Rivals approached as Jaypee Group plans to sell cement business

According to a media report UltraTech, Shree Cement and Dalmia Bharat backed by private equity investor KKR are among prospective investors approached to take over the Jaypee Group's cement business. Debt ridden Jaypee group is looking to sell its cement business, joining a list of conglomerates that dipped in the cement business over the years and have eventually chose to exit. The sale is for consideration of an estimated Rs 19,500 crore enterprise valuation.

The cement business of the conglomerate is mostly housed under Jaiprakash Associates (JPA). It is India's third largest cement maker, with annual capacity of 31.65 million tonnes. It has approximately 6.8% of the total market share. The proceeds from sale will be used by JPA to retire a part of its debt. For FY15 the total debt of company stands at Rs 61285 crores. This is an increase of 0.30 percent from last year. The total debt burden is 56 per cent of total assets for FY15.

The Jaypee Group defaulted more than once in repaying loans in 2015. In February, JP Power defaulted on the repayment of its $200 million foreign currency convertible bonds and had to re-negotiate with lenders. Rating agencies downgraded JP Associate's debt to default in July. Also, JP Power's credit rating was downgraded to default category at the start of 2015.

On the financial front JPA's operating revenue decreased by 1.55 per cent to Rs 19666 crores in FY15 from Rs 19834 crores in FY14. The company faced a loss of Rs 1551 crores in FY15. The sale of cement business will help the JPA to reduce part of debt, decreasing losses and improve financials. Further it will also help the company to improve its credit rating which get downgraded in the current year.

The share price of the company is trading at Rs 11.57 indicating an increase of 0.96 per cent from the previous close.

With Jaypee group a host of Indian groups like Essar, Videocon, Lanco, GMR, GVK and Reliance are selling assets to repay their debt.