Ultratech Cement (UTCEM) entered into an MoU with JPA for 22.4mt (clinker 16.2mt) of cement assets at a valuation of Rs 165 billion. The deal comprises 11.4 mt in Satna Cluster, 4.8 mt in north and 6.2mt in south, 325 MW of captive power plants and 40 years limestone reserve. UTCEM with 94.5mt capacity (by mid-FY17) would become fourth largest capacity holder in the world (outside China).
Demand cycle at the cusp of acceleration, organic expansion getting costly and time consuming (land, limestone and approvals) and JPA-portfolio of 12 plants offering complementary market reach to its existing asset base – thus creating strong strategic sense.
Complementary market mix keeps us optimist on CCI node despite large size of the deal. 50% of capacities fall in Satna cluster where UTCEM had no presence. State-wise combined entity’s market share wouldn’t cross 20-30%, while share in central region would be 30%. However amendment to MMDR ACT remains a contingency.
Management is optimist on resolution in near future, followed by deal conclusion of 12-15months by 1HFY18.