Mumbai, Feb. 28: Aditya Birla Group company UltraTech today announced the acquisition of debt-ridden JP Group's cement plants at an enterprise value of Rs 16,500 crore, just days after the two companies agreed to sever an agreement on the purchase of Jaypee's two cement plants.
In the biggest deal in the sector, UltraTech Cement said it had entered into a binding MoU with Jaiprakash Associates Ltd to acquire its identified cement plants having a total capacity of 22.4 million tonnes per annum (mtpa) situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka.
The deal will also include a 4mtpa plant under implementation at a cost of Rs 470 crore.
A number of Indian and foreign players were said to have been in the race for these cement plants.
Only on Friday. UltraTech and Jaypee broke off a deal for Jaypee's two plants on the grounds that current rules do not permit the transfer of mines allotted on a nomination basis. It is not known whether the Bela and Sidhi units of Jaypee in Madhya Pradesh are part of the current deal.
UltraTech said the assets would give it access to the newer markets of Satna, Uttar Pradesh East, Himachal Pradesh and coastal Andhra where it did not have a presence.
"Upon consummation of the proposed transaction, the company's cement capacity will stand augmented to 90.7mtpa (from 68.3mtpa)," it added.
The two groups have agreed to an enterprise value of Rs 16,500 crore for the deal, which is subject to definitive agreements and regulatory approvals, the statement added.
JP Associates said in a separate statement that headwinds in the economy had impacted all companies that had borrowed to invest in the brick-and-mortar segment, currently reeling under severe pressure. The power sector is witnessing never-seen-before challenges with capacity utilisation and tariffs at all-time lows.
It further said Jaypee Group had taken steps to deleverage its balance sheet through the sale of two hydropower projects in Himachal Pradesh, sale of cement assets in Gujarat, Jharkhand and Haryana, and sale of wind power assets in Gujarat and Maharashtra.
On the latest deal, the group said, "The enterprise value for the operating capacity of 18.4mtpa has been agreed at Rs 16,500 crore. An additional amount of Rs 470 crore shall be paid by the purchaser for completion of the grinding unit under implementation."
"The group has taken these steps to effectively address the subject of debt reduction but notwithstanding the government's focus on ease of doing business, Jaiprakash Associates would be dependent on the regulatory framework, including the proposed amendment in MMDRA, for different options available to it for consummating the proposed transaction expeditiously," it added.
"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 also the first cement company in India to achieve the coveted 100mt mark in the cement segment," Manoj Gaur, executive chairman of Jaiprakash Associates, said.
Gaur added that Jaypee Group would leverage its expertise in engineering and construction, real estate and project execution and such steps would "further cement its credentials of being a trustworthy organisation in the long run".
Last month, the government said it would take views from the public, states and industry on amending the mines and minerals (development and regulation) act to include provisions allowing the transfer of captive mines granted through procedures other than auction.
