New Delhi: Faced with lenders invoking the strategic debt restructuring (SDR) option, debt-ridden Jaypee Group on Monday hiked the sale value of 21.2 million tonne per annum (MTPA) cement assets to Aditya Birla Group firm UltraTech to Rs 16,189 crore.
The decision was taken today at the board of directors meeting, convened at a short notice, of the Japyee Group flagship firm Jaiprakash Associates to discuss the progress of divestment plans and other issues.
Ultratech Cement has also agreed to pay an additional amount of Rs 470 crore for completion of 4 million tonne per annum (MTPA) grinding unit in Uttar Pradesh.
Earlier in March this year, in one of the biggest deals in the domestic cement industry, embattled Jaypee Group had
announced part sale of its cement business in five states and a grinding unit in Uttar Pradesh to Kumarmangalam Birla-led UltraTech for Rs 15,900 crore.
"The Board of Directors of Jaiprakash Associates Ltd (JAL) has today approved an amendment to the definitive agreement dated March 31, 2016 and also the draft scheme of arrangement with UltraTech Cement for sale of cement business of JAL and its wholly owned subsidiary, Jaypee Cement Corporation Ltd (JCCL) comprising identified operating cement plants with an aggregate capacity of 17.20 MTPA besides a grinding unit of 4 MTPA," JAL said in a statement.
It said, "The total enterprise value now agreed is Rs 16,189 crore. An additional amount of Rs 470 crore shall be
paid by UTCL for completion of the griding unit under implementation."
The cement plants are spread over Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh.
Jaypee Group Executive Chairman Manoj Gaur said, "Jaypee Group is determined to reduce its overall debt through its proactive divestment initiatives to help the Group tide over these current turbulent times caused by economic slowdown in the country."
He added, "Post this deal, Jaypee Group shall retain an aggregate cement manufacturing capacity of 10.60 MTPA with plants spread in the states of Madhay Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka. The Group would continue to leverage its expertise in the fields of engineering and construction, real estate and project execution in a committed manner."
In another statement, UltraTech Cement said its board of directors in a meeting today, in continuation of the pact on March 31 this year, approved a "Scheme of Arrangement between the Company, Jaiprakash Associates Limited, Jaypee Cement Corporation Limited and their respective shareholders and creditors for acquisition of cement plants for a total capacity of 21.2 mtpa at an enterprise value of Rs 16,189 crore."
It said the proposed transaction is essentially a "geographic market expansion" which will lead to UltraTech's entry into growing markets of India, such as the Satna cluster in Uttar Pradesh (East) and Madhya Pradesh (East), Himachal Pradesh, Uttarakhand and coastal Andhra Pradesh.
UltraTech Cement said the operations will be strengthened by the consequent technological upgradation and enhancement in capacity utilisation on Y-o-Y basis, creating synergies in manufacturing, distribution and logistics and creation of efficiencies, enhancing competitiveness and creating value for shareholders by acquiring ready-to-use assets.
Both Jaypee and UltraTech said the transaction is subject to the approval of shareholders and creditors, high courts and all other regulatory approvals as may be required and will be consummated within the next 9 to 12 months.
"Upon consummation, the Company's cement capacity will stand augmented to 91.1 MTPA including its overseas
operations," UltraTech Cement said.
The lenders of Jaiprakash Associates had invoked SDR option against the debt-laden group.
The company said the Joint Lenders Forum meeting held to review the progress made so far on the Corrective Action Plan, approved by the lenders in January, 2015 has agreed for invocation of SDR taking 28 June, 2016 as reference date, subject to approval of lenders.
Jaiprakash Associates owes over Rs 30,000 crore to a consortium of lenders led by ICICI Bank and the sale of its
21.2-million tonne cement business is very crucial for the promoters (the Gaur family) to continue in business.
Meanwhile, the trading window of the Jaiprakash Associates shall remain closed 9 pm onwards from 1 to 6 July
in pursuant to SEBI (Prohibition of Insider Trading), Regulations, 2015 and in accordance with the code of conduct
to "regulated, monitor and report trading by insiders for trading in listed or proposed to be listed securities."
During the closed trading window period, the employees, directors, key managerial personnel and designated persons and their immediate relatives shall not trade in company's shares, it has said.
The Jaypee Group had a consolidated debt of Rs 58,250 crore as of March 2016.
"The Jaypee Group is already an NPA non-performing asset) for SBI. The lenders have already invoked the SDR. The JLF (joint lenders forum) will shortly consider the cement sale. Our steering committee which will look into the Jaypee-UltraTech deal whether to accept it or not," a senior SBI official has said recently.
The country's largest lender has an exposure of Rs 7,000 crore to JP Associates, which for long has been struggling to service its debt after its infra, led by roads and power business, had cash flow issues.
The company sold most of its power plants over the past two years and the sale of the cement business got stuck due to restrictions on mine leasing.
But the recent modifications in the Mines and Minerals (Development and Regulations) Act have paved the way for the company to transfer its coals mines along with the cement plants, which led to the Birlas agreeing to snap up the cement business late March.
UltraTech and Jaiprakash Associates on 31 March, signed an agreement for sale of the latter's cement division, which has a capacity of 21.2 million tonnes in factories located across five states.
Last December, UltraTech was keen to snap up the complete cement portfolio of the Jaypee Group for Rs 19,500
crore along with some private equity players. But the deal did not go through.
Jaiprakash Associates was the third largest cement maker in the country with annual capacity of 31.65 million tonne. It had sold 13.3 MT capacity in 2014-15 to repay debts.
The company had earlier sold two cement units - in Gujarat and MP - to UltraTech for Rs 3,800 crore and Rs 5,400
It had sold its stake in the Bokaro cement unit to Dalmia Cement for Rs 667 crore and the Panipat-based grinding unit to Shree Cement for Rs 360 crore. The Group had sold its hydel power projects to JSW Energy for Rs 9,700 crore last year.
Shares of the company have lost more than three-fourths of its market value since last January. It closed at Rs 9.08, up 5.70 percent on the BSE.
Its 52-week high was Rs 14.90 and the low was Rs 5.30. Once a Sensex heavyweight, the company had m-cap of just
Rs 2,089.52 crore.
UltraTech cement closed at Rs 3410.75 apiece on the BSE, down 0.46 percent today from the previous close.