Aditya Birla Group firm UltraTech on Sunday announced acquisition of debt-ridden JP Group’s cement plants for Rs 16,500 crore, making it the biggest deal in the sector. The buyer will pay an additional amount of Rs 470 crore to complete the grinding unit.
In a transaction that will take its cement portfolio to nearly 91 million tonne, UltraTech Cement will acquire 22.4 mt of assets from Jaiprakash Associates. The deal includes two units in Madhya Pradesh.
The announcement comes close on the heels of a cancelled deal between the two last Friday when UltraTech called off a Rs 5,400-crore transaction with JAL for cement plants in Madhya Pradesh. UltraTech failed to get court approval for transfer of rights to mine limestone to be used at the cement plants, since these had not been won through an auction.
While it is unclear how UltraTech plans to overcome regulatory hurdles this time around, sources in JAL explained there is a possibility of the Mines and Minerals (regulation and development) Act, being amended.
Current provisions of the MMDR Act prevent transfer of mining rights, other than those acquired through open auctions, and the contentious regulation has been a deal breaker in at least two such transactions. They also said the assets could be housed in a separate company which will then be acquired by UltraTech.
JAl executives said the proposed transaction entails transfer of JAL’s debt of close to Rs 12,000 crore to UltraTech’s books. The JP Group has been grappling with a high level of borrowings and has been attempting to sell assets to pare its debt.
UltraTech said JAL’s assets will give it access to the newer markets of Satna, east Uttar Pradesh, Himachal Pradesh and coastal Andhra, where it does not have presence currently, and will increase its manufacturing capacity to 90.7 mtpa from 68.3 mtpa at present.
The plants are located in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka. The enterprise value for the operating capacity of 18.4 mtpa has been agreed at Rs 16,500 crore. FE