Bankers Pull Off Largest Stressed Asset Resolution With UltraTech-JP Cement Deal
A lenders consortium led by ICICI Bank on Thursday concluded the biggest stressed asset resolution in the country with the conclusion of the Rs 16,189 crore takeover of Jaypee Cements by Ultratech.
“This is the largest asset resolution in the country so far and I hope that this landmark transaction will pave the way for more such resolutions,” Chanda Kochhar, ICICI Bank managing director and chief executive, said in the media statement.
Though the exact gain to the lenders is not mentioned in the statement, a March 2016 media report had pegged banks would receive about Rs 4,000 crore from sale.
ICICI Bank was the lead bank in the lenders' consortium and played a "significant role" in the sale process, Kochhar said. A decision to to reduce Jaiprakash Associates and Jaypee Cement's debt was taken more than a year ago and its subsidiary ICICI Securities was appointed to manage the sale process, she added.
The deal involves transfering a part of the debt of Jaiprakash Associates and Jaypee Cement from a stressed account to an AAA-rated new company.
On March 31, 2016, UltraTech, the largest cement company in the had announced its intension to take over the troubled JP Cement for Rs 15,900 crore and ealier this year the valuation was increased to Rs 16,189 crore. Birla group chairman Kumar Mangalam Birla had on March 1 this year expressed hope that the sale process would be completed by June.
The deal will increase the Birla group firm’s capacity by 21.1 million tonne per annum to more than 91 mtpa, Jaiprakash Associates said in a stock exchange filing. Jaypee will continue to have 10.6 mtpa cement capacity in Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka.
The deal will help Jaiprakash Associates pare its debt pile by Rs 14,000 crore, the filing added.
Many banks had to take a hit on provisions in the fourth quarter of the financial year 2016-17 as the deal failed to take off. Lenders had expected a writeback with the conclusion of the sale.
The announcement comes less than a week after banks cleared the Rs 86,000 crore Rosneft-Essar Oil deal which will also help banks. The Eassar Oil owed more than Rs 26,000 crore in debt to 23 lenders led by SBI apart from a Rs 1,290 crore to Life Insurance Corporation of India (LIC).
The ICICI Bank scrip closed 0.95 percent up at Rs 293.70 on the BSE while the benchmark Sensex ended the session with a marginal gain of 0.08 percent.