With banks set to take over Jaiprakash Associates — which has already become a defaulter — under the provisions of strategic debt restructuring (SDR), UltraTech Cement Ltd of the Aditya Birla group has finally ended the uncertainty and announced that its board has cleared the acquisition of the former’s cement plants at an enterprise value of Rs 16,189 crore.
The Birla group announcement came after a Joint Lenders’ Forum (JLF) meeting decided to invoke the conditions of SDR. Under the SDR route, banks can take majority control of the debt-laden company and scout for a strategic investor. There were reports that ICICI Bank has decided to convert its debt into equity under the SDR route in the wake of the undue delay in the UltraTech acquisition.
UltraTech was keen to reduce the deal size and change the terms of the deal, said a banker. However, banks which are under the pressure of growing NPAs wanted the deal to go through. Banks, including State Bank of India, then decided to meet this week to proceed with the SDR provisions which will enable them to convert debt into equity which in turn will be sold to a strategic investor.
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The deal was monitored by banks led by ICICI Bank. SBI alone has an exposure of Rs 7,000 crore to the account. The Jaypee group companies has on a consolidated basis failed to repay Rs 2,905.6 crore in principal amount to banks and another Rs 1,558.93 crore in interest payments, it said in a stock exchange filing recently.
“Overdue principal repayment of loans borrowings … outstanding on March 31, 2016, wherein the period of delay ranges from 1 day to 269 days” include debt of Rs 2,183.17 crore on Jaiprakash Associates, Rs 688.48 crore on Jaiprakash Power Ventures and Rs 33.95 crore on Jaypee Cement, as per latest disclosures.
“The operations will be strengthened by the consequent technological upgradation and enhancement in capacity utilisation on a year-on-year basis, creating synergies in manufacturing, distribution and logistics leading to economies of scale and creation of efficiencies by reducing lead time to markets, enhancing competitiveness and thereby benefiting consumers …,” UltraTech said.
The size of the deal was originally Rs 16,500 crore as Jaiprakash Associates decided not to sell its cement plant in Karnataka.
The two firms had signed an accord last month under which UltraTech was to buy 22.4 million tonnes of cement capacity. Under the revised deal in March, UltraTech was to buy 21.2 MT of cement capacity from Jaiprakash for Rs 15,900 crore. The deal size has now increased to Rs 16,189 crore.
The total debt of Jaiprakash Group works out to Rs 75,163.7 crore, according to a Credit Suisse report. “The total enterprise value now agreed is Rs 16,189 crore. An additional amount of Rs 470 crore will be paid by UltraTech for completion of the grinding unit under implementation,” Jaypee group said.
Jaypee Group executive chairman Manoj Gaur said, “Jaypee Group is determined to reduce its overall debt through its proactive divestment initiatives to help the Group tide over these current turbulent times caused by economic slowdown in the country.”
“Post this deal, Jaypee Group will retain an aggregate cement manufacturing capacity of 10.60 MTPA with plants spread in the states of Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka …”