Orient Cement, a CK Birla Group company, has acquired two cement assets of debt-ridden Jaypee Group in Madhya Pradesh and Chhattisgarh for ₹1,950 crore.
It will acquire 74 per cent stake in Bhilai Jaypee Cement for enterprise value of ₹ 1,450 crore from Jaypee Associate and another two million tonnes per annum (mtpa) grinding unit at Nigrie in Madhya Pradesh from Jaiprakash Power Venture for enterprise value of ₹500 crore.
Bhilai Jaypee Cement has a 2.2-mtpa cement making capacity at Satna in Madhya Pradesh and one mtpa grinding unit at Bhilai in Chhattisgarh. Steel Authority of India, a joint venture partner, owns 26 per cent stake in Bhilai Jaypee Cement.
Subject to satisfactory negotiation and execution of definitive agreements, the acquisition is expected to complete in the first half of 2017, said Orient Cement in a statement.
The deal also requires approvals from SAIL, the Competition Commission of India and other regulatory approvals, it added.
New marketsThe transaction will be funded by Orient Cement through a mix of internal accruals, debt and equity funding.
The deal will propel Orient Cement’s total capacity to 10.2 mtpa from 8 mtpa and provide entry into new markets in central and eastern region. It has cement manufacturing facilities across three units in Telangana, Maharashtra and Karnataka.
Orient Cement will also benefit from BJCL’s access to limestone reserves and other raw materials including slag.
CK Birla, Chairman, CK Birla Group, said the demerger of Orient Cement from Orient Paper and Industries was envisioned to create a pure-play cement company that could grow fast.
The current proposal to acquire BJCL from JAL is a significant step towards accomplishing our current mission to reach 15 mtpa capacity by 2020, he said.
Manoj Gaur, Executive Chairman, Jaiprakash Associates, said downturn in infrastructure sector has affected infrastructure companies with leveraged balance sheet and divesting of stake especially with those of 40 years of lifespan is intended to make the Group emerge stronger.
In bid to cut debt, Jaiprakash group had earlier sold three power plants to JSW Energy for ₹12,400 crore. In July, UltraTech Cement, an Aditya Birla Group company, agreed to buy 21.1 mtpa cement assets of Jaiprakash Associates for ₹16,189 crore.
The shares of Orient Cement were down 0.63 per cent at ₹222 and that of Jaiprakash Associates were up 1 per cent at ₹11 on Thursday.