JP Associates sheds NPA tag with cement biz sale

ICICI Bank-led consortium successfully completed one of the largest asset resolutions in the country. Cement major Jaiprakash Associates concluded formalities for the biggest sale in the cement sector by selling off six integrated cement plants and five grinding units of Jaypee Cement with a total capacity of 21.2 million tonne to Aditya Birla-promoted UltraTech.

The transaction valued at Rs 16,189 crore will upgrade Jaiprakash Associates's account from the NPA status to standard, helping many banks to reduce their NPA levels and also write back the provisions to its profits in the first quarter ended June 30, 2017. Provisions is the money kept as a buffer against a loan. The deal supported by ICICI Bank, SBI and other public sector banks was undertaken to reduce the loan of the company.

Bankers are now hoping that it would be possible so that the non-performing loans issue is sorted out.

The proceeds of the transaction will help the company reduce its debt to bankers, holders of foreign currency convertible bonds, fixed deposits and other priority payments. "Jaypee group has demonstrated its serious intent of reducing its debt by selling off its high-quality assets. The deal would have been sealed earlier had it not been for the time consuming regulatory approvals and amendment in the various laws," said a company release.

Chanda Kochhar, managing director & chief executive officer, ICICI Bank, said, "With this sale, part of the debt of JAL(Jaiprakash Associates) and JCCL (Jaypee Cement Corporation Ltd) has been transferred from a stressed account to an AAA-rated company."

"This is the largest asset resolution in the country so far and I hope that this landmark transaction will pave the way for more such resolutions. The decision to sell the cement business to reduce JAL and JCCL's debt was taken more than a year ago. ICICI Securities was then appointed to manage the sale process," Kochhar said.

The deal involves operating cement plants in Himachal Pradesh, Andhra Pradesh, Madhya Pradesh, Uttar Pradesh and Uttarakhand for a consideration of Rs 16,189 crore. Another Rs 450 crore will be paid by Ultratech for a grinding unit which is under implementation in Uttar Pradesh.

Manoj Gaur, executive chairman of Jaiprakash Associates, said in a release, "Jaypee group has taken unflinching efforts to take these proactive steps to tide over the turbulent times caused by the economic slowdown.The group is determined to leverage its experience in the areas of real estate construction and other areas of national importance.

Upgrading the JP Power account from NPA to standard is something most banks are looking forward to in the first quarter which ended on June 30, 2017. Transfer of the 18 mines of the company was taking time as it needed approvals from four states.

The company's cement plant at Shahabad in Karnataka was excluded from the deal. Post the deal, JP Group will retain 10.60 million-tonne-per-annum capacity cement plants spread in states of Madya Pradesh, UP, Andhra Pradesh and Karnataka. Jaiprakash Associates owes the bank consortium an amount of Rs 60,000 crore.