Displaying items by tag: Jaiprakash Associates

Boy, is the UltraTech Cement and Jaiprakash Associates deal dragging on. The agreement by UltraTech to buy cement plants from Jaiprakash Associates reached its latest revision this week when UltraTech upped its offer to US$2.40bn from the US$2.36bn offered at the end of March 2016. The deal also includes an additional US$70m for a cement grinding plant under construction in Uttar Pradesh.

This time round the haggling took place to the background music of Jaiprakash Associates’ mounting debts. It owes US$4.45bn to a group of lenders led by ICICI Bank. A repayment window was due to close on 30 June 2016. Defaulting this deadline could have switched the account to non-performing asset status. So, according to reports in the Indian media, the lenders forced a strategic debt restructuring scheme on Jaiprakash Associates. Or in other words they took control of the company. Alongside all of this UltraTech was allegedly trying to renegotiate the terms of the deal agreed in March 2016 following amendments to the Mines and Minerals (Development and Regulation) (MMDR) Amendment Act, 2015.

How paying more for the same assets benefits UltraTech remains to be seen. In addition US$1.78bn worth of Jaiprakash Associates’ debts will be transferred to UltraTech, according to Rahul Kumar, Director & CFO of Jaiprakash Associates. At US$118/t for new-ish production capacity it still seems like a good deal. Doubtless the devil lies in the (unseen) detail. Reports in the Indian media speculate that the lenders may have threatened UltraTech with rival bids.

To add to the confusion, the deal covers cement plants with a production capacity of 21.2Mt/yr but this total includes both integrated cement plants (clinker producing) and standalone cement grinding plants. Given the difference in cost to build a clinker production line compared to a grinding mill this makes assessing the value of the deal difficult.

UltraTech have described the purchase as a ‘geographic market expansion,’ which will allow its entry into markets of India including the Satna cluster in
Uttar Pradesh and Madhya Pradesh, Himachal Pradesh, Uttarakhand and coastal Andhra Pradesh. It has also stated that its cement production capacity (clinker and grinding) will rise to 91.1Mt/yr following the deal. As ever, the latest revised agreement is dependent on shareholder, creditor, high court and regulatory approval. UltraTech plan to complete the transaction by July 2017. What can possibly go wrong!?

India: UltraTech Cement and Jaiprakash Associates have revised their deal for UltraTech to buy 21.2Mt/yr of cement production capacity from Jaiprakash Associates. The revised value of the deal is now US$2.47bn, up from US$2.40 agreed previously. UltraTech will have to pay an additional US$70m upon completion of a grinding unit under construction. The new agreement is an amendment to the 31 March 2016 scheme of arrangement., according to the Hindu newspaper.

The approval follows an agreement of Jaiprakash Associates’ lenders who invoked Strategic Debt Restructuring (SDR) scheme on 28 June 2016. This allowed the lenders may take control of the company and sell its assets to recover dues.

“Jaypee Group is determined to reduce its overall debt through its proactive divestment initiatives to help the group tide these current turbulent times caused by the economic slowdown,” said Manoj Gaur, Executive Chairman, Jaypee Group. The company has put together a committee of directors to explore its options to tackle its debt management.

India: Jaiprakash Associates has had problems meeting its financial commitments towards the purchase of some of its cement plants by UltraTech Cement. Sources quoted by the Mint newspaper said that the cement producer had met issues clearing statutory dues and providing necessary working capital for the plants under review. They added that UltraTech Cement had also sought additional funding ahead of the completion of the US$2.4bn deal. Both cement producers have claimed that the deal is still on track.

India: Sarat Kumar Jain, vice chairman of Jaiprakash Associates, has resigned from the group with immediate effect. Jain had been associated with the Jaypee Group for over 50 years. The firm said in a statement that the 78 year old had cited health reasons as his reason to resign.

India: Jaypee Group companies have defaulted on loans and other payments worth US$666m. The group has, on a consolidated basis failed to repay US$434m in principal amount to banks and another US$233m in interest payments.

Jaiprakash Associates, the group's main company, reported a loss of US$500m in its 2015 – 2016 financial year, compared to US$259m in the same period in the previous year. Earlier in 2016, Jaiprakash Associates agreed a deal to sell cement plants in five states to UltraTech Cement for US$2.4bn. Once the deal concludes Jaiprakash Associates will be left with a cement production capacity of 10.6Mt/yr in Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka.

