentioned in the Board Resolution passed for approving the scheme, MCL will give loan of INR 5 crores to MTPL. This financial support might be to runs the operations of MTPL till the time scheme becomes operative.


Both the companies operate in different industry not even remotely having any synergies or commonality of customers or suppliers and located and serving in different markets i.e. MCL serving west coast and MTPL serving east coast.  So, in effect the merger does not seems to be in any way beneficial to the shareholders of MCL except tax break it can have carried forward losses of MTPL. If one looks at the financial of MTPL for last 5 years, against total revenue of Rs 150 crores, it incurred loss before tax of Rs 87 crores. Deferred tax assets of Rs 28 crores is effectively zero considering it loss making operations in last so many years.... Continue to read!!