UltraTech to buy Gujarat Cement for Rs 3,800 cr

In a major development, cement major UltraTech plans to buy Gujarat Cement unit 4.8 mtpa of Jaypee Cement Corporation Ltd (JCCL) for Rs 3,800 crore, according to the company release.

The proposed transaction is subject to the approval of shareholders and creditors, sanction of the scheme of arrangement by the High Courts, approval of the Competition Commission of India and all other statutory approvals. “We anticipate the transaction to close in 7 to 9 months,” said a top official of the company.

“The enterprise value is Rs3,800 crore besides the actual net working capital at closing. UltraTech will take over all the assets and the liabilities of the unit at closing and the net amount of enterprise value less liabilities taken over will be the consideration,” the release said.

Reacting the deal, however, Kumar Mangalam Birla, chairman, UltraTech Cement Limited said, “With this acquisition of 4.8mtpa the company’s current capacity increases to 59mtpa. With projects underway, it will stand raised to 70mtpa by 2015.

“Despite the prevailing muted growth of the industry, we believe the long term fundamentals and growth prospects remain intact. We will add more capacities in coming years,” Birla added.

The board of directors of UltraTech Cement at its meeting held on September 11, approved the acquisition by way of a demerger, comprising of an integrated cement unit at Sewagram and Grinding Unit at Wanakbori.

JCCL, being a wholly-owned subsidiary of Jaiprakash Associates Limited (JAL), such consideration will be discharged by allotment of equity shares of UltraTech to the shareholders of JCCL, subject to a maximum value of such equity shares to be Rs150 crore.

The combined capacity of both the divisions of the Gujarat Unit is 4.8mtpa of cement with 57.5 MW coal-based thermal power plant, limestone reserves for over 90 years at current capacity and a captive Jetty at Sewagram.

OP Puranmalka, whole-time director of the company said, “Besides giving us a stronger production base in Gujarat to serve the local market, it will also bolster our coastal footprint enabling us to cater to other regions of India and exports.”