JP Associates, the indebted company with standalone debt of Rs 27,200 crore is reportedly looking to sell its entire stake in its cement joint ventures with SAIL to cut down its debt.
The company which is India's third largest cement producer with total current capacity of 33.30 mtpa is likely to part with its 74% stake in Bhilai and Bokaro cement plants that together have an installed capacity of 4.3 mtpa. As per the story on The Economic Times, the company is eying around Rs. 2900 crore from the deal with cement major ACC.
The deal if it works out would mean that JP Associates presence in East zone would no more be there following the company's decision to exit west zone. JP Associates had earlier sold its two Gujarat plants with 4.8mtpa capacity to Ultratech in September 2013 for Rs. 3800 crore.
The group which has been struggling to repay its lenders would likely be getting quite better valuation for the sale than it had in its earlier sale transaction. The deal with ACC if it happens would imply enterprise value of USD 147 per MT as against USD 127 per MT it got for Gujarat plant sale.
On the other hand, Holcim India too is likely to benefit from increased presence in eastern region which is on its focus list. A recent Ambuja -Holcim India presentation highlights the company's plans to invest and focus on growth opportunities in India's most attractive regions viz. North, East and Central regions.
As per the latest monthly dealer sales check, the cement prices in eastern region continue to be at 10-30% premium (Rs. 330 to Rs. 350 per 50kg bag) to rest of India given the decent historical demand growth and supply deficit.
The stock of JP Associates the debt laden infrastructure company was trading down nearly 2% in the afternoon after witnessing a brief 1.5% spurt in the morning as a result of the news.