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Orient Cement to buy two Jaypee units for Rs 1,950 crore
MUMBAI: Orient Cement Ltd, part of the CK Birla Group, on Thursday said it has agreed to acquire a 74% stake in Jaiprakash Associates Ltd’s unit Bhilai Jaypee Cement
MUMBAI: Orient Cement Ltd, part of the CK Birla Group, on Thursday said it has agreed to acquire a 74% stake in Jaiprakash Associates Ltd’s unit Bhilai Jaypee Cement Ltd (BJCL) for an enterprise value of Rs 1,450 crore, in a move to expand business. Orient Cement will acquire the 2 million tonne per annum (mtpa) Nigrie Cement grinding unit in Madhya Pradesh from another Jaypee Group company, Jaiprakash Power Ventures Ltd, for an enterprise value of Rs 500 crore.
The company will fund the two transactions valued at ₹1,950 crore through a mix of internal accruals, debt and equity.
In a separate filing on Thursday, Jaiprakash Power Ventures said it is in discussions with lenders for further steps for implementation of strategic debt restructuring (SDR). For struggling Jaypee Group, the two cement deals come after it sold three power plants to JSW Energy in the past year.
In July, Aditya Birla Group company UltraTech Cement agreed to buy Jaiprakash Associates’ 21.1 mtpa cement assets for ₹16,189 crore.
BJCL is a 74:26 joint venture between Jaiprakash Associates and Steel Authority of India Ltd (SAIL) and has an integrated PSC (Portland Slag Cement) cement capacity of 2.2 mtpa, consisting of a clinkerisation unit in Satna area in MP and a grinding unit in Bhilai, Chhattisgarh.
“The acquisition of BJCL and Nigrie unit provides Orient Cement with a high quality asset at a well located region with ready to market capacity,” Orient said in a statement.
Orient Cement currently gets about 80% of its sales from Maharashtra, Andhra Pradesh, Telangana and Karnataka. The acquisition will help it expand in states including Chhattisgarh, Madhya Pradesh, Odisha, Bihar, Jharkhand and Uttar Pradesh.
The deal will give Orient Cement access to the supply deficit markets of East India and Uttar Pradesh and a presence in central India. “East India is the most attractive cement market in India—demand is expected to grow at a compound annual growth rate of 9% in the medium term,” the company said.
The acquisition is expected to be completed in the first half of 2017, and is subject to necessary approvals.
Orient Cement currently has a production capacity of 8 mtpa; the acquisition will take its total capacity to 10.2 mtpa.
