KKR among four bidding for Jaiprakash's 20 mtpa cement capacity
25 January 2016
Jaypee group-promoted Jaiprakash Associates has received four bids for the 20-million tonne cement capacity that the debt-laden group has put on the block. The bidders include global private equity firm KKR, and Aditya Birla Group cement company UltraTech, and Dalmia Bharat Cement. The name of the fourth bidder could not be ascertained.
The Jaypee group had an estimated debt of Rs 75,000 crore at the end of at the end of last financial year 2014-15, according to a Credit Suisse report. The sale could help the company pare Rs20,000 crore of that debt.
The group defaulted on repayment of a non-convertible bond last year. CARE Ratings had last year downgraded Jaypee to 'default' after the group defaulted on repayment of a non-convertible bond.
Jaypee Group has now appointed ICICI Securities as banker to the deal. The company expects to sell its cement arm by March for Rs19,500 crore, at $140 a tonne capacity.
"The deal involves demerging other infrastructure businesses in Jaiprakash Associates and then selling the standalone cement business, which has a capacity of around 20 mtpa," said a banker familiar with the bidding. "The company is expecting a valuation of over $140 a tonne for these assets." This could help it pare about Rs 20,000 crore of debt.
The deal, however, would not include the 2.2 mtpa Bhilai cement plant - a joint venture between Jaiprakash Associates (74 per cent) and Steel Authority of India Ltd (24 per cent) - for which separate bids have been invited. Similarly, a 3 mtpa capacity in Andhra Cement held by another group firm Jaypee Development Corporation has also been put on the block through a separate bid, for which ICICI Securities is the sell-side banker.
Meanwhile Jaipee's sale of a five-million-tonne annual capacity in Madhya Pradesh to UltraTech in December 2014 is pending completion as the transfer of mining rights for the reserves catering to the plant has not been effected as a change in regulation after the deal prohibited this in the event of an asset sale.
The government has now agreed to make an amendment to this rule in the next session of Parliament, to facilitate such deals. Lenders are now working on future deals through share sale in companies as such deals would include transfer of mining rights as well.