Ultratech-JAL cement deal fails on lack of regulatory approval

The Rs 5,400-crore deal between India's largest cement maker Ultratech and Jaiprakash Associates (JAL) to acquire the latter's two cement plants has been called off on account of lack of regulatory approvals.
Aditya Birla Group's flagship firm UltraTech Cement today said it has called-off the deal, which is a blow to the debt ridden Jaiprakash Associates, who has been selling its cement and power assets to pare debt and improve balance sheet.
In a regulatory filing today, Ultratech said: "The Bombay High Court has indicated that based on the recent amendments in the provisions of the Mines and Minerals Act, 1947 (MMDRA), preventing transfer of mines granted other than through auction.

"... And in absence of any clear timelines for any amendment/clarifications in MMDRA, the court cannot sanction this scheme."
The filing further said: "Under the circumstances, it was decided to apply for withdrawal of the scheme filed before the Bombay High Court, which was permitted by the High Court at the heading held on February 25."
In one of the biggest deals in the cement sector, in December 2014, Ultratech had said it will acquire JAL's Bela unit (Madhya Pradesh), which has 2.1 million tonnes per annum (mtpa) clinker and 2.6 mtpa cement grinding capacity.

The other unit, located at Sidhi also in Madhya Pradesh, has 3.1 mtpa clinker and 2.3 mtpa cement grinding capacity. Both units have a total of 180 MW power generation capacity.

In a separate filing, JAL said: "In view of recent amendment in MMDR Act, 1957, Bombay High Court indicated that it cannot sanction Scheme of Arrangement for transfer of 2 of company's cement plants at Bela and Sidhi in MP to UltraTech Cement and on its request, UTCL was permitted by Bombay High Court to withdraw its petition on February 25, 2016."
Further, since "Regulatory approvals (including sanction of Bombay High Court)" could not be received prior to the Long Stop Date, "the Scheme stands revoked", it added.
Interestingly, last month government said it will take views from the public, states and industry on amending the MMDR Act to include provisions allowing transfer of captive mines granted through procedures other than auction.

Mines Ministry has prepared the draft Mines and Minerals (Development and Regulation) (Amendment) Bill, 2016 to amend Mines and Minerals (Development and Regulation) Act, 1957.
As part of consultations, government invited suggestions from public, state governments, mining industry and entities concerned, on the draft Bill. The last date for sending comments and suggestions was January 26, 2016.
The transfer of captive mining leases, granted otherwise than through auction, would facilitate banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged.
The move will allow M&As worth billions of dollars in the domestic market, especially in the Cement sector where several such deals are stuck.