Jaypee Cements Merger With JIL Coming

New Delhi, January 27: | Updated: Jan 28 2003, 05:30am hrs
Less than a year after creation of Jaypee Cements Ltd (JCL) through merger of Jaiprakash Industries Limiteds (JIL) cement business with Jaypee Rewa Cement, the group is now contemplating yet another amalgamation. This time, it will be Jaypee Cement with JIL.

JIL has set up a committee of directors for considering a merger of Jaypee Cements with JIL. The merger will be done in consultation with the board of directors of Jaypee Cements.

Industry sources said the merger of Jaypee Cements with JIL would result in a healthier bottomline for JIL on account of lower tax outflows since Jaypee Cements past losses could be set off against the profits of JIL, giving tax benefit to the company. The cement business emerged out of the red last year.

Post-creation of Jaypee Cement on April 1, 2002, the company had a capacity to produce over 4.25 million tonnes per annum (mtpa) of cement which is being raised to 6.50 mtpa.

The company is also setting up two thermal power units of 27 megawatt (mw) each for captive consumption. The total investment in these projects is estimated at around Rs 350 crore.

The expansion of the cement capacity will be done at a capital outlay of Rs 150 crore and is expected to be commissioned by March 2004, the companys managing director Manoj Gaur told FE recently.

The coal-based power projects being set up for captive consumption will cost around Rs 200 crore. The company is raising around Rs 175 crore as loans from financial institutions and banks including ICICI Bank and Punjab National Bank. The first 27 mw unit is expected to be commissioned in December this year.

The captive power production will bring down the companys electricity costs by nearly half, from the present Rs 4.50 per unit to about Rs 2.20 per unit.

The future may see further growth in sales volume and benefits of economies of scale as the company is planning to upgrade its capacity, credit rating agency ICRA said in a recent report on the cement industry.