Jaypee Cement: Dalmia Bharat to buy Jaypee Cement for Rs 5,666 crore

Dalmia Bharat Limited on Monday said that its cement subsidiary will be acquiring the cement and power plants of Jaiprakash Associates Limited for Rs 5,666 crore, marking an end to months of speculation over potential suitors for the assets.

The assets put together have a cement manufacturing capacity of 9.4 million tonnes, clinker capacity of 6.7 million tonnes and thermal power plants of 280 megawatts and are situated in Madhya Pradesh, Uttar Pradesh, and Chhattisgarh. Arpwood was the adviser to the transaction.

The new plants will take the cement manufacturing capacity of Dalmia Cement to 46.3 million tonnes per annum (MTPA) from the present 35.9 MTPA, as per its website. This will take the cement maker closer to its target of achieving 75 MTPA capacity by FY27 and upwards of 110 MTPA by FY31.

It will also put the fourth-largest cement maker in India close to third-placed Shree Cement in terms of manufacturing capacity. UltraTech Cement and the Adani Group – who recently acquired Ambuja Cements and ACC – are the leading cement makers in India.

Debt-laden Jaiprakash Associates had said in a regulatory filing earlier this year that it would be divesting its cement assets. Earlier, media reports claimed the Adani Group as the frontrunner for acquiring these assets.

For Dalmia Cement, the acquisition will expand its footprint in the central region, furthering its target of being a pan-India player.

The stock of Dalmia Bharat climbed 3.3% to close at Rs 1,905.7 on the BSE on Monday compared to a flattish Sensex.
The transaction is yet another major consolidation in India’s highly fragmented cement sector. The acquisition of ACC and Ambuja Cements by the Adani Group earlier this year and Gautam Adani’s subsequent announcement of aggressive expansion plans jolted the cement industry into action. Incumbent leading players have followed suit and announced similarly aggressive expansion plans.

Experts have said that the capacity expansion by large cement makers will impact the smaller players, leading to further consolidation in the sector.

Large cement makers like UltraTech, Adani Group, Shree Cement and Dalmia Cement have better bargaining power given their scale, which helps them achieve lower cost of production compared to their smaller rivals. They also tend to have better distribution channels, which helps them improve their market share and capacity utilisation, experts said. They believe that a rapid expansion in manufacturing capacity by large cement makers will further tip the scales in their favour.