While the cement plant sale is a marginal positive for JPAs valuations and it would only lead to a marginal reduction in JPAs consolidated debt, it improves visibility of further asset monetisation and the likelihood of meeting the guidance of R15,000 crore of total monetisation.
JPAs announced sale of its cement plant to UltraTech would also include the associated land, mining reserves and a 57.5-Mw captive power plant. UltraTech would issue equity amounting to R150 crore to JPA, takeover the debt of ~R2,100 crore and pay the balance amount post the consummation of the deal to JPA.
The company has maintained its guidance of an asset monetisation program of R15,000 crore in FY14, of which, it has signed definitive agreements valued at R5,400 crore (including the Greater Noida land sale to Gaursons). Media sources indicate an addition $2 billion of asset monetisation from sale of hydro power projects on the anvil. The sale of the Gujarat plant demonstrates the focused intent of the management towards achieving the stated objectives which we believe is critical for the stock to perform.