Jaypee an NPA for SBI, bankers invoke strategic debt rejig

But sale deal with UltraTech on track

Jaiprakash Associates' plan to sell 21.2-million-tonnes-per-annum (mtpa) cement capacity to UltraTech Cement for Rs 15,900 crore is on track despite the lenders invoking strategic debt restructuring (SDR).

“Banks invoked SDR as the lenders had time only till June 30 to treat it as standard asset while the sale process continued,” said a senior official at State Bank of India (SBI). Invoking SDR would help lenders protect status of accounts for the next 18 months. “The Joint Lenders Forum will meet soon to discuss more options,” the official said.

The Jaiprakash Associates' account became a non-performing asset (NPA) on the books of SBI last financial year. There are over 30 lenders to the company which can keep the account standard now since the SDR has been invoked.

Jaiprakash Associates had disclosed that it defaulted on bank loans, interest and statutory payments of Rs 4,539 crore. The company said it failed to repay Rs 2,905 crore in principal amount to banks and Rs 1,558 crore in interest payments. 

Earlier, banks had approached the Reserve Bank of India with a request to allow Jaiprakash Associates’ assets to be considered standard as the sale was under process. “The RBI declined the request and bankers invoked the SDR, which allows treating asset as standard for some more time in which the sale process could be completed,” the senior official said.

The move by banks led to speculation that lenders wished to convert debt into equity under the SDR process to find a new buyer. But bankers, along with both the companies, claim that the deal between Jaypee and UltraTech is on track.

The transaction will help debt-heavy Jaiprakash Associates to reduce its debt, which was around Rs 58,250 crore or 4.5 times its net worth at the end of March. The lenders, led by ICICI Bank, had asked the company to sell assets so it could repay its loans.

UltraTech signed a definitive agreement on April 1 for the acquisition of Jaypee's cement plants in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, and Andhra Pradesh having a capacity of 21.2 million tonnes. The acquisition was expected to take around 12-14 months to close and was subject to regulatory approvals.

“The agreement is valid and under implementation,” said UltraTech in statement to stock exchanges on Friday. Jaiprakash Associates also clarified the same to the exchange. The scheme of the deal has been given to the Competition Commission of India (CCI) to get approval. The legal process for the merger has also started.  

The deal valued the cement capacity at $107 per tonne. Of the total 21.2-mtpa capacity, four mtpa is under commissioning.

UltraTech plans to take over Jaypee's Rs 11,500 crore debt as part of the deal, which will be refinanced at lower rates due to its good credit rating. For the remaining Rs 4,400 crore, UltraTech will fund it by taking additional debt, which it would raise on its own balance sheet. There is no upfront payment to Jaypee and the money will be paid on the date of closing of the deal. An additional Rs 470 crore will be paid by UltraTech once the grinding unit is completed.