UltraTech Limited has agreed to acquire Jaypee Group’s 22.4 million tonnes of cement capacity assets for Rs.16,500 crore, making it the largest deal in the Indian cement sector.
Kumar Mangalam Birla’s cement flagship firm entered into a binding agreement with Jaiprakash Associates Ltd., for the acquisition of its identified cement plants having a total cement capacity of 22.4 mtpa and situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka. As per the agreement these plants have been valued at Rs.16, 500 crore, according to a BSE filing. A number of foreign and Indian companies were in the race to acquire these plants.
The deal will also include a four mpta plant under implementation at a cost of Rs.470 crore, according to the filing. The acquired assets will give UltraTech access to the newer markets in Satna, UP East, Himachal Pradesh and Coastal Andhra
The acquisition, which is subject to definitive agreements and regulatory approvals as may be required, will augment UltraTech’s cement capacity to 90.7 mtpa from the current 68.3 mtpa, according to the filing.
The move comes two days after UltraTech called off a Rs.5400-crore deal to buy Jaiprakash Associates’ (JAL) 2.1 mtpa cement plant in Madhya Pradesh as new MMDR Act 2015 barred transfer of mines not allocated through auctions.
“On a proactive basis, we had taken concrete steps to divest two cement plants in MP in January 2015 but for reasons not attributable to the company, this divestment could not take place which is a matter of great concern, as this affects even groups like us which are proactively pursuing the process of de-leveraging through disinvestment,” said Manoj Gaur, Executive Chairman, JAL, said in a BSE statement.
He said that in the given situation, it has now been considered appropriate to divest a significant portion of the total cement capacity in favour of a company which is not only India’s largest cement player but would also be the first cement company in India to achieve the coveted 100-million-tonne mark in the cement segment.
On Friday, UltraTech was forced to call off the deal after the Bombay High Court refused to approve the scheme of arrangement entered between UltraTech Cements and JAL, for acquisition of entire cement business along with mining rights situated at Bela and Siddhi in Madhya Pradesh.
Jaypee Group, India’s third largest cement maker with cement capacity of 28 mtpa, will be left with capacity of 6 mtpa.
The Jaypee Group has taken the decision to sell its cement assets “to effectively address the subject of debt reduction,” according to the BSE filing by the company.
Jaypee Group is determined to leverage its expertise in the fields of engineering & construction, real estate and project execution, in a committed manner and such steps would further ‘cement’ its credentials of being a trustworthy organisation in the long run, Mr. Gaur said.
Aditya Birla Group chairman Kumar Mangalam Birla had told The Hindu that UltraTech will maintain its leadership position in India.
Investment advisor S P Tulsian believes that the acquisition will propel Ultratech to the coveted 100-mtpa club, and ahead of its competitors.