Stake sale buzz: JP Associates looking to ease debt burden

Jaiprakash Associates, a Rs 14,597 crore cement company, may be looking to sell its cement plants for an amount that is likely to fetch around Rs 9,000 crore ($1.6 billion), the Economic Times (ET) reported. Reacting to the report, the stock gained 1.3 percent today.

The Aditya Birla Group (Ultratech) and France’s Lafarge are in talks to buy out JP Associates’ cement plants in Gujarat and Andhra Pradesh, the report said.

The company has already spun off its cement units in Gujarat and Andhra Pradesh in to a separate company, Jaypee Cement, which has a combined capacity of 9.8 million tonnes, in order to attract strategic investors.

“We are exploring the option of getting a strategic investor into this company to monetise a part of our investment so the parent company can reduce debt,” a senior official at the company was quoted as saying in the report.

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 Apart from the above two companies, it is reported that even Swiss cement company Holcim is also interested in picking up the stake. Holcim already has stakes in two Indian companies, ACC and Ambuja Cements.

The stake sale might just be what the company needs in order to help improve its balance sheet. According to data provider Ace Equity, JP Associates’ total debt as of the September quarter stood at Rs 23,092 crore, far more than the company’s market cap. Also its financial performance is nothing home to talk about as its profits for the year ended March 2012 fell by 54 percent to Rs 947 crore. In the last one year, its stock has fallen 18.5 percent, far more than the Sensex fall of 8.9 percent.