UltraTech Cement, India’s largest cement maker and part of the Aditya Birla Group, on Tuesday said it’s board had agreed to acquire two cement plants of Jaiprakash Associates in Madhya Pradesh for an enterprise value of Rs 5,400 crore. The deal would raise UltraTech’s total capacity to about 65 million tonnes per annum (mtpa) from the current 60 mtpa and with projects underway, to about 71 mtpa by 2016.
In a statement, UltraTech, which is also looking to acquire cement capacities overseas including units set to be divested by global majors Lafarge and Holcim, said that the acquisition will create significant synergies.
This is the second time that UltraTech has acquired a cement unit of Jaiprakash Associates. In 2013, the company had agreed to buy Jaiprakash’s Gujarat plant for Rs 3,800 crore.
UltraTech will acquire two cement plants with clinker capacities at Bela and Sidhi in Madhya Pradesh and also the captive power plants for `5,400 crore. “Surplus clinker capacities will enable UltraTech to augment its annual cement capacity by a further 1.8-2.5 mtpa,” UltraTech managing director OP Puranmalka said. This would be in addition to 4.9 mtpa that will accrue to UltraTech from the existing cement capacities.
The integrated cement plant at Bela has a clinker capacity of 2.1 mtpa and cement grinding capacity of 2.6 mtpa while the one at Sidhi has an integrated cement plant with clinker capacity of 3.1 mtpa and cement grinding capacity of 2.3 mtpa.
Jaiprakash Associates has been selling its power and cement units to raise funds and reduce its debt, which has ballooned to `72,600 crore.
“The proposed transaction valuation demonstrates the quality of assets and reiterates Jaypee Group’s resolve of reducing its indebtedness to improve stakeholder’s value,” Jaiprakash Associates executive chairman Manoj Gaur said in a statement.
With this disinvestment, the group has divested assets of over `20,000 crore, displaying the intent of the group’s founder to maintain credibility with all its stakeholders including lenders, creditors and shareholders, the statement added.
The Aditya Birla Group had recently submitted bids for buying the cement assets of global major Lafarge in Brazil and The Philippines. These assets are part of a $6.3-billion combined portfolio of Lafarge and Swiss building materials giant Holcim, which are to be divested under a proposed merger scheme. The group is one among many international bidders for the assets, which have a combined sales of about $4.4 billion and employ more than 10,000 people.
UltraTech has a low debt-equity ratio of 0.3. A low debt equity ratio indicates that a company is able to service its borrowings and can raise additional funds from the market.