UltraTech to buy Jaiprakash's Gujarat cement unit for Rs. 3,800cr - Angel Broking

Jaypee group has reached an agreement to sell its 4.8mn ton Gujarat cement plant (a unit of Jaypee Cement Corporation [JCCCL] a wholly owned subsidiary of Jaiprakash Associate) to Ultratech Cement. The Gujarat cement project consists of an integrated cement plant at Sewagram and a 2.4mn ton cement grinding unit at Wanakbori. The enterprise value of the transaction is Rs. 3,800cr excluding actual net working capital. As per the agreement, UltraTech will take over the debt of Rs. 3,650cr of Jaypee's Gujarat unit and transfer remaining Rs. 150cr worth of shares once the transaction is completed.

As per the Management, the transaction is expected to be completed within 7-9months subject to approval of shareholders and creditors, sanction of the Scheme of Arrangement by the High Courts, approval of the Competition Commission of India besides other statutory approvals. The Management has guided to reduce its consolidated debt by ~Rs. 15,000cr in FY2014 through monetization of land parcel, cement, thermal and hydro assets. Going forward, we believe deleveraging the balance sheet through monetization of assets would help reduce the huge debt which continues to remain an overhang on the stock. Hence we believe closure of such a deal would be positive for the company. However, due to recent increase in the stock price we maintain our Neutral rating on the stock.

Source : Equity Bulls

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