India: UltraTech concludes Jaypee deal

India: UltraTech concludes Jaypee deal
Published: 05 July 2016


UltraTech Cement has struck a deal to obtain the cement assets of Jaypee Group with a last-minute increase in acquisition price on Monday.

UltraTech will purchase Jaypee Group’s cement operations, that have a total capacity of 17.2Mta spread across Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh, for INR161.9bn (US$2.4bn). In addition to existing cement operations, UltraTech will also acquire the 4Mta grinding unit that is currently being constructed in Uttar Pradesh.

However, the deal has not proceeded smoothly, running into hurdles at various stages. Last week a committee of directors was assembled to evaluate various options for financial restructuring to deal with debt, and the lenders, led by ICICI Bank, agreed to invoke the Strategic Debt Restructuring (SDR) mechanism on fears the deal was collapsing. "Jaypee Group is determined to reduce its overall debt through its proactive divestment initiative to help the group tide these current turbulent times caused by the economic slowdown in the country," Manoj Gaur, executive chairman of Jaypee Group, said after the revised deal.

In addition, UltraTech wrote to the group last week reiterating that talking to rival bidders was illegal as it had struck a binding agreement. Discussions has been entered with rival suitors, including JSW and US-based private equity firm KKR. Both submitted separate non-binding bids after the UltraTech deal was given the go-ahead. A senior official commented on that matter, saying, "UltraTech wanted to revise the commercial terms to bring down the acquisition cost. Instead of taking over the entire portfolio, it wanted to cherry-pick JAL's assets from north and central India. It wanted to revise the deal value downwards by about INR15000m (US$222.2m).”