Apollo Global Management may lend $1 bn to JSW for Ambuja Cements buy

American private equity major Apollo Global Management, which owns a minority stake in JSW Cement, is planning to offer up to $1 billion to the Sajjan Jindal-led JSW group to make a bid for Ambuja Cements, banking sources said.

The Jindal family, which is in talks with a number of private equity firms for financing the transaction, is likely to pledge part of its 45 per cent stake in group flagship JSW Steel to raise funds for the acquisition, the sources said. The steel company was valued at Rs 1.75 trillion on the Indian stock market on Friday. The Jindals also own 75 per cent in JSW Energy, whose market value was Rs 52,000 crore on Friday.

A JSW group spokesperson declined to comment, while Apollo did not respond to an email query.

According to a banker, Apollo Global is helping the Jindal family negotiate the transaction, apart from looking at synergy opportunities with JSW Cement. Apollo Global also has representation on the JSW Cement board.  

“As Holcim is selling the company by seeking offers, the process will see bidders making very aggressive offers. No one knows what will be the final cost of acquisition, but taking into account the current market price, the base price would be at least Rs 76,000 crore,” said a banker. “There are a number of financing options under negotiations with several private equity firms. Both Holcim and the bidders are also looking at tax implications of the transaction,” said the banker.

Bankers are, however, expecting an aggressive bid from the Adani group, which wants to make a foray into the cement industry. The group is in talks with several sovereign funds based in west Asia to acquire Ambuja Cements.

The acquisition of Ambuja will propel the buyer to number two position in the industry. JSW Cement currently has a capacity of 14 million tonnes per annum. Ambuja, after its ongoing expansion of 1.5 mt in north India and another 7 mt in east India, will have a total capacity of 40 mt. Its subsidiary, ACC, has another 33 mt capacity.

“No one wants to let go of this opportunity. Even the Birla group is talking to Holcim on how to go about making the bid, so that it does not attract the Competition Commission of India’s objections. The Adani and Birla groups will not have any problems raising the funds, taking into account their existing strong balance sheets,” said the banker.