Jaiprakash Associates has salvaged its cement deal with UltraTech after a last-minute increase in the offer price. UltraTech will now pay almost ₹6,200 crore to buy Jaypee Group’s cement operations that has a capacity of 17.2 million tonnes spread across five states.

Speaking to Bloomberg TV India , Jaiprakash Associates Director and Chief Financial Officer Rahul Kumar says the group will now look at improving the operating performances of remaining plants, which has a capacity of 10.5 million tonnes.

Initially, the enterprise value for 17.2 million tonnes was ₹15,900 crore. It has been raised by around ₹289 crore. What are the factors behind this? Is it because of the limestone assets in Madhya Pradesh, which has become feasible after the passage of the Mines and Minerals (Development and Regulation) Amendment Bill?

You are right. After signing the definitive agreement, there were two developments. One was the amendment to the MMRD Act, which paves way for the transfer of these mines; the transfer charges that has been stipulated are different from what were expected earlier. Also, for one of our plants in Uttar Pradesh, where the matter was sub judice, we have an order from the National Green Tribunal that clears the way for completing the balance formalities and commissioning the plants. So, with these two developments, we were able to increase the total enterprise value.

Is your Karnataka unit out of the deal?

The Karnataka unit still remains excluded from the scope of the transactions. We have 17.2 million tonnes of operating assets and 4 million tonnes of grinding assets in it, which is under implementation and for which UltraTech shall pay an additional ₹470 crore.

How much of this will be the debt component that will be directly taken up by UltraTech?

The portion of debt that is directly assumed by UltraTech as part of the transaction is about ₹11,400 crore of long-term debt, plus there will be ₹1,000 crore of working capital loans.

What is the consolidated debt level of the Jaypee Group?

If we add up the debt at the group level, the total debt would be around ₹67,000 crore.

The group has constantly pursued the strategy of monetising assets in the energy and cement businesses. How much of the cement assets are left with you inclusive of the Karnataka unit?

The group still has an operating capacity of about 10.5 million tonnes post this divestment.

Do you have any further plans to divest these 10.5 million tonnes?

As of now, there are no plans for divesting any further. We will be looking at improving the operating performances of these plants.

What’s your current capacity utilisation for the 17.2 million tonnes?

It should be close to 55-60 per cent.

What is the EBITDA per tonne for the installed operational capacity?

is close to ₹550-600 per tonne.

In terms of valuations, the deal comes to around $120 per tonne if you include the additional ₹400 crore. It will be $108-110 per tonne if you exclude that ₹400 crore. The Reliance cement deal happened at an enterprise value of $140 per tonne and that was quite healthy. Do you think your valuation has been low?

Even in this deal, if you look at the operating capacity of 17.2 million tonnes and the total valuation, the valuation per tonne will be close to about $140 per tonne. The grinding unit is not even ready. It is just an opportunity to set up a grinding unit. The fair value for the assets, which is operating, is in the same range. It is slightly different from the Reliance deal. There you have one large capacity in South where the average capacity utilisation is much lower than rest of the country.

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