Jaiprakash to divest 49% stake in cement unit

JUNE 28: The Jaiprakash group is in talks with leading international cement majors including Lafarge, Italcementi, Cemex and Blue Circle f...

JUNE 28: The Jaiprakash group is in talks with leading international cement majors including Lafarge, Italcementi, Cemex and Blue Circle for divesting up to 49 per cent equity in its cement business. The group proposes to retain a majority 51 per cent equity.

Jai Prakash group chairman Jai Prakash Gaur told reporters that the foreign partner will be offered equity of up to 49 per cent in Bela Cement Ltd, the wholly-owned subsidiary of Jaiprakash Industries Ltd (JIL) in which the group’s cement business is being consolidated. Bela Cement is acquiring JIL’s 2.5 mtpa cement capacity.

He said the group is likely to finalise its foreign partner by October-November this year. "We want a strategic partner to improve cash flows and reduce JIL’s debt burden," Gaur said. JIL has term loans of Rs 500 crore which is proposed to be reduced to Rs 200 crore when Bela Cement takes over debt liability of Rs 300 crore along with JIL’s cement business.

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Gaur said Bela Cement is also setting up a 2 mtpa-greenfield cement project in Himachal Pradesh which will take up its total capacity to 6.2 mtpa. Bela currently has a 1.7 mtpa capacity which will go up to 4.2 mtpa after merger of JIL’s 2.5 mtpa capacity cement business.

According to Gaur, the group’s existing cement business has been valued at around Rs 1,500 crore. After accounting for debts of around Rs 300 crore, the net value comes to Rs 1,200 crore. In case JIL is able to offload 49 per cent equity to a strategic foreign partner, the company would raise close to Rs 600 crore.

The group is also in talks with Uttar Pradesh government for acquisition of UP Cement Corporation which has three cement units with total capacity of 1.8 mtpa. This acquisition, however, is not proposed to be done under Bela Cement.

Gaur said the restructuring of the group was being done in a manner whereby the flagship JIL focusses on construction business and at the same time the group remains a strong player in the cement business through Bela Cement Ltd.

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JIL’s order book position currently stands at Rs 7,500 crore. The company proposes to add another Rs 4,000 crore orders over the next two years.

The group is also venturing into information technology business with initial investment of Rs 5 crore. The IT venture is being taken up by Jai Prakash Information Technology Ltd.