Mines law hurdle for big cement buyout
07 Mar 2016
The big ticket acquisitions in the cement sector, announced recently by UltraTech, Reliance Cement and the imminent sale by Lafarge, will depend on a crucial amendment to the law on transfer of mines.
At present, the Mines & Minerals (Development and Regulation) Act, 2015, or the MMDR Act, does not allow the transfer of limestone mines to new owners of cement companies — unless the mines were granted through auctions.
The companies have appealed to the government to allow the transfer of mines, and are expecting an amendment to the Act in the ongoing Budget session of Parliament.
In case the amendment is not passed, the companies would have to seek alternative routes.
Aditya Birla Group’s UltraTech Cement is in the process of acquiring the entire 22.4 million tonne cement capacity of Noida-based Jaiprakash Associates, or Jaypee. According to sources, UltraTech Cement will pay Rs 17,000 crore for the deal.
An UltraTech official said, if the amendment is not made, Jaypee will carve out a separate entity that will own the group’s other businesses, such as hotels, construction and real estate. The residual company left behind will own the assets that UltraTech is acquiring.
When UltraTech completes the acquisition, it will also get the mining rights, under the current Act.
Earlier, the company did not acquire Jaypee’s cement units in Madhya Pradesh, as the Rs 5,500-crore deal would be considered a partial sale — and prevent the transfer of mining rights.
Source: Business Standerd