PE major Blackstone joins race for Indian co Jaypee Group’s cement assets

Global private equity (PE) investor Blackstone Group LP has joined the list of bidders interested in the cement assets of Jaypee Group, valued at more than Rs 20,000 crore.

Blackstone will back Dalmia Cement Bharat Ltd, a subsidiary of Dalmia Bharat Ltd, to bid for Jaypee’s cement assets, according to two people in the know of the development.

They both requested anonymity as the negotiations are confidential.

Another global fund, KKR, is also looking to bid for the assets and is likely to do it alone, confirmed both the people quoted above.

Aditya Birla Group’s UltraTech Cement Ltd has also placed a bid, said a third person familiar with the developments.

On 21 January, Bloomberg reported that UltraTech and KKR have submitted initial bids for Jaypee’s cement assets.

The sale of Jaypee Group’s 20 million tonnes of cement capacity comes against the backdrop of large accumulated debt at the company, which the management has failed to pare down over the years. The group had an estimated debt of Rs.75,000 crore at the end of fiscal 2015, according to the 21 October edition of brokerage house Credit Suisse’s House of Debt report.

While the group has been aggressive in selling assets, including a part of its cement capacity, “debt levels are estimated to be up 18% over the past two years”, the report said.

With banks deciding to clean up their balance sheets and reduce stressed assets, the pressure on companies such as Jaypee Group to sell large chunks of their business is high.

“The sale of these cement assets is being pushed by the lenders to Jaypee Group. If successful, the proceeds would go towards taking care of the debt component,” said an investment banker and consultant for one of the bidders.

“We do not comment on market speculation,” said a spokesperson for the Jaypee Group.

For Blackstone, this is not the first time it is bidding for a large cement asset.

It was an initial bidder for Reliance Cement Co. Pvt. Ltd, a wholly-owned subsidiary of Anil Ambani-owned Reliance Infrastructure Ltd.

The sale of Reliance Cement is expected to be completed shortly.

In May 2015, Blackstone had also placed a bid to acquire 5.15 million tonnes in cement assets of French cement firm Lafarge SA. The deal, while still not closed, was eventually bagged by Kolkata-based Birla Corp. Ltd in August 2015 forRs.5,000 crore.

This time around, Blackstone has chosen to bid along with Dalmia Cements.

A spokesperson for Blackstone declined to comment.

“These are unsubstantiated and speculative rumours. We are not in talks with any company,” said a spokesperson for Dalmia Bharat, adding that it cannot comment on Blackstone’s behalf.

Interestingly, KKR until recently had an investment in Dalmia Cement. On 16 January, KKR said that it would exit the cement subsidiary, but acquire an 8.5% stake in the holding company, Dalmia Bharat Ltd.

Despite its relationship with the Dalmia Group, KKR has decided to bid for Jaypee’s cement assets on its own. KKR already has existing exposure to the sector through its credit infusion into Andhra Pradesh-based Bhavya Cements Ltd, where it provided debt of Rs.250 crore last year. A spokesperson for KKR declined to comment.

The increased interest of PE funds to invest in the cement sector emerges from the opportunity to gain from the restructuring needed by some of the cement firms, said an expert.

“There is a real opportunity from the need to correct capital structure as some companies in this sector that have aggressively expanded their capacities, largely funded through debt. Some of them have been impacted by volatility in cement prices in the backdrop of continued increases in capacities and some fairly sluggish demand situations. PE funds have traditionally preferred situations such as these where they can potentially gain from capital restructuring,” said Srinivas Baratam, MD, Kriscore Financial Advisors. Kriscore was the financial adviser for Birla Corp.’s acquisition of Lafarge India’s assets last year.

The consolidation in the cement sector is nothing new, domestically or globally. Still, the pace of deal activity in the sector has picked up over the past year or so.

The Rs.20,000-crore deal to buy Jaypee Group’s cement assets, if concluded, would be biggest cement deal in India.

Also Read:

India: Dalmia Bharat, UltraTech & Shree Cement in race to buy Jaypee’s cement business

This article was first published on Livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.