NEW DELHI | Feb 23, 2016: US buyout firm KKR and India's largest cement maker, Ultra-Tech, are in the race to acquire the cement division of Jaiprakash Associates, two people familiar with the matter said. Besides these two, Dalmia Bharat Cement has also put in a bid.
Each of the non-binding bids has put an enterprise value in excess of Rs 18,000 crore on the 21-million-tonne-a-year business, the people said.
The suitors are expected to enter into separate agreements shortly to initiate due diligence that will be completed in the next four weeks. Post that, one of the contenders will likely enter into a binding agreement before this fiscal year-end, said one of the people. Banks that have huge exposure to debt-ridden Jaiprakash Associates are keen to complete the transaction by March 31 to avoid fresh slippage in non-performing assets, the person added.
"Cement business is the main cash cow for Jaiprakash Associates that has debt of about Rs 28,000 crore. Even if they manage to reduce the debt by Rs 18,000 crore, it will be left with about Rs 10,000 crore of debt, which is a big number," said this person.
"India's leading banks led by ICICI Bank and Jaiprakash Gaur and Manoj Gaur, the promoters of Jaiprakash Associates, are engaged in negotiation with the suitors ... to finalise the contours of a deal," said the other person.
The deal is expected to close at an enterprise value of between Rs 18,000 crore and Rs 19,000 crore, this person added. UltraTech, Dalmia Bharath and KKR declined to comment on the mater, while Jaiprakash Associates called it market speculation.
One of the bidders has suggested to take over maximum debt in its book and infuse minimum equity. It has also suggested that the no loan will be converted into equity, one of the people said.
Another bidder has proposed a 51:49 joint venture with lenders holding the minority stake by way on conversion of debt into equity, the person said. This will help in optimizing the capacity and also debottlenecking the capacity.
Unlike in a 2014 deal between Ultra-Tech and Jaiprakash Associates, the buyers and lenders are evaluating two separate options to avoid the transaction hitting legal hurdles over the mines and minerals Act (MMDRA Act), said one of the people.
In December 2014, UltraTech had agreed to acquire Jaiprakash Associates' integrated cement plant with clinker capacity of 2.1 million tonnes per annum (mtpa) and cement grinding capacity of 2.6 mtpa at Bela in Madhya Pradesh for Rs 5,400 crore.
After several extensions, UltraTech's exclusivity for the Madhya Pradesh assets expired last week. Now, the AV Birla group company has submitted bids for the entire 21 million tonne capacity spread over various locations.
(Source: http://economictimes.indiatimes.com/)