Displaying items by tag: UltraTech Cement
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.
India: UltraTech’s net profit has risen by 8% year-on-year to US$479m for its financial year that ended on 31 March 2016 from US$449m in the same period in the previous financial year. Its net sales rose by 5% to US$3.8bn from US$3.6bn. It reported that its portland cement sales volumes grew by 8% to 46.9Mt in the 2015 – 2016 financial year from 43.4Mt. It noted that its operating costs fell due to improved operational efficiency, a better fuel mix and a fall in fuel prices.
The Indian cement producer commissioned a 6MW waste heat recovery (WHR) system at Chittorgarh, Rajasthan during the January to March 2016 quarter. Overall, it generates 59MW from WHR. Since commissioning cement grinding plants at Jhajjar, West Bengal and Patliputra, Bihar the company’s cement production capacity is 66.3Mt/yr. It also signed a Memorandum of Understanding to buy cement plants from Jaiprakash Associates in late February 2016. The cement plants altogether have a total cement production capacity of 22.4Mt/yr.
In its outlook UltraTech expects cement demand to grow by up to 8% in the 2016 – 2017 financial year. This will be supported by government infrastructure and housing development.
India: UltraTech Cement has commissioned a cement grinding plant in Pataliputra, Bihar. The 1.6Mt/yr plant is the company’s 15th grinding plant. It is intended to produce cement for markets in eastern India.
The new grinding plant increases the company’s production capacity to 69.3Mt/yr including overseas operations. The Indian cement producer has added 6.1Mt/yr in production capacity in the year that ended in March 2016.
India: Dilip Gaur has replaced K K Maheshwari as the managing director of Grasim Industries, with effect from 1 April 2016. Maheshwari will remain on the board as a non-executive director.
Gaur was previously the deputy-managing director of Ultratech Cement. Before that he worked for Birla Copper, Alexandria Carbon Black and Pan Century Edible Oils. He also worked for over 20 years with Hindustan Unilever. Gaur holds a bachelor of engineering degree in chemicals and took the Advanced Management Program at Harvard, US.
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.
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.
UltraTech purchase of Jaiprakash Associates cement plants likely to complete by June 2017
01 March 2016India: UltraTech Cement's US$2.5bn proposed acquisition of Jaiprakash Associates' cement plants is expected to be completed by June 2017, according to UltraTech Cement.
"We have to ink definitive agreements and get permission from the High Courts. This will take time. The firm expects the agreement to be finalised in the next 12 - 15 months. Expect it to consummate by June 2017," said UltraTech Cement Chief Financial Officer Atul Daga.
Daga added that UltraTech is also looking at alternative routes in case proposed amendments to the Mines and Minerals (Development and Regulation) (MMDR) Act do not happen. In February 2016 the government took views from public, states and industry on amending the MMDR Act to include provisions allowing transfer of captive mines granted through procedures other than auction.
The transfer of captive mining leases, granted other than through auction, would allow banks and financial institutions to liquidate assets where a company or its captive mining lease is mortgaged. The move will allow mergers and acquisitions in the Indian domestic market, especially in the cement sector, in which several deals are currently on hold.
UltraTech Cement signed a Memorandum of Understanding to buy Jaiprakash Associates’ cement plants in late February 2016. Altogether, the cement plants have a total cement production capacity of 22.4Mt/yr.
India: UltraTech Cement has signed a Memorandum of Understanding to buy Jaiprakash Associates’ cement plants, which have a total cement production capacity of 22.4Mt/yr. The deal includes both integrated cement plants and cement grinding plants. The plants are situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka.
The acquisition also includes a 4Mt/yr cement grinding plant being built in Uttar Pradesh. UltraTech will pay an additional US$68.7m for this plant once it is completed. The deal will increase UltraTech’s total cement production capacity to 90.7Mt/yr from 68.3Mt/yr. The transaction is subject to regulatory approval.
Ultratech Cement net profit rises by 37% to US$83m in Q3
21 January 2016India: Ultratech Cement has reported a 37% rise in its net profit to US$83m for the quarter that ended on December 2015. It attributed the growth to lower operating costs and higher sales. The subsidiary of Aditya Birla Group reported a net profit of US$59m in the same period of the 2014 – 2015 financial year.
The company's total income rose by 4% year-on-year to US$910m from US$875m. Grey cement sales rose by 7% to 11.26Mt/yr from 10.51Mt.
"Though cement prices remained subdued, the performance during the quarter was encouraging, driven by operational efficiencies, judicious fuel mix and lower energy costs. This has resulted in lower operating costs," Ultratech said in a statement. However, this benefit was partially offset by rise in costs due to District Mineral Foundation levy in terms of the provisions of the Mines and Minerals (Development) Amendment Act, 2015 and amendment to the Payment of Bonus Act.