An UltraTech Cement plant. Source: Aditya Birla Group website

Jaiprakash Associates Shares Surge 15% Post UltraTech Deal

Shares of Jaiprakash Associates Ltd. surged as much as 14.6 percent after the company announced a revised deal to sell its cement business to UltraTech Cement Ltd.

UltraTech Cement will complete the acquisition of cement plants with a total capacity of 21.20 million tonnes per annum, including a 4 million tonne per annum grinding unit, within the next 9-12 months, according to separate statements from both companies to the stock exchanges.

UltraTech will pay an enterprise value of Rs 16,189 crore for these assets. And an additional Rs 470 crore for the grinding unit, as per its filing with the stock exchanges.

The enterprise value agreed on is Rs 289 crore higher than the amount disclosed in March 2016, when the definitive agreement was signed. And it is Rs 371 crore lower than the enterprise value determined in February 2016, when the MoU was signed.

UltraTech Cement has also disclosed it will pay a total of Rs 4,625 crore to Jaiprakash Associates and its wholly owned subsidiary Jaypee Cement Corp Ltd, via debt and quasi debt instruments.

The two companies first contemplated a deal in January, 2015, when an agreement was signed for the acquisition of two of Jaiprakash Associates’ cement plants in Madhya Pradesh. This deal fell through due to a delay in amendments to the Mines and Minerals (Development and Regulation) Act, 1957 permitting the transfer of mining leases.

Then, in February this year, the two companies signed a fresh memorandum of understanding for the 21.2 million-tonnes-per-annum cement and grinding units. Since then the Mines and Minerals (Development and Regulation) Act, 1957 has been amended to permit the transfer of mining rights in select circumstances.

The cement plants in question belong to Jaiprakash Associates and its subsidiary and are located in Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand, and Andhra Pradesh. In financial year 2015-16 they accounted for 42% of Jaiprakash Associates’ revenue, and 81% of that of Jaypee Cement Corp. The combined revenue of these cement units stood at Rs 4,541 crore for the financial year 2015-16.

Also Read: Jaiprakash Associates Board Meets to Review Asset Sales After Lenders Trigger Takeover