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Jaiprakash Associates Expects Lenders to Drop Strategic Debt Restructuring Post UltraTech Deal

Jaiprakash Associates says group has done its bit when it comes to divestment of its assets; hopes lenders will pause SDR proceedings.



 0.6 MTPA Jaypee Cement Blending Unit, Sadwa Complex, Allahabad, UP (Source: www.jalindia.com)
0.6 MTPA Jaypee Cement Blending Unit, Sadwa Complex, Allahabad, UP (Source: www.jalindia.com)

Jaiprakash Associates Ltd. hopes that lenders will put on hold strategic debt restructuring (SDR) proceedings after the company announced the sale of its cement units to Aditya Birla Group’s UltraTech Cement Ltd.

This was a proposal that was initiated by lenders in the last meeting of the joint lenders forum (JLF), but now, with this divestment moving towards its finality, and approval of the scheme, I don’t think there will be any need to invoke those SDR guidelines.
Rahul Kumar, Whole-time Director & CFO, Jaiprakash Associates 

The Jaiprakash Associates board on Monday approved the transfer of the cement units to UltraTech Cement for an enterprise value of Rs 16,189 crore. The transaction, which requires various regulatory nods including approvals from the high courts, is expected to be completed in 9-12 months.

Jaiprakash Associates will transfer approximately Rs 12,000 crore of debt to UltraTech Cement as part of the deal. It will also monetise debt instruments worth Rs 4,625 crore, provided by UltraTech to pay off other liabilities. Post this deal, Jaiprakash Associates’ standalone debt will be brought down to around Rs 15,000 crore and the consolidated debt at the group level to around Rs 50,000-52,000 crore.

The company will now enter into fresh negotiations with lenders for the restructuring of its debt, Rahul Kumar, the whole-time director and chief financial officer of Jaiprakash Associates told BloombergQuint in a phone interview. Jaiprakash hopes to take advantage of the new debt restructuring guidelines issued by the Reserve Bank Of India.

We are examining the guidelines in consultation with our lenders. We will see what is the best kind of a structure and solution to get debt across the group at manageable levels.
Rahul Kumar, Whole-time Director & CFO, Jaiprakash Associates

So are Jaiprakash Associates’ promoters open to infusing more equity?

Kumar told BloombergQuint, “Whatever is required to comply with the guidelines, will be done.” The cement deal will allow the company to reduce its interest burden, he added.

On an enterprise value of Rs 16,000 crore, the annual (interest) component would be around Rs 2,000 crore. The impact of this deal would be felt in the next financial year.
Rahul Kumar, Whole-time Director & CFO, Jaiprakash Associates 

Kumar said the company has already divested fair share of its assets as part of the corrective action plan agreed upon with lenders. He does not foresee further divestment from the group.

“The group has already done more than its bit.”

Kumar told BloombergQuint that the cement and grinding units acquired by UltraTech Cement had a revenue of Rs 4,513 crore and earnings of Rs 500 crore for the financial year 2015-16.

Jaiprakash Associates will be left with 10 million tonnes per annum capacity post the completion of the transaction. The group will now focus on running these plants efficiently and increasing capacity utilisation levels.