Ultratech buys cement plants as Jaypee divestments continue

28 January 2015

Jaiprakash Associates (Jaypee Group) has announced it will sell two cement plants in India’s Madhya Pradesh state to fellow cement manufacturer Ultratech. The assets comprise cement plants and grinding facilities in Bela and Sidhi with a total capacity of 4.9 million tonnes per year along with an associated 180 MW power plant to supply them.

Ultratech will pay INR 4,537 crore (US$ 740 million) in non-convertible debentures (loan certificates) and shares worth INR 10 lakh (US$ 16 million) for the facilities. It will also assume net debt and negative working capital of INR 787 crore (US$ 128 million) associated with the businesses. This puts the overall value of the transaction at US$ 628 million.

Ultratech said the acquisition would take its cement manufacturing capacity in India from about 60 million tonnes per year to some 65 million tonnes. It added that other projects to increase capacity would raise this to 71 million tonnes per year in 2016.

Commenting on the sale, Jaypee Group executive chairman Shri Manoj Gaur said, “We wish Ultratech the very best in their journey to become a global player in the cement industry.”

The sale is part of Jaypee’s programme to pay-down debt, and it said it has sold assets worth INR 22,000 crore (US$ 3.6 billion) in pursuit of this. This includes some INR 10,000 crore (US$ 1.6 billion) of assets in its cement business. However it says it remains India’s third largest cement producer, with a capacity of 22 million tonnes per year.

Is largest previous cement divestment was also to Ultratech. Last year it agreed to sell a facility in Gujarat state comprising a 2.4 million tonnes per year cement plant in Kutch and a 2.4 million tonnes per year grinding plant in Wanakbori, for INR 3,800 crore (US$ 620 million). The deal reached a financial close in June 2014.

Last September Jaypee announced the INR 360 Crore (US$ 60 million) sale of a 1.5 million tonnes per year cement grinding plant in Panipat to Shree Cement.

Jaypee has also agreed to sell its 74% stake in Bokaro Jaypee Cement Limited, a cement joint venture with the steel Authority of India to Dalmia Cement for INR 6.9 billion (US$ 115 million). That deal was announced in March 2014.

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