What was the deal between Jaypee & UltraTech Cements?
The deal was worth a whopping 3800 Cr
UltraTech Cement Pvt Ltd. took over the debt of Jaypee Cement worth Rs. 3650 Cr and issued fresh equity worth 150 Cr. The deal transferred all the cement operations of JCCL in Gujarat which consisted of units at Kutch, Sevagram, Wanakbori and other western regions to UltraTech Cement. The Gujarat Plant of Jaypee Cement had a 57 MW coal-based power plant and 30 MW diesel generator. The valuation of the plant would be approximately Rs. 7936 a tonne.
Impact on Jaypee Cements
Jaypee carried a debt of Rs. 56000 Cr on its books. The banks under pressure from RBI to get rid of bad loans insisted on selling off assets to pay the debt. The deal reduced the debt by Rs. 3650 Cr and helped to maintain the liquidity and reliability of the company. However, it lost a unit which was generating substantial cash flow.
The shares of the company were valued at just Rs. 6.73 and were getting traded as stocks. After the transaction the price of the shares rose to Rs 43.40
The deal reduced the capacity of Jaypee Cements to 33 Million Tonnes but it still continued to operate as the third largest producer of cement in the country.
Impact on UltraTech Cement
Ultra Tech greatly benefitted from the deal. Acquiring Jaypee’s units gave UltraTech a presence in the central and western regions where it lacked presence. Gujarat was strategically well-positioned too from an export point of view for UltraTech to explore new markets.
The deal helped UltraTech to establish itself as a market leader again. Its capacity, with the addition of 4. MTPA, to 59 MTPA. The market share of UltraTech increased from 17% to 21% as it was able to create synergies between its existing plant in Saurashtra and Jaypee ‘ s plant which was embedded with latest technology and could generate immediate cash flows.