UltraTech in final talks to buy JP Associates' cement plants in Gujarat for Rs 4,100 cr

NEW DELHI: UltraTech Cement is in final-stage talks to buy Jaiprakash Associates' 4.8-million-tonne cement plants in Gujarat for an enterprise value of Rs 4,100 crore, two persons with direct knowledge of the development said. The deal, if consummated, will strengthen the AdityaBirlaGroup company's grip on the domestic cement market. UltraTech is India's second-largest cement producer.

"The deal is expected to be sealed before May," one of the two persons said. "The valuation and other critical aspects, such as the indemnity amount, are more or less finalised. We are waiting for one more approval," the second person said. The enterprise value includes debt of Rs 1,800 crore. 

The sale of the cement units is aimed at reducing Jaypee's debt by Rs 8,000 crore. The group, which has interests in power, 
real estate and hospitality, had debt of Rs 45,000 crore as of December 2012. 

A senior Jaypee official refused to confirm the deal. "I reserve my comments on the divestment of cement plants," said Manoj Gaur, executive chairman and CEO, Jaiprakash Associates. 

Jaypee Group to Also Sell Land Parcels 

"We have given a commitment to reduce our debt by Rs 8,000 crore by December this year, before embarking on any fresh capital expenditure," said Manoj Gaur, executive chairman and CEO, Jaiprakash Associates. 

"We do not comment on market stories," said OP Puranmalka, wholetime director at
UltraTech CementBSE -0.81 %. On Monday, Jaiprakash AssociatesBSE 2.79 % shares gained 1% to close at Rs 77 while UltraTech's stock slipped 2.5% to end at Rs 1,878.75 on the BSE. 

"The management had indicated a debt reduction of Rs 6,000-6,500 crore by selling the cement plants in Gujarat for Rs 4,500 crore and the rest from (sale of) land parcels," ICICI Direct's analysts Deepak Purswani and Bhupendra Tiwary wrote in a research note on April 16. 

Jaypee Group also plans to raise Rs 1,000 crore by selling land parcels owned by subsidiary Jaiprakash Infratech. 

Lenders to the group have reduced the rate of interest to 12.5% from 15%, and extended the loan tenure to 18 years from 10 years, giving a breather to the real estate developer. "We will reduce the debt of Jaiprakash Infratech to about Rs 4,000 crore by December, from Rs 7,000 crore now," Gaur said.

Private equity fund KKR-backed Dalmia Cement, in September, had acquired a 1.5-million-tonne plant in Meghalaya owned by Adhunik Cement for an enterprise value of Rs 1,085 crore, offering a value of $130 per tonne. UltraTech will pay $155 a tonne, a premium for the faster-growing western India market, compared with the eastern region. 

The deal, if it happens, will make 
Aditya Birla Group the country's largest cement maker with 20% market share, overtaking multinational Holcim, which has a capacity of 57 million tonnes. "The deal will strengthen UltraTech's position and reach in the market," said Gaurav Dua, research head at Sharekhan, a brokerage. 

"The transaction will be win-win for both the companies as it will save time for cash-rich UltraTech in ramping up capacity in western India - where demand is robust, and at the same time ensure liquidity for the Jaypee Group," said a senior official with a foreign investment bank.