UltraTech Cement, an Aditya Birla Group Company, has acquired the 4.8-million tonne per annum (mtpa) Gujarat unit of Jaypee Cement Corporation, for Rs 3,800 crore.
As part of the deal, UltraTech will take over debt of Rs 3,650 crore. It will issue equity worth Rs 150 crore, with the fresh issue resulting in dilution of no more than 0.32 per cent of its capital. The deal is expected to be closed in eight-nine months.
The Gujarat unit of Jaypee Cement has a 57-MW coal-based power plant with a 30-MW DG (diesel generator) back-up, limestone reserves sufficient to run the plant at current capacity for 90 years and a captive jetty at Sewagram. The valuation of the plant works out to $124 a tonne with the rupee valued at 64 against the dollar.
For Jaypee Associates, this may be only the first of the moves to prune the Rs 60,000-crore debt it carried on its books as of March this year.
The acquisition will raise UltraTech’s capacity to 59 million tonne. With new expansion plans in Karnataka, Rajasthan and Madhya Pradesh set to go on stream by 2015, UltraTech’s capacity is expected to touch 70 mtpa.
UltraTech will also benefit from the Rs 350-380 crore unrealised depreciation and tax set-off against the losses incurred by Jaypee Cement.
Of the total debt of Rs 3,650 crore, UltraTech plans to finance Rs 1,650 crore through internal accruals and renegotiate a lower rate for the remaining debt of Rs 2,000 crore.
Kumar Mangalam Birla, Chairman, UltraTech Cement, said the company intends to regain much of the market share it lost through the sale of its earlier asset Digvijay Cement in Gujarat.
“We are targeting the entire coastal markets including Mumbai, Mangalore and Kochi besides Sri Lanka where the company has a grinding unit. Our plant in Saurashtra operates at 95 per cent capacity,” he said.
UltraTech has already identified savings of Rs 40 crore through operational synergy with its existing plant in Saurashtra and the acquired plant in Kutch, increasing capacity utilisation of the Kutch unit and entering new markets.
On why the 5-mtpa Andhra Pradesh plant of Jaypee was left out of the deal, Birla said currently the cement supply in the southern market was much higher than demand. This apart, he said, UltraTech recently commissioned a 4.8-mtpa capacity in Tadapatri.
Kailash Birla, Chief Financial Officer, UltraTech Cement, said the acquisition will help the company realise logistics gains by shifting some of the transportation from road to sea route. It will turn value accretive in three years, he said.