India: Jaiprakash Associates has withdrawn from some of its markets in north India as part of a streamlining its operations. A spokesperson for the parent Jaypee Group confirmed that the company has chosen to withdraw from certain markets in Haryana and Delhi, according to Livemint.

"The company continues to sell cement in markets of north India. However, as a strategy the company has increased its focus on high realisation markets and has withdrawn from certain markets of Haryana and Delhi where due to low prices and high freights (long lead markets) the net realisation was very low and operations unviable," said a spokesman for Jaypee Group.

Non-payment to truck drivers and coal shortages at its cement plants in Himachal Pradesh are believed to have contributed to the decision to exit the north Indian market. Jaiprakash Associates has a cement production capacity of 4Mt/yr in Himachal Pradesh.

In late March 2016 Jaiprakash Associates signed an agreement with UltraTech Cement to sell 21.2Mt/yr of cement assets in five states for US$2.4bn. Following the deal Jaypee Group will be left with 10Mt/yr in Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka.

India: Two cement plants in Himachal Pradesh have been accused of evading goods tax worth US$9m, the Comptroller and Auditor General of India (CAG) has said. The Ambuja integrated cement plant at Darlaghat and the JP Cement Himachal grinding plant at Bagha allegedly avoided the tax.

The companies transported 1.7Mt of limestone and 0.21Mt of shale from their quarries between April 2012 and March 2014. Ambuja Cement and JP Cement were liable to pay US$5.1m and US$3.9m respectively. The CAG only became aware of the shortfall in December 2015.

India: Jaiprakash Associates has revised a US$2.4bn deal to sell cement plants to and UltraTech Cement. The new deal excludes a 1.2Mt/yr cement plant in Karnataka. UltraTech will also spend US$71m to complete a cement grinding plant that is currently being built. UltraTech will now acquire Jaiprakash Associates cement plants in five states with total capacity of 21.2Mt/yr. Jaiprakash Associates will retain a cement capacity of 10.6Mt/yr.

A Memorandum of Understanding signed in February 2016 agreed the terms of the sale. However, currency fluctuations between the Indian Rupee and US Dollar have kept the US Dollar value of the revised deal at a similar amount despite a drop in the Indian Rupee amount. The sale is expected to take around 12 to 14 months to complete subject to statutory and regulatory approvals.

India: Jaiprakash Associates has missed an interest payment due on 7 March 2016 on its bonds worth US$150m. The interest will be paid later from the proceeds of its recent US$2.4bn sale of cement assets, the company said in a statement.

"Interest was payable on the bonds on the semi-annual interest payment date of 7 March 2016. The issuer wishes to inform you that it has not paid such interest. The issuer intends to engage in discussions with holders of the bonds," the statement said. The convertible bonds are due for redemption in 2017.

Jaiprakash Associates announced in late February 2016 that it was selling the majority of its 22.4Mt/yr cement portfolio to UltraTech Cement for US$2.4bn.The group has an estimated debt of US$11bn as of 31 March 2015, according to a Credit Suisse House of Debt report dated 21 October 2015.

India: UltraTech will create a separate corporate structure for the cement assets of Jaiprakash Associates it has agreed to buy if a key mining law is not amended by June 2016. An amendment to the Mines & Minerals (Development & Regulation) (MMDR) Act in 2015 suggested that the transfer of mining rights could only be passed by auction, leading to delays in several mergers and acquisitions in the cement industry.

"We have considered both scenarios. If the amendment goes through, it is a clear asset purchase. If not, there are structures we have in mind, with which we will be able to do the deal," said Atul Daga, chief financial officer of UltraTech to the Hindustan Times. He added that the deal is not entirely linked to the mining amendment. "The agreement is for specific assets. It's more about how you structure it. I do not want to comment on the structure until the closure of the definitive agreement."

If the MMDR Act amendment is not approved, Jaiprakash Associates will need to create a separate entity out of the assets being sold to UltraTech, for the deal to proceed. However, it will refinance Jaiprakash's borrowings at lower rates if the MMRDA amendments get approved.

UltraTech announced in late February 2016 that it was purchasing the majority of Jaiprakash Associates’ 22.4Mt/yr cement portfolio instead for US$2.4bn.