India: Jaypee reduces northern cement supply

India: Jaypee reduces northern cement supply
22 April 2016

Debt-laden Jaiprakash Associates Ltd has withdrawn itself from some of its cement markets in north India as part of streamlining its operations even as lenders continue to prod the firm to shed assets and pare debt, reports Mint.

The company has drastically cut its cement supply to markets in the north, said two Delhi-based cement dealers.

A spokesperson for the parent Jaypee Group confirmed that the company has chosen to withdraw from certain markets of Haryana and Delhi.

"The company continues to sell cement in markets of north India. However, as a strategy the company has increased its focus on high realisation markets and has withdrawn from certain markets of Haryana and Delhi where due to low prices and high freights (long lead markets) the net realisation was very low and operations unviable," the spokesperson said in an email response.

These moves are part of a wider reorganisation within the group. On 18 April, Mint reported that the company is looking to hire consultants to restructure and turn around its businesses to pare debt by either shutting down a business completely or moving resources to help another business grow.

According to analyst estimates, Jaiprakash Associates operates a total capacity of 4.7Mta in the northern region and 15.6Mta in the central region. "Supply of Jaypee cement to this (central region) market continues to remain normal," said a Bhopal-based cement dealer, part of the central India market.

"Jaypee cement is almost out of the north India market due to various issues including non-payment of dues to truckers and unavailability of coal at the Himachal Pradesh cement plants, which sell cement to the north India markets," said a cement analyst, who has done channel checks in these markets.

On 31 March, Jaiprakash Associates signed a definitive agreement with UltraTech Cement Ltd for its 21.2Mta cement assets spread across five states for INR159000 (US$2.389bn)

After the completion of the deal, the Jaypee Group will be left with cement capacity of 10Mta across Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka.

Published under Cement News