Talks between the Jaypee Group and the Aditya Birla Group for sale of the former’s cement units in Gujarat have reached the last lap and a decision is expected any time, according to a source directly involved.
The deal, if it fructifies, will result in the Birlas paying close to $800 million or Rs 4,357 crore for the units and help Jaypee Group retire its debt, the source said.
The talks are centred around final valuation of the unit. “There is an issue over the valuation of the units from the Birlas’ side, who think the units are expensive. The Birlas are negotiating hard and have made the final offer,” the source said.
The Birlas have offered close to $160 a tonne of capacity and Jaypee and its bankers are going through the offer. The earlier deal in the industry between Holcim and ACC was signed at an acquisition price of $200 a tonne of capacity.
When contacted, Manoj Gaur, executive chairman & CEO of Jaiprakash Associates, confirmed the units’ sale plans were on but declined to give details. O P Puranmalka, whole-time director of UltraTech Cement, an Aditya Birla group company, said no takeover talks were on with the Jaypee Group for the Gujarat units.
However, based on cement units’ sale reports, the shares of Jaiprakash Associates have already gone up 100 per cent this year-to-date to Rs 105 a share on the Bombay Stock Exchange. The company was earlier talking to the CRH group of Ireland to sell the cement units, but the deal fell through over valuation reports. The talks to sell the Gujarat units with the Birlas was re-started after the negotiations failed to make any headway early this year over valuation.
According to analysts, sale of the units is very important for the Jaypee Group as it will help it to retire its huge pile of consolidated debt worth over Rs 50,000 crore, which is a cause of concern for its bankers. The deal will help the Birlas to raise its capacity in the crucial Gujarat market.
Jaypee’s cement units in Gujarat consist of a clinker plant and a grinding plant in Kutch, with the capacity to produce 4.8 million tonnes per annum. This will add to UltraTech's 22 cement plants in India with an installed capacity of 52 million tonnes per annum. It wants to add another 10 million tonnes per annum capacity by investing close to Rs 12,000 crore.
UltraTech’s stock is also up by 69 per cent this year-to-date to Rs 1,957 a share, fuelled mainly by a construction boom in the country.
The consolidation of the Indian cement sector has resulted in two players ACC-Holcim owned by Holcim of Switzerland and UltraTech controlling a sizeable chunk of the market.
With the B K Birla cement units of Century Textiles also coming into his grandson Kumar Mangalam Birla's fold, analysts say UltraTech will retain its pole position in the industry.