UltraTech Cement - Deal With JP Associates Derails :: Edel

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UltraTech Cement (UTCEM) has formally called off the deal to acquire JP Associates’ (JPA) cement assets in Madhya Pradesh (MP), pending amendment to a clause in the new MMDR Act 2015, which currently prevents transfer of mines unless granted through the auction route. The deal to acquire 4.9mpta cement capacity was announced in December 2014 for a consideration of ~INR54bn. Another deal, wherein Birla Corp had agreed to buy 5.15mtpa cement assets from Lafarge India Private Limited met similar fate early this month. Given pending clearances, we had not factored in impact of this proposed acquisition and hence our earnings estimates remain unchanged. However, our target price is revised down by ~2% (from INR3,191 to INR3,131) as we were positive on the proposed deal which was set to consolidate UTCEM’s capacity share in the central region from 11% to 21% and was done at a lucrative EV/t of USD128 (adjusted for surplus clinker and power capacity). We retain our positive view on existing operations of UTCEM.

Proposed acquisition deal cancelled: A fateful event  

The deal to acquire cement assets based in MP from JPA has been called off for want of an amendment in the new MMDR Act 2015, which currently prohibits transfer of mines unless granted through the auction route.  We were positive on the proposed deal as it would have catapulted UTCEM’s capacity share in central region from ~11% to 21% and was done at adjusted EV/t of USD128 as compared to USD120 replacement cost.  

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https://www.edelweiss.in/research/EdelFlash-UltraTech-Cement--Deal-With-JP-Associates-Derails/31704.html