Monday, March 24, 2014

Jayprakash Associates to sell 74% in Bokaro cement JV to Dalmia Cement

Mumbai: Jaiprakash Associates Ltd will sell its stake in a cement joint venture in Jharkand to Dalmia Cement (Bharat) Ltd for about Rs.690 crore, the company said.

The board of Jaiprakash Associates has approved signing of the share-purchase agreement with Dalmia Cement for selling its 74% stake in Bokaro Jaypee Cement Ltd, a joint venture with Steel Authority of India Ltd (SAIL), Jaiprakash Associates said in a statement to the stock exchanges. Dalmia Cement will pay Rs.69.74 per share of Bokaro Jaypee Cement.

Bokaro Jaypee Cement is incorporated to set up a 2.1 million tonne per annum (mtpa) capacity cement plant at Bokaro, according to the Jaiprakash Associates’ website. The company has another joint venture with SAIL—Bhilai Jaypee Cement Ltd—in Chhattisgarh.

Dalmia Cement has cement manufacturing plants in the southern states of Tamil Nadu (Dalmiapuram and Ariyalur) and Andhra Pradesh (Kadapa), with a capacity of nine mtpa.

The stake sale in the Bokaro unit is the latest divestment of assets by the debt-laden Jaypee group.

On 2 March, a consortium led by Abu Dhabi National Energy Co. PJSC had agreed to buy two operational hydro-power plants from Jaypee Group, the parent of Jaiprakash Associates, by investing Rs.10,320 crore, the latest instance of a local firm selling assets to cope with rising levels of debt on the balance sheet.

Jaypee Group has a total debt of about Rs.60,000 crore and it plans to pare that by Rs.15,000 crore by the end of this fiscal year.

The Abu Dhabi firm, also known as Taqa, will buy a 51% stake in Karcham Wangtoo (1,000 megawatts) and Baspa II (300MW) hydroelectric power plants in Himachal Pradesh. Canada’s Public Sector Pension Investment Board will purchase a 39% stake, with IDFC Alternatives Ltd, the private equity arm of infrastructure finance company IDFC Ltd, buying the remaining 10%.

Jaiprakash Associates will be exiting a cement JV with SAIL in Bokaro.

This deal is expected to be completed in November.

In a 20 March report, India Ratings and Research Pvt. Ltd said it expects low demand in the cement sector because of continued weak economic activity. Cement production grew 2% in the third quarter of the current fiscal compared with 5.9% in the preceding three months.

“The construction sector grew (major consumer of cement) 0.6% in 3QFY14 from 4.3% in 2QFY14. In 2013, the cement industry saw mergers and acquisitions of around $3.3 billion,” the report said.

India Ratings added that consolidation in the cement sector may pick up. Possible acquisition targets include cement companies or cement manufacturing facilities (which are part of over-leveraged conglomerates) with cost-effective access to raw materials and energy or a locational advantage to optimize freight costs, India

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