Roadblock For Ultratech’s Rs 15,900 Crore Deal With Jaypee Cement

Mumbai: India’s biggest cement company UltraTech Cement Ltd’s Rs15,900 crore deal to buy the cement assets of debt-laden Jaiprakash Associates Ltd has run into a snag over the latter’s failure to meet some commitments linked to the transaction.

“Jaypee Group has not met certain financial commitments including clearing statutory dues and providing necessary working capital for the plants under review. The group has also sought additional funding (from UltraTech) before the consummation of the deal,” sources said.

The deal, however, has not been called off yet and efforts are under way to salvage it.

On 31 March, UltraTech and Jaiprakash Associates signed a definitive agreement for the sale of Jaiprakash’s cement division. Under the agreement, UltraTech was to purchase 21.2 million tonnes in cement capacity located across five states for Rs15,900 crore. UltraTech was also to pay Rs 470 crore on the completion of Jaiprakash’s under-construction cement plants, which were part of the deal. In February, Ultratech called off its deal with Jaiprakash Associates for the purchase of two Madhya Pradesh cement assets for Rs 5,400 crore due to lack of required regulatory approvals for the transfer of related mining assets. 

As of 31 March, Jaiprakash Associates had consolidated debt of Rs 58,250 crore. The deal with UltraTech was largely driven by Jaiprakash Associates’ lenders to help reduce their exposure to the infrastructure conglomerate. The debt pile-up has been the result of aggressive bids to build infrastructure projects in the past decade when India’s economy was growing rapidly and capital costs were low. Most of these projects were hit by delays in securing mandatory approvals and policy issues.