Buys part of Jaypee ce­ment biz for ₹16,500 crore

Aditya Birla Group to en­ter list of world’s top 5 ce­ment mak­ers with an­nual ca­pac­ity of 90.7 mn tonnes

Hindustan Times ST (Mumbai) - - NATION - HT Cor­re­spon­dent 2016-17

MUM­BAI: India’s largest ce­ment maker and Aditya Birla Group com­pany Ul­trat­ech Ce­ment said on Sun­day that it will ac­quire debt-rid­den Jaiprakash As­so­ciates’ (Jaypee) 22.4 mil­lion­tonne ce­ment ca­pac­ity for an en­ter­prise value of ₹16,500 crore.

One of the big­gest deals in the sec­tor, this ac­qui­si­tion will put the Aditya Birla Group among the world’s top five ce­ment companies with an in­stalled ca­pac­ity of 90.7 mil­lion tonnes, and also give it ac­cess to ce­ment mar­kets in south­ern and cen­tral India, where it was hith­erto not present. Ul­trat­ech cur­rently has a ca­pac­ity of 68.3 mil­lion tonnes.

Un­der the deal ap­proved by reg­u­la­tors, Ul­trat­ech will pay ₹16,500 crore for the debt of Jaiprakash As­so­ciates, which will flow to the banks that had lent to Jaypee. An en­ter­prise value ac­qui­si­tion typ­i­cally in­volves the cost of the as­set as well as the debt on the books of the com­pany be­ing ac­quired. Jaypee cur­rently has a debt of around ₹31,000 crore.

The trans­ac­tion comes a week af­ter Ul­trat­ech with­drew from the Bom­bay High Court, its bid to buy a unit of Jaiprakash As­so­ciates, since cur­rent laws do not al­low the trans­fer of mines in a piece­meal ac­qui­si­tion. As Sun­day’s an­nounce­ment in­volves ac­qui­si­tion of the en­tire unit, own­er­ship of lime­stone mines — vi­tal in ce­ment mak­ing — also stand trans­ferred to Ul­trat­ech.

Af­ter this deal, Jaypee will be left with 6 mil­lion tonnes of ce­ment ca­pac­ity.

“It is an all-debt deal and gives us en­try into mar­kets where we did not have much pres­ence,” Ul­trat­ech CFO Atul Daga told HT. “We see this ac­qui­si­tion as prepa­ra­tion for the be­gin­ning of the next round of de­mand growth in the in­dus­try.”

Till 2014, the In­dian ce­ment in­dus­try was sec­ond only to China in an­nual growth, but it is cur­rently grap­pling with slow de­mand growth of 2-3% per an­num due to fewer allocations to hous­ing and in­fra­struc­ture projects.

“It has been con­sid­ered ap­pro­pri­ate to di­vest a sig­nif­i­cant por­tion of the to­tal ce­ment ca­pac­ity in favour of a com­pany, which would be the first to achieve the cov­eted 100 mil­lion-tonne mark in the ce­ment seg­ment,” said Manoj Gaur, ex­ec­u­tive chair­man of Jaiprakash As­so­ciates.

In 2014, Ul­trat­ech stood 11th among the world’s top 75 ce­ment companies by ca­pac­ity, ac­cord­ing to the Global Ce­ment Magazine. The JP deal takes it to the fifth spot be­hind An­hui (China), La­farge (France), Hol­cim (Switzer­land) and CNBM (China).

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