UltraTech calls off bid for Jaypee cement assets

The Aditya Birla Group's UltraTech Cement on Friday said it has called off its deal to buy Jaiprakash Associates' two cement assets in Madhya Pradesh for Rs5,400 crore due to a regulatory hurdle.

The company, which had put the purchase of the plant before the Bombay High Court for approval, was advised by the court to withdraw the offer since some amendments in the Mines and Minerals Development and Regulation Act prevents the transfer of mines granted through mechanisms other than through auction.

The court said that in the absence of any clear timelines for further amendment to the said clause, it cannot sanction the deal.

''The effectiveness of the scheme was subject to the sanction of the Bombay High Court. The high court indicated that based on the recent amendments in the provisions of the Mines and Minerals Development and Regulation Act, 1947, preventing transfer of mines granted other than through auction, and in the absence of any clear timelines for any amendment, the court cannot sanction the scheme,'' UltraTech Cement said in its statement to the Bombay Stock Exchange.

In December 2014, UltraTech Cement had entered into an arrangement with Jaiprakash Associates to buy its cement assets in Madhya Pradesh along with related limestone mining rights (See: UltraTech to buy Jaiprakash's 2 cement plants for Rs5,400 cr).

However, subsequently the amended Act barred transfer of mines other than those allotted through auctions. This means that the Jaiprakash Group could not transfer its limestone mines to UltraTech.

However, UltraTech has indicated that in the event of the government amending the clause concerned, it will be open to once again acquire these assets from the Jaiprakash Group.

The inability of the two parties to close the transaction will impact the Jaypee Group adversely as it will delay its asset monetisation plan. The group had an estimated debt of Rs75,000 crore at the end of FY15, according to Credit Suisse's House of Debt study.

For UltraTech, the plants concerned, located at Bela and Sidhi in Madhya Pradesh, with a combined capacity of 4.9 million tonnes per annum (mtpa), would have helped it gain a pan-India footprint.

Currently, the company does not have a presence in the Satna cluster of Madhya Pradesh, which supplies cement to regions like central and eastern Uttar Pradesh and Bihar.

The Kumar Mangalam Birla-led UltraTech has been one of the most aggressive cement makers in India in terms of capacity creation over the last decade (FY05-FY14), adding nearly 30 mt in this period.

This was the second cement deal that UltraTech had entered into with Jaiprakash Associates. In September 2013, it purchased two cement plants in Gujarat with a capacity of 4.8 mtpa from the Manoj Gaur-led Jaypee Group for an enterprise value of Rs3,800 crore.

This is also the second deal in recent times in the cement sector to be called off due to regulatory hurdles. Earlier this month, the Kolkata-headquartered Birla Corporation called off a $750-million deal to acquire two cement assets of LafargeHolcim in eastern India after failing to secure limestone-mining rights.