Jaiprakash Associates in talks to rope in strategic partner for cement business

Jaiprakash Associates, the Jaypee Group flagship firm, is exploring options of roping in a strategic partner for its cement business, the third largest in the country.
 
The company, which is open to diluting up to a 26-per cent stake, has initiated talks with South America conglomerates such as Cemex and Votorantim Group, according to a report in the Business Standard.
 
At 9.23 am, the shares of the company were trading up by about 3 per cent at Rs 68.30 on the BSE.
 
According to the report, Jaypee has roped in a clutch of investment bankers to advise on any strategic stake sale.
 
However, the company denied a potential stake sale.
 
''There is no plan to rope in anybody or any partner for the cement business,'' Manoj Gaur, executive chairman, Jaiprakash Associates, told the newspaper.
 
Cemex spokesperson Jorge Luis Perez said company would not comment on market speculation, while Votorantim's spokesperson said the company evaluated business development opportunities in key markets across the globe, including India.
 
Jaypee Cement, with a current capacity of 23 million tonnes per annum, has been scaling up rapidly from being a nine million tonne player in FY'08. It is targeting 35.9 million tonnes per annum by FY'12, according to the report.
 
On 1 September 2011, the company said in a release its cement shipments in August rose 21 percent from a year earlier to 1.32 million tonnes. 
 
According to a JPMorgan report, the net debt of the cement business alone stood at around Rs 14,100 crore, which is a drag on the overall value despite the scale of the operation.
 
Headquartered in Brazil, Votorantim Cementos is among the top 10 cement manufacturers in the world with operations spread across 20 countries in four continents.
 
The NYSE-listed Cemex of Mexico is also a global leader in building materials, with an annual cement capacity of 96 million tonnes and sales of $14.7 billion.
 
Its geographical spread includes the Americas, Europe, Middle East and even pockets of South East Asia. However, it has undergone a debt restructuring exercise recently, which may make it difficult to pursue large-scale M&A opportunities just yet.