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.''

He said of the total outstanding amount of around Rs500 crore, the convertible part would be around Rs300 crore. This will give it majority control, displacing the current promoters, though it is not clear yet what the exact size of its stake would be.

After the acquisition, Shriram Group will rope in a strategic European partner, Shivaraman said.

Jayajothi Cements is part of the diversified Jayajothi Group of Tamil Nadu. Set up in 2006, the company has a 3.2-million tonnes per annum (mtpa) greenfield cement plant and a two million tonne per annum clinker facility in Kurnool district in Andhra Pradesh.

It has large limestone reserves in the same district, including three new quarries in various stages of getting ministerial and environmental clearances.

Jayajothi Cements promoter and managing director T R Kannan has so far refused to comment on the development.