Jaiprakash Associates Ltd (JAL) and its group companies on Monday announced the sale of the final cement assets to Dalmia Bharat Ltd at an enterprise value of Rs 5,666 crore. This is part of JAL’s strategy to reduce its debt. Dalmia Bharat Ltd will purchase 9.4 million tonnes of cement and a thermal plant from Jaypee Group flagship firm JAL across several states, as stated in the deal.
Dalmia Bharat Ltd strives to become a leading company throughout India, and the recent move would help increase its manufacturing capacity to 45.3 million tonnes per annum (MTPA) from 35.9 MTPA. The change would also allow Dalina Bharat Ltd to expand its presence in central India where many other businesses compete.
A regulatory filing from Dalmia Bharat stated that its wholly-owned subsidiary, Dalmia Cement Bharat Ltd (DCBL), has entered into a-
“Binding framework agreement for the acquisition of clinker, cement and power plants from Jaiprakash Associates Ltd and its associate company”.
The deal is worth Rs 5,666 crore and includes a total cement capacity of 9.4 MTPA, along with a clinker capacity of 6.7 MTPA and thermal power plants of 280 MW, it added. Dalmia will gain access to JAL’s assets in Madhya Pradesh, Uttar Pradesh, and Chhattisgarh through this acquisition, thereby expanding its operations into central India.
The move will also help the company achieve its goal of becoming a pan-India cement company with a capacity of 75 MTPA by FY27 and 110-130 MTPA by FY31.
Dalmia is currently the fourth-largest cement manufacturer in India, behind UltraTech, Adani Cement (which recently merged with ACC and Ambuja Cements), and Shree Cement. JAL had a total capacity of approximately 6 MTPA while Jaiprakash Power Ventures Ltd (JPVL) has around 4 MTPA.
In addition, Jaypee group companies JAL and JVPL also notified the exchanges about this deal with Dalmia Bharat. JAL explained that selling its cement business falls in line with the Jaypee Group’s goal of reducing debt.
Earlier, JAL had sold its cement capacity of more than 20 MTPA to Aditya Birla group firm UltraTech Cement as part of its debt resolution exercise between 2014 and 2017. In 2015, Jaypee group sold its controlling stake of more than 2 MTPA cement capacity to Dalmia Group.
As the company’s Executive Chairman Manoj Gaur commented on the situation, JAL has been taking steps to reduce its debt, proactively repay lenders, and meet other commitments. He said-
“In order to repay the loans of lenders and concentrate in its other core areas of working, JAL has decided to divest from cement business completely with the sale of cement capacity of 9.4 MTPA in favour of Dalmia Cement (Bharat) ltd.”
In the future, Gaur promises that JAL will be known as a reliable establishment in terms of infrastructure development. The transaction hinges on due diligence, as well as the approvals from Jaiprakash Associates Limited’s lenders or JV partner and relevant regulatory authorities.
Jaiprakash Power Ventures said in a regulatory filing that it plans to sell its 2 million ton Jaypee Nigrie Cement Grinding Unit to Dalmia Cement (Bharat) Ltd. for Rs 250 crore.
Jaiprakash Associates and Jaiprakash Power Ventures announced in October that they plan to sell their cement business along with some non-core assets to reduce debt.
ICICI Bank filed for insolvency against JAL in September 2018, but the case is still ongoing in Allahabad’s NCLT. SBI, the country’s biggest lender, moved to NCLT against JAL in September of this year due to an alleged default of Rs 6,893.15 crore as of September 15th, 2022.
The Jaypee Group’s exit from the cement business is certainly a noteworthy event in India’s corporate history. Dalmia Bharat Ltd, on the other hand, appears to be well on its way to becoming one of India’s leading cement companies. The implications of the deal for both parties remain to be seen.
It will certainly be interesting to see what this transaction means for both companies in the long run and how it affects their respective positions in the Indian cement industry. We will keep you updated on the latest developments in this story.
Shivendra Tiwari is an Engineer and an MBA in Marketing. He is the Content head at Marketing91 and a thorough Online Marketing enthusiast. Shivendra loves to follow different brands and study their Business and Marketing tactics.