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UltraTech Cement will acquire a cement facility and a captive power plant of Jaiprakash Associates in Madhya Pradesh in a deal which does not involve any immediate cash outflow.
UltraTech will issue non-convertible debentures worth ₹4,538 crore and non-convertible redeemable preference shares worth ₹10 lakh to Jaiprakash Associates.
The cement maker also take over the latter’s ₹627-crore debt and ₹161-crore loss.
The cement plant has an annual capacity to produce 4.9 million tonnes (mt), while the power station has a capacity to generate 180-MW electricity.
The transaction is expected to be closed in seven to nine months.
Shrenik Gujrathi, Senior Research Analyst, Angel Broking, said though the deal may lead EPS (earnings per share) dilution in the near term, in the long run, it will push up UltraTech’s market share in the central region to 14 per cent from 4 per cent now.
The enterprise value of the deal would also come down to $135-$140 a tonne from $175 a tonne if one takes into account the possibility of putting up grinding units in Chhattisgarh and Bihar with the excess clinker capacity available at the mother plant in Madhya Pradesh. This apart, the capacity utilisation at the cement plant has been curtailed at 74 per cent due to cash crunch. This can easily be ramped up to 80-85 per cent, Gujrathi added.
The acquisition will enhance UltraTech’s capacity in India to 65 million tonnes a year from 60 mt.
With the company’s current projects under way, the capacity will increase to 71 mt in 2016, it said.
The transaction is subject to approvals of shareholders, creditors and the Competition Commission of India.
Besides, the scheme of amalgamation requires the High Court’s approval as well.
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