Jaypee Group’s cement assets up for grabs

Jaypee Group’s cement assets up for grabs

Jaypee Group is planning for an outright sale of its 20Mt portfolio of cement assets worth an estimated INR190 (US$2.86bn) enterprise valuation.

UltraTech, Dalmia Bharat backed by private equity investor KKR and Shree Cement have each been approached to take over Jaypee Group’s cement business. Other private equity firms are also reported to have been approached with a detailed information memorandum of operations.

Jaypee Group, one of the top ten most indebted Indian conglomerates with a reported debt of INR753bn (US$11.34bn), aims to reduce its debt mountain through the cement asset sale.

The cement business is mostly housed under listed Jaiprakash Associates (JPA), which has INR600bn (US$9.04bn) of debt, according to Bloomberg data. The plan is to divest its entire stake, worth 39.38 per cent as of September 2015, to a new acquirer and follow the transaction with a mandatory public offer to non-promoter shareholders. ICICI Securities has been appointed by Jaypee Group to manage the formal sale process.

JPA shares have fallen 54.34 per cent so far this year as ballooning debt and deteriorating fundamentals of the company have weakened investor sentiment.

Jaypee has a pan-India cement manufacturing footprint across Himachal Pradesh, Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Andhra Pradesh, Chhattisgarh and Karnataka.

It has already announced the sale of close to 14Mt of capacity to companies such as Dalmia Bharat, Shree Cement and UltraTech. But the last transaction, involving two units in Madhya Pradesh with a total annual capacity of 4.9Mt, has been stuck for almost a year due to regulatory hurdles over the transfer of limestone mines along with the plants.

The bulk of the cement business, 14.2Mt, is with JPA. The rest, including the 5Mt Balaji Cement, are housed under subsidiaries, joint ventures or group entities.