- The transaction will see Ultratech become possibly India’s biggest cement player
- Ultratech will gain an overall capacity of 21.2 million
- Value of the transaction was reduced from Rs 16,500 crore to Rs 15,900 crore
- The deal is expected to take 9-12 months to fructify
- The deal will help Jaiprakash Associates reduce debt from the current Rs 60,000 crore.
In one of the biggest deals in the domestic cement industry, debt-ridden Jaypee Group on Thursday announced part sale of its cement business to Kumarmangalam Birla-led Ultratech for Rs 15,900 crore. The transaction will see Ultratech become possibly the biggest cement player in the country after gaining an overall capacity of 21.2 million tonne per annum from Jaypee’s cement plants in five states and a grinding unit in Uttar Pradesh.
Post this deal, the capacity of Ultratech will rise to 91.1 MTPA, including its overseas operations, while that of JAL will come down to 10.6 MTPA spread over Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka.
The value of the transaction, however, has been reduced from Rs 16,500 crore announced last month as Jaiprakash Associates’ (JAL) Karnataka plant with a capacity of 1.2 million tonnes per annum (MTPA) has been excluded.
Announcing the deal, JAL in a filing to the BSE said its board approved the definitive agreement with Ultratech Cement (UTCL) for sale of part of its cement business. It includes “cement plants with an aggregate capacity of 17.2 MTPA spread over the states of Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh, besides a grinding unit of 4 MTPA capacity, which is currently under implementation in UP.” Both the parties have mutually agreed to exclude Shahabad plant in Karnataka from the transaction, it added.
“The total enterprise value is Rs 15,900 crore and additional amount of Rs 470 crore shall be paid by UTCL for completion of the grinding unit under implementation,” it said.
The transaction is subject to various regulatory approvals including approval of stock exchanges, Competition Commission of India, shareholders and creditors as well as sanction of scheme of arrangement by High Courts at Mumbai and Allahabad.
“The consummation of transaction is expected to take 9-12 months,” JAL said in the filing. ICICI Securities assisted JAL as transaction advisors, Ernst & Young (EY) as tax advisors and Vaish Associates as legal advisors for the transactions.
For Ulratech, Standard Chartered bank was transaction advisor, Cyril Amarchand Mangaldas as legal advisor and EY did the financial due diligence. The deal will help JAL reduce its debt. The Group is reported to have a consolidated debt of around Rs 60,000 crore.
On the deal, a ICICI Bank spokesperson said: “Jaypee Group in consultation with ICICI Bank has been selling various assets in its cement and power businesses to take care of its debt obligations.” These sales have helped bring down debt to some extent. ICICI Bank has actively worked with the management of Jaypee to sell its entire cement business and this business is now being sold to the Aditya Birla group, it added.
“This sale will further bring down the level of debt in the Jaypee group significantly. ICICI Bank is also working with Jaypee Group to find solutions to further reduce the Debt burden in other ways,” the spokesperson said.
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