Jaiprakash Associates Ltd has finalised a deal to sell nearly two-thirds of its cement business to UltraTech Cement Ltd, in a development that gives it a breather in its attempt to stave off creditors seeking to take over the debt-laden company.
The two companies said in separate stock-exchange filings that they have agreed to amend the deal, which is now valued at Rs 16,189 crore ($2.4 billion) including debt. UltraTech will also spend Rs 470 crore to complete an under-construction grinding unit, as agreed earlier.
UltraTech said a part of the deal will be through issuance of non-convertible debentures and preference shares worth Rs 4,625 crore. The assets being bought generated revenue of Rs 4,541 crore for the year ended 31 March 2016, it added.
The two companies had signed a preliminary pact worth Rs 16,500 crore at the end of in February and a revised deal valued at Rs 15,900 crore at the end of March. The deal's dollar value remains almost the same because of exchange rate fluctuations.
Noida-based Jaiprakash Associates is one of several infrastructure developers in the country that went on a rapid debt-fueled expansion over the past few years but are now selling their assets to repay loans. The builder of the expressway that connects the national capital region to Agra and India’s only Formula One track had total debt of about Rs 58,250 crore as of 31 March. It had sold two hydropower projects in Himachal Pradesh for Rs 9,275 crore, including debt, to JSW Energy Ltd last year.
On Monday, Jaiprakash Associates also said that it has formed a committee of directors to evaluate various options necessitating financial restructuring to manage its debt. The move comes after the company’s lenders late last month decided to invoke Strategic Debt Restructuring, a mechanism that allows creditors to convert their debt into equity and take over the management if a company defaults.
The announcement comes after media reports last week said the deal had hit a roadblock. The Economic Times had reported that UltraTech wanted to reduce the deal size and that Jaiprakash had sent feelers to other companies including JSW Group and private equity firm KKR for a possible sale. The Mint had reported that Jaiprakash had not met some financial commitments and that it had sought additional funding from UltraTech to finalise the deal.
As per the deal, UltraTech will acquire Jaiprakash cement plants in five states with total capacity of 21.2 million tonnes a year, instead of 22.4 million tonnes proposed initially. UltraTech, part of the diversified Aditya Birla Group, will have total cement capacity of 91.1 million tonnes after the deal is completed. Jaiprakash Associates will retain a cement capacity of 10.6 million tonnes.
The transaction is subject to customary approvals and is likely to be completed in about a year’s time.
Bansi S Mehta & Co and JM Financial provided independent fairness opinion while Standard Chartered was the transaction adviser. Cyril Amarchand Mangaldas was the legal adviser and EY conducted financial due diligence, UltraTech said.
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