Cement-maker Dalmia Bharat has discontinued its tolling arrangement with Jaypee, for use of manufacturing facilities of the latter, and taken an impairment loss of ₹113 crore in view of ongoing uncertainty over the deal.

Jaypee’s assets could now see fresh bidding in the NCLT, say sources.

Dalmia Bharat had, for five-odd quarters, initiated a tolling arrangement with Jaypee (JP Associates), which was recently discontinued. The arrangement allowed the cement-maker access to the key Central India market under its own brand.

“We have discontinued the tolling arrangement with Jaypee, and right now we are catering to Central India through our facilities in the East,” Puneet Dalmia, Managing Director and CEO, Dalmia Bharat said during a post result analyst call.

In December 2022, Dalmia Bharat had signed a deal to acquire Jaypee’s cement and power assets for an enterprise value of ₹5,666 crore. It was then touted as the largest deal in the sector. The acquisition included cement plants with a capacity of 9.4 million tonnes per annum, clinker assets of 6.7 million tonnes, a 280 MW thermal power plant and a 74 per cent stake in Bhilai Jaypee Cement. Definitive agreements were executed in 2023.

Earlier, the company top brass had referred to the “uncertainty” surrounding the deal, with JP going into insolvency and called it a “surprise” which was not anticipated. On June 3, the NCLT, Allahabad, accepted accepted Jaiprakash Associates for corporate insolvency, following ICICI Bank’s application for debt resolution dating back to September 2018.

Dalmia Bharat had previously said it was in touch with the Interim Resolution Professional (IRP).

A report by analyst firm Systematix said, “JP associates will see a fresh bidding in NCLT.”

Impairment Loss

According to Dalmia, an impairment loss to the tune of ₹113 crore has been provided for as likely final settlement

Certain advance payments had been made to Jaypee, for past defaults; so that the company could restart operations These advances were to be adjusted against the cost of acquisition. However, “with the company going to IBC, there is uncertainty of realisation of this amount.”

At present, Dalmia Bharat was catering to the region “organically” - from its facilities in the east. This however has led to an increase in logistics costs for Q2FY25, up 7.6 per cent y-o-y, to ₹1102 per tonne. In the year-ago period logistics cost stood at₹1,024 per tonne.

“We will continue to service the Central India market.... in the medium term, we will look to have our own facilities,” Dalmia said.

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