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Displaying items by tag: Jaiprakash Associates
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.
UltraTech faces block to Jaiprakash Associates deal
01 July 2016India: 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.
Sarat Jain resigns from Jaiprakash Associates
08 June 2016India: 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.
Jaypee Group defaults on US$666m payments
06 June 2016India: 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.
Jaiprakash Associates cuts back business in north India
22 April 2016India: 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.
Jaiprakash Associates misses interest payment on bonds
09 March 2016India: 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.
UltraTech to restructure Jaiprakash Associates deal if mining law amendment not approved
07 March 2016India: 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.
Looking at the small print
02 March 2016Small print can cause large consequences. Billion US Dollar consequences. Take the 2015 amendment to India’s Mines and Minerals (Development and Regulation) (MMDR) Act from 1957. Ambiguous wording in the legislation may have held up two prominent cement industry acquisitions in 2015. It also hangs over the recently announced purchase by UltraTech Cement of Jaiprakash Associates’ cement plants.
The MMDR was amended in January 2015. As the Times of India explained in mid-2015, a clause in the amendment said, “The transfer of mineral concessions shall be allowed only for concessions which are granted through auction.” However, it was unclear whether this meant historically allocated mines given via nominations or only newly allocated ones. Given the reliance of clinker plants on reliable mineral reserves this caused havoc. Cue confusion and large legal budgets.
LafargeHolcim’s divestment of two cement plants to Birla Corporation was one casualty. As a condition of the merger between Lafarge and Holcim the Competition Commission of India (CCI) required that the Jojobera and Sonadih cement plants in Eastern India be sold in 2015. Together the plants have a combined cement production capacity of 5.1Mt/yr. However the ambiguity over the 2015 MMDR Act clause on transfer of mining rights held the deal up. By February 2016 Birla Corporation had endured enough. It publicly complained about Lafarge India’s ‘inability’ to complete the deal and threatened legal action. LafargeHolcim retorted by asking the CCI if it could sell all of Lafarge India instead. It received the revised clearance and a new buyer is yet to be announced.
Another victim was UltraTech Cement in a previous attempt to buy Jaiprakash Associates’ cement assets. That time it was down to buy two integrated cement plants in Madhya Pradesh with a combined clinker production capacity of 5.2Mt/yr with associated mineral rights. The deal was agreed in December 2014 and then reported delayed in mid-2015. Finally, on 28 February 2016 the Bombay High Court rejected the deal, citing the MMDR Act as the prime cause.
Luckily for UltraTech Cement the story has a happy ending (so far) as it then announced that it was purchasing the majority of Jaiprakash Associates’ 22.4Mt/yr cement portfolio instead for US$2.4bn. It is hoped that the deal will be finalised by June 2017 but this partly depends on the MMDR Act being amended. Although UltraTech Cement have said they are looking at alternative routes to the deal in case the act isn’t amended.
Poor legal wording kiboshed at least two cement industry deals for over 10Mt/yr production capacity. Roughly, at the price UltraTech Cement is paying for its latest deal, that’s over US$1bn worth of Indian cement assets. Given the hard time the Indian cement industry had in 2015 the question should be asked regarding how much damage the MMDR Act amendment has done. One option for the beleaguered industry is to consolidate and cut its costs. This was massively delayed in 2015.
The proposed 2016 amendment to the MMDR Act reads as follows:
“Provided that where a mining lease has been granted otherwise than through auction and where mineral from such mining lease is being used for captive purpose, such mining lease will be permitted to be transferred subject to compliance with the terms and conditions as prescribed by the Central Government in this behalf.”
Let’s hope it does the trick this time.