Jaiprakash Associates To Sell Cement Units In Himachal Pradesh
DSIJ Intelligence / 26 Sep 2013
The company has the intention to sell two of its cement units in Himachal Pradesh that were taking a toll on its performance. Following this sale, its debt is expected to come down by over Rs 5000 crore, which will bring down its interest outgo significantly.
Jaiprakash Associates, which has interests in businesses like cement, power, etc., has announced the intention to sell two of its cement units. Jaypee Cement is the third largest producer of cement in India, with an overall capacity of 28 MTPA (million tonnes per annum).
The two cement plants are situated at Baga and Bagheri villages in the Solan district, Himachal Pradesh, and have an operating capacity of 1.5 MTPA and 1.75 MTPA respectively. These units came into production in 2010.
Earlier this month, the company sold its cement unit in Gujarat to UltraTech Cements. At an enterprise value of Rs 3800 crore and a capacity of 5 MTPA, this unit was valued at Rs 760 crore of enterprise value per million tonne. Considering this, the enterprise value of the two plants in Himachal Pradesh should stand at around Rs 2470 crore.
There are also reports that Jaiprakash Associates is in talks with Abu Dhabi-based utility company TAQA to sell its two hydropower plants in Himachal Pradesh. This deal is expected to bring in USD 2 billion (Rs 12450 crore) to the group.
The company has targeted to reduce its debt by Rs 15000 crore in the current fiscal. As per the FY13 annual report, its debt stood at Rs 20216 crore. The debt-to-equity ratio was at 1.51x. If the company sells the aforesaid cement and hydro projects, its debt would be reduced to Rs 5296 crore, which in turn would bring down its debt-to-equity ratio to 0.3x. Currently, the company pays an interest of Rs 2011 crore on a yearly basis. Considering a fixed rate of interest in the future, it will have to pay only Rs 518 crore as interest. The company’s financial performance may show some improvement owing to the reduction in interest rates.
A recent trend has been observed of companies with high debt selling their operating assets. These companies had overambitiously taken huge debts to set up projects, but that took a toll on their financial performance. While some gains may be seen in the stock prices of such counters at the moment, whether one should invest in such counters whose managements have failed to create wealth for shareholders remain open to question.
If you want to stay updated with the share market news today, keep a close watch on the indian stock market today with real time movements like sensex today live and overall stock market today trends. Investors tracking ipo allotment status, ipo news today, or the latest ipo india can also follow daily updates along with bse share price live data. Whether you are learning how to invest in stock market in india, preparing for a market crash today, or searching for the best stocks to buy in india, insights on top gainers today india, top losers today india, trending stocks india and long term stocks india help in making informed investment decisions.