UltraTech Cement, part of the Aditya Birla Group, will issue Rs 4,538 crore of non-convertible debentures and non-convertible preference shares worth Rs 10 lakh to Jaiprakash Associates in exchange for the two Madhya Pradesh cement units it aquired from the latter in December, the company said in a statement on Friday.
On December 23, UltraTech agreed to acquire two integrated cement plants from the debt-laden Jaiprakash Associates for an enterprise value of Rs 5,400 crore. The plants, which have a combined capacity of 4.9 million tonne per annum (mtpa), are located at Bela and Sidhi in Madhya Pradesh. The cement units also come with a captive power plant of 180 MW.
“As part of the business, the company shall take over Rs 626.50 crore of debt and negative working capital of Rs 160.50 crore,” Ultratech’s latest statement said.
These cement plants will help UltraTech gain a pan-India footprint — before this acquisition, it did not have a presence in the Satna cluster of Madhya Pradesh, which supplies cement to regions like central and eastern Uttar Pradesh and Bihar.
The two cement plants being sold by Jaiprakash Associates also come with clinker capacities that can help UltraTech augment its cement-making capacity in the region by 1.8-2.5 mtpa, OP Puranmalka, managing director and chief executive of UltraTech, had told FE. UltraTech will consider building a greenfield cement grinding unit or acquire one in the region for this purpose, he had said.
With this acquisition, UltraTech has achieved a domestic cement capacity of 65 mtpa, up from 60 mtpa. With the current projects underway, capacity in India will rise to 71 mtpa in 2016, the company said. The acquisition has extended UltraTech’s lead over the Holcim Group, which has a combined capacity of 60.1 mtpa in India through its two subsidiaries, ACC and Ambuja.
The company said that it hopes to close the transaction in 7-9 months, and this was subject to approval of shareholders and creditors, sanction of the scheme of arrangement by the High Courts, approval of the Competition Commission of India and other stautory approvals. Standard Chartered Bank and Moelis & Company India were transaction advisors of the deal while the valuation was done by chartered accountants Bansi S Mehta &Co.
This is the second time that UltraTech has bought cement-making assets from Jaiprakash Associates. In September 2013, UltraTech purchased two cement plants in Gujarat with a capacity of 4.8 mtpa from the Jaypee Group (of which Jaiprakash Associates is a part) for an enterprise value of Rs 3,800 crore.