India's UltraTech in the hunt for 20 m tonne cement deal

25 February 2016

India’s largest cement maker, UltraTech, has reportedly offered more than Rs. 18,000 crore (US$ 2.62 billion) for the cement division of Jaiprakash Associates.

The debt-ridden business currently generates more than 20 million tonnes of cement annually, and UltraTech, along with KKR & Co and Dalmia Cement have reportedly each made bids.

An unnamed source said, "UltraTech is in the advanced stage of acquiring Jaiprakash Associates' cement assets. The company is working on various modalities for this acquisition."

The source also said UltraTech - a subsidiary of Aditya Birla Group - would fund the deal primarily with loans and a small amount of equity.

At this point, there has been no comment from either UltraTech or Jaiprakash.

If agreement were to be reached between the two companies, there are a number of regulatory issues that could potentially prevent a deal going through.

Amendments would need to be made to the Mines and Minerals Act, which currently does not allow a company to transfer rights to an allotted mine to another company or subsidiary. As it stands, it would be difficult for a deal to be done on the cement assets, without the related limestone mines being part of the equation.

There could also be anti-trust issues, with UltraTech’s acquisition of Jaiprakash’s assets giving it a significantly expanded presence in northern and central Indian markets.

The anonymous source said options currently under consideration include “acquiring the cement division and then divesting according to the CCI [Competition Commission of India] requirements”.

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