Adani Group, which recently completed its $6.5 billion acquisition of Ambuja Cements and ACC, is now in talks to buy the cement businesses of debt-laden Jaypee Group for about `5,000 crore.
After completing the acquisition of Ambuja Cements and ACC, Adani Group chairman, Gautam Adani had said that he plans to double the cement manufacturing capacity of his firms to 140 million tonne in the next five years and emerge as the most profitable manufacturer in the country. Currently, Adani Group is the country’s second-largest cement maker with annual production capacity of 67.5 million tonne.
Sources said Adani group is in advanced talks with the management of Jaiprakash Associates and the deal could be announced shortly.
Both Adani group and Jaypee group declined to comment on the matter.
Shares of Jaiprakash Associates and Jaiprakash Power Ventures ended with gains on the day after the news of talks came out. Jaiprakash Associates (JAL) jumped 9.72% to settle at `11.74 apiece on the BSE while Jaiprakash Power Ventures (JPVL) climbed 3.80% to end at `8.46 apiece.
Jaypee Group had sold its cement business to UltraTech back in 2016 for `15,900 crore but a few units were still housed in group firms. The boards of Jaiprakash Associates and Jaiprakash Power Ventures on Monday approved plans to divest their residual cement business as well as some non-core assets to reduce debt.
If the deal goes through, Adani Group would get nearly 10 million tonne per annum (MTPA) of capacity from the Jaypee Group spread over the states of Madhya Pradesh (MP), Uttar Pradesh (UP), Andhra Pradesh (AP) and Karnataka.
Aditya Birla Group’s UltraTech, the country’s largest cement manufacturer, has a production capacity of 119.95 MTPA and has plans to raise it to 159.25 MPTA.
Jaiprakash Associates (JAL), currently has an aggregate capacity of around 6 MTPA and Jaiprakash Power Ventures (JPVL) has around 4 MTPA. On Monday, JAL and JPVL, both part of the Jaypee group and facing business headwinds, announced plans to divest their cement business as well as some non-core assets to reduce debt. The companies’ decision to sell their cement business also comes against the backdrop of a recent plea by State Bank of India to initiate insolvency proceedings against Jaypee group’s flagship firm Jaiprakash Associates.
“With a view to give thrust to the ongoing efforts of the company to reduce its debt, the board of directors in their meeting… decided to divest company’s significant cement business,” JAL said in a regulatory filing.
The board of JPVL has also ‘decided to divest company’s Nigrie Cement Grinding Unit as well as other non-core assets’, according to another regulatory filing.
Nigrie Cement Grinding Unit, which is based near Jaypee Nigrie Super Thermal Power Plant at Singrauli in Madhya Pradesh, has a capacity of 4 million tonne per annum. At present, 2 million tonne per annum capacity is in operation.
In September 2018, ICICI Bank filed an insolvency petition against JAL but the matter is still pending before the Allahabad bench of the National Company Law Tribunal (NCLT).