Jaypee Group stocks gain on cement biz deal with UltraTech Cement

Shares of Jaypee Group companies such as Jaiprakash Associates (up 3% at Rs 6.94), Jaypee Infratech (4% at Rs 9.59) and Jaiprakash Power Ventures (5% at Rs 4.66) were trading higher after the Jaiprakash Associates signed a binding Memorandum of Understanding (MOU) with UltraTech Cement for divestment of part of the company's cement businesses.

Shares of UltraTech Cement were trading higher by 2% at Rs 2,830 on the BSE in early morning trade after the company announced that it has entered into binding MOU with Jaiprakash Associates for acquisition of its identified cement units across six states having total cement capacity of 22.4 million tonnes per annum (mtpa) at an enterprise valuation of Rs 16,500 crore.

Under the deal, UltraTech will pay Rs 470 crore for the said acquisition of the cement units which includes 4 mtpa capacity under implementation.

Post the acquisition UltraTech Cement's capacity will increase to 90.7  from 68.3 mtpa.

The acquisition is said to give the company access to newer markets of Satna, UP East, Himchal Pradesh and coastal Andhra and is also in-line with company’s strategy of increasing its overall capacity to 100 MTPA over the next few years.

As for JP the company has been in the process of reducing its debt via disinvestment over the past two years and the deal will enable substantial debt reduction for the company.

“If the deal goes through, then JP Associate’s assets will be valued at around US$110 EV/Tonne which is on a lower side and hence should be positive for UltraTech. We maintain our Accumulate recommendation on the stock,” Angel Broking said in a client note.

Source: Business Standerd