Ultratech drops out of race to buy Jaiprakash Associates' cement assets

Lack of agreement over valuation spurs decision; deal would have provided relief to Indian lenders, which have an exposure of Rs 28,753 crore to Jaiprakash

After the Adani group, the Aditya Birla Group-owned UltraTech Cement has dropped out of the race to acquire Jaiprakash Associates’ remaining cement assets in India due to lack of agreement over valuation of the assets.

The sale of cement units by Jaiprakash Associates would have provided relief to Indian lenders, which have an exposure of Rs 28,753 crore as on November 7, to the company and its various infrastructure projects.

Bankers said the firm approached Ultratech this October for Nigrie, Madhya Pradesh assets after the Adanis didn't agree to the valuation Jaiprakash sought. Media reports had pegged the valuation of the cement units at Rs 5,000 crore. The company had put on sale 10.55 million tonnes a year of cement capacity after defaulting on bank loans.

Mails sent to the Aditya Birla group spokesperson and Jaiprakash Associates did not elicit responses till going to press.

Since 2017, Jaiprakash has sold assets worth Rs 30,875 crore to repay lenders. These include the hydro power assets it sold to the JSW group and cement assets with 22.4 million tonnes per annum capacity to Ultratech. An offer to  acquire Jaypee Super Plant along with mines in Sonbhadra in Uttar Pradesh for Rs 1,000 crore has been withdrawn by Ultratech citing lack of mining permits.

Jaiprakash has defaulted on loans of Rs 3,860 crore to its lenders. The sale of its cement units would help it thwart a bankruptcy petition filed by ICICI Bank, one of its 32 lenders. The petition is pending at the NCLT.

In June 2017, lenders had agreed to divide the company's debt into three parts. Of these, the first part of Rs 11,689 crore was settled in 2017 with the sale of its cement plants to UltraTech Cement, while another portion of debt amounting to Rs 6,367 crore remained in the company’s books.

According to the company, another bucket of debt worth Rs 11,833 crore was to be transferred to a special purpose vehicle (SPV), Jaypee Infrastructure Development, along with identified land owned by the company. This debt was to be serviced by the new SPV and is awaiting NCLT’s clearance.

The Jaiprakash Associates board had cleared the sale of cement units in a board meeting held in October. The firm's stock closed at Rs 9.65 a share, giving it a total valuation of Rs 2,368 crore.

The Indian cement industry is expected to consolidate with several small companies being taken over by Ultratech, Adani and Dalmia Bharat.

Jaiprakash Associates
Consolidated Figures Rs Crore

FY	Net sales	PBIDT	PAT
FY18	7,645	671	-1,937
FY19	9,210	-901	-2,045
FY20	7,035	2,707	1,096
FY21	6,406	910	-662
FY22	7,034	144	-1,478
H1FY23	3,794	193	-711

Source: Capitaline
Compiled by BS Research Bureau