Cement-maker Dalmia Bharat is looking to complete acquisition of Jaypee Cement’s facilities by September-end, thereby pushing back the timeline by another six months, following “procedural delays”, the company’s MD and CEO, Puneet Dalmia said. Hindrances to the deal continue because of pending approvals from banks, ongoing arbitration between Jaiprakash Associates (parent company of Jaypee Cement) with UltraTech, and some lack of clarity on previously announced JVs with SAIL.
Jaypee Cement’s contribution to Dalmia Bharat’s volume in FY24 was 1.4 million tonnes (mt). “We had hoped to get approvals and consummate the deal by March-end. But the Jaypee acquisition has taken longer than anticipated. However, I still say we are progressing in the right direction. These are procedural delays over which we have no control.....we believe that the deal will get consummated in Q2 (September-end) of this year,” Dalmia said.
No timeline
Dalmia Bharat had in 2022 announced signing a definitive agreement with Jaiprakash Associates Group for acquisition of the latter’s cement plants at a cost of over ₹5,500 crore. This was touted as one of the largest deals in the sector some 16 months back. No timeline had then been announced for completion of the deal. The March 2024 deadline was reportedly a revised one and the cash outflow earmarked for the deal is around ₹3,300 - 3,500 crore.
Structured in parts, one part of the acquisitions involved buying of Dalla Super Cement (formerly JP Super Cement’s) assets in Uttar Pradesh.. Arbitration is currently ongoing with UltraTech on this. Steel major SAIL, which had formed a JV with Jaypee for Bhilai Jaypee Cement Ltd (BJCL), for a 2.2 mt unit, is yet to take a call on it, officials of Dalmia Bharat said.
Also, lenders of Jaypee — some 35-odd banks — have reportedly engaged with NARCL (National Asset Reconstruction Company Ltd) for takeover of the “entire debt of Jaiprakash Associates”. “We understand that the lenders are keen to create lending capacity by transfer this debt to NARCL..... the discussions are undergoing and progressing well....” Dalmia said. Until banks take the company to NCLT, sale processes are being driven by the Board and shareholders. “Board and shareholders have already approved it (sale to Dalmia),” he added.
High-cost plants
While Dalmia has a supply agreement with Jaypee, the latter’s plants are seen as “high-cost” ones. The plan is to finally bring down operating costs of Jaypee’s plants to the level of Dalmia Bharat’s over a 2 year period. “From the third year onwards, we expect Jaypee plants to have similar production as rest of our group,” Dalmia said.
Dalmia’s acquisition of Jaypee’s plants cover 9.4 mt of cement-making capacity, across plants located in Madhya Pradesh, Uttar Pradesh and Chattisgarh. The acquisition is expected to give Dalmia Bharat a strong foothold in Central India. Central India represents 15 per cent of the country’s cement demand, market sources say.