CK Birla group firm Orient Cement Ltd said on Thursday it has terminated a deal to buy two cement assets from Jaiprakash Associates Ltd.
The company had, on 31 May 2017, signed definitive agreements with Jaiprakash to buy its majority stake in a joint venture with Steel Authority of India Ltd (SAIL) and a grinding unit from a group firm. The deadline to complete the deal was one year from signing the pacts.
However, the deal couldn't be completed within the one-year period and so Orient scrapped the pact, it said in a stock-exchange filing.
In a separate filing, Jaiprakash Associates said that, after signing the agreement last year, Orient Cement had stipulated certain new conditions that were not acceptable to SAIL.
Orient and Jaiprakash had first agreed on the deal in October 2016. Orient was to acquire Jaiprakash’s 74% stake in its joint venture with SAIL, Bhilai Jaypee Cement Ltd, for an enterprise value of Rs 1,450 crore. The other agreement was for buying Nigrie Cement Grinding unit from Jaiprakash Power Ventures Ltd for an enterprise value of Rs 500 crore.
Group chairman CK Birla had said at the time that the deal was a significant step towards accomplishing the goal of reaching a capacity of 15 million tonnes per annum by 2020.
Bhilai Jaypee Cement has a capacity of 2.2 million tonnes consisting of a clinker unit at Satna in Madhya Pradesh and a grinding unit in Bhilai, Chhattisgarh. The Nigrie grinding unit at Singrauli, Madhya Pradesh, has a capacity of 2 million tonnes.
Orient Cement has an annual cement manufacturing capacity of 8 million tonnes across three units in the states of Telangana, Maharashtra and Karnataka, according to its website.
The CK Birla Group has a presence across technology, automotive, home and building materials, healthcare and education sectors.
The deal’s collapse adds to Jaypee Group’s woes. The group has been weighed down by debt that totaled nearly Rs 60,000 crore in 2016. Since then, the group has been selling assets in cement, power and other sectors to cut debt.
Last year, UltraTech Cement Ltd completed the acquisition of six cement plants from Jaiprakash Associates for Rs 16,500 crore. UltraTech had earlier acquired two units of Jaypee Cement with 4.8 mtpa capacity located in Gujarat at an enterprise valuation of Rs 3,812 crore.
This isn't the first time a company has backtracked from acquiring the group's asset. Earlier this year, Sajjan Jindal-led JSW Energy Ltd had cancelled a plan to purchase the 500-megawatt Bina thermal power plant from Jaiprakash Power Ventures.
Separately, group firm Jaiprakash Infratech Ltd is undergoing bankruptcy resolution at the National Company Law Tribunal. The stranded housing projects under Jaypee Infratech have resulted in huge protests from home buyers, prompting the Supreme Court to order the company to deposit Rs 2,000 crore with the registry last month.
Consolidation in cement
India's cement sector has witnessed a spate of merger and acquisition activity in the past two to three years.
In 2016, Birla Corp acquired Reliance Infrastructure Ltd's cement assets of 5.5 million tonne per annum for Rs 4,800 crore. The same year, LafargeHolcim Ltd sold LafargeHolcim India Pvt. Ltd to Nirma Ltd for $1.4 billion to complete the India leg of the global merger of French cement giant Lafarge and Swiss building materials group Holcim.
Earlier this year, Shree Cement Ltd agreed to buy a majority stake in UAE-based Union Cement Co in its first takeover outside India.
Currently, Dalmia Bharat Ltd and UltraTech are battling the takeover of debt-laden Binani Cement Ltd.