Aditya Birla Group’s flagship UltraTech Cement has acquired a unit of Jaypee Group in Gujarat for an enterprise valuation of Rs3,800 crore.
UltraTech will assume Rs3,650 crore of debt and issue Rs150 crore of equity to Jaypee for the 4.8 million tonne (mt) unit, which would raise UltraTech’s capacity by 9% to 59 mt.
“With projects underway, it will stand raised to 70 mt by 2015.
Despite the prevailing muted growth of the industry, we believe the long-term fundamentals and growth prospects remain intact.
We will add more capacities in coming years,” said Kumar Mangalam Birla, the group chairman said.
The Gujarat asset will be value accretive after three years of operations, he said, adding the company would continue to look at more acquisitions in India and overseas.
The Jaypee deal which is expected to close in nine months was struck at the valuation of $124 per tonne, which compares with $133 a tonne that Ambuja Cement is estimated to be paying for a stake in ACC.
Jaiprakash Associates, the Jaypee Group flagship, has been trying to sell the plant for more than a year and was in talks with several potential buyers, including Ireland’s CRH.
Including subsidiaries, Jaiprakash has total debts of Rs55,000-56,000 crore, which it plans to cut by Rs15,000 crore by selling more assets including cement and power businesses this fiscal year ending next March, executive chairman Manoj Gaur said.
Jaypee plans to sell about 30% of its cement capacity of 35 mt.
The Gujarat acquisition includes a land parcel of 5,479 hectares and limestone reserves of close to 500 mt, a 3.6 mt of clinker unit, a 2.4 mt of cement unit and a grinding unit of 2.4 mtpa, a captive thermal plant of 57.5 mega watt and a DG unit of 30 mw, a jetty of 2,500 deadweight tonne barges for coal and clinker movement and a desalination plant to meet water requirement. It also has a cement bag manufacturing unit with a capacity of 3 lakh bags per day.
UltraTech officials said along with strengthening its operations in Gujarat, the unit would help it cater more to coastal regions Mumbai, Mangalore and Kochi and exports to Sri Lanka.
The unit is running at a capacity utilisation of 60-62%, which UltraTech plans to raise to 85%.