Dalmia Bharat to buy JP’s cement plant: Deal for Rs 5,666 crore, Jaiprakash Associates sold plant to reduce debt.

Dalmia Bharat’s subsidiary Dalmia Cement has entered into an agreement to acquire the cement, clinker and power plants of Jaiprakash Associates. The company’s plants are located in Madhya Pradesh, Uttar Pradesh and Chhattisgarh.

Jaiprakash Associates has a total cement capacity of 9.4 million tonnes (with a clinker capacity of 6.7 million tonnes and a thermal power plant of 280MW). The plant has been bought at an enterprise value of Rs 5,666 crore.

Plant sold to reduce debt

In October, Jaiprakash Associates and Jaiprakash Power Ventures announced plans to sell some non-core assets along with their cement business to reduce debt. Now this transaction will be completed after the approval of regulatory authorities.

Installed cement capacity of 10.55 million tonnes

According to Jaiprakash Associates Annual Report, Jaypee Group (including Jaiprakash Power Ventures) currently has an installed cement capacity of 10.55 million tonnes per annum and 339MW captive power.

50% cement capacity in central Indian market

More than 50% of Jaypee Group’s cement capacity is located in the Central Indian market. This is not the first time that Jaiprakash Associates is selling a cement plant. In 2016, Jaypee Cement sold the 21.2 MTPA plant to UltraTech Cement at an enterprise value/tonne (EV/t) of $115.

What will be the benefit of Dalmia?

This acquisition is being considered positive for Dalmia Cement. With this, the market of Uttar Pradesh and Madhya Pradesh will open for Dalmia. This will help Dalmia to diversify from the existing markets in the south and east.

This is expected to be marginally negative for central region players such as Prism, Heidelberg and Birla Corp as the central region could become more competitive with the entry of Dalmia.