 "Orient Cement buys Jaypee cement units for Rs 1,950 cr")
Orient Cement, a firm owned by the Chandra Kant Birla group, on Thursday agreed to acquire 74 per cent stake in Bhilai Jaypee Cement and Nigrie cement grinding unit in Madhya Pradesh from Jaypee group companies at an enterprise valuation of Rs 1,950 crore.
While the transactions would help beleaguered Jaypee group in reducing its Rs 67,500 crore of consolidated debt as on March this year, it would increase Orient Cement’s presence in central and eastern India.
“The demerger of Orient Cement from Orient Paper and Industries was envisioned to create a pure-play cement company which could grow fast. After establishing Orient Cement as one of the most operationally efficient companies, we commissioned our greenfield plant at Gulbarga, Karnataka last year, increasing our capacity by 60 per cent to 8 mtpa,” CK Birla, chairman of the CK Birla Group, said after Orient Cement’s board meeting that cleared the transaction.
Orient Cement, a relatively smaller player in the Indian cement sector, is eyeing to become a pan-national player and with this acquisition. Its capacity would go up from eight million tonnes per annum to 10.2 mtpa. Orient currently has three cement manufacturing units in Telangana, Maharashtra and Karnataka. The transaction will be funded by Orient Cement through a mix of internal accruals, debt and equity funding.
Deepak Khetrapal, CEO and MD of Orient Cement said the company will take over Rs 600 crore of debt of BJCL and pay Rs 600 crore as equity value for the 74 per cent stake to Jaypee. "We saw a strategic fit of these units with our units and the markets we want to tap. In the past, we looked at all opportunities for acquisition but this one was the best option for us as we would end up paying valuation of $98 a tonne of cement and $38 a tonne for Nigrie grinding unit," he said.
Bhilai Jaypee Cement is a joint venture between Jaypee group flagship, Jaiprakash Associates and Steel Authority of India and has an integrated cement capacity consisting of a clinkerisation unit in Satna in Madhya Pradesh and a grinding unit in Bhilai, Chhattisgarh. Jaiprakash would get Rs 1,450 crore from the sale.
While the transactions would help beleaguered Jaypee group in reducing its Rs 67,500 crore of consolidated debt as on March this year, it would increase Orient Cement’s presence in central and eastern India.
“The demerger of Orient Cement from Orient Paper and Industries was envisioned to create a pure-play cement company which could grow fast. After establishing Orient Cement as one of the most operationally efficient companies, we commissioned our greenfield plant at Gulbarga, Karnataka last year, increasing our capacity by 60 per cent to 8 mtpa,” CK Birla, chairman of the CK Birla Group, said after Orient Cement’s board meeting that cleared the transaction.
Orient Cement, a relatively smaller player in the Indian cement sector, is eyeing to become a pan-national player and with this acquisition. Its capacity would go up from eight million tonnes per annum to 10.2 mtpa. Orient currently has three cement manufacturing units in Telangana, Maharashtra and Karnataka. The transaction will be funded by Orient Cement through a mix of internal accruals, debt and equity funding.
Deepak Khetrapal, CEO and MD of Orient Cement said the company will take over Rs 600 crore of debt of BJCL and pay Rs 600 crore as equity value for the 74 per cent stake to Jaypee. "We saw a strategic fit of these units with our units and the markets we want to tap. In the past, we looked at all opportunities for acquisition but this one was the best option for us as we would end up paying valuation of $98 a tonne of cement and $38 a tonne for Nigrie grinding unit," he said.
Bhilai Jaypee Cement is a joint venture between Jaypee group flagship, Jaiprakash Associates and Steel Authority of India and has an integrated cement capacity consisting of a clinkerisation unit in Satna in Madhya Pradesh and a grinding unit in Bhilai, Chhattisgarh. Jaiprakash would get Rs 1,450 crore from the sale.
On the other hand, Nigrie cement grinding unit in Singrauli, Madhya Pradesh is housed within Jaiprakash Power Ventures, a subsidiary of Jaiprakash Associates, and has a capacity of 2 mtpa. This grinding unit, sold for an additional Rs 500 crore, is located very close to the end markets of Bihar, Jharkhand and Eastern UP, Orient Cement said in a statement. Orient Cement will also benefit from BJCL’s access to limestone reserves and other raw materials including slag, the company said. The sale of assets by Jaypee group was necessitated by the fact that Jaiprakash Associates had revealed in its post FY2016 results statement that it has defaulted on bank loans, interest and statutory payments of Rs 4,539 crore.
In the past few years, the Jaypee group has sold series of assets to reduce its debt (see chart). In February this year, Jaypee sold its cement unit with a capacity of 17.2 mtpa to Aditya Birla group’s Ultratech at an enterprise value of Rs 16,000 crore. Earlier, in November 2014, Jaiprakash Power had sold its hydro power projects to JSW Energy for Rs 9,300 crore.
On Thursday, Jaiprakash Associates shares closed flat at Rs 11 a share while Jaiprakash Power Ventures closed 10 per cent up at Rs 4.50 a share. Since January this year, Jaiprakash has lost 6 per cent of its market value while Jaiprakash Power has lost 35 per cent of its market value as both make huge losses. Orient Cement shares closed flat at Rs 221 a share. Jaypee Power said it’s in talks with lenders for further steps to implement strategic debt restructuring (SDR) programme.
