JSW in talks to buy Lafarge, Jaypee Group’s cement assets

Billionaire Sajjan Jindal-led $11 billion JSW Group is in talks with LafargeHolcim to acquire its Indian unit Lafarge India with 11 mtpa cement capacity at enterprise valuation of Rs.10,000 crore and another 22 mtpa of Jaypee Group's cement assets at a valuation of Rs.20,000 crore.

In talks Manoj Gaur  & Sajjan Jindal

If these deals goes through, JSW Group will emerge as India’s third largest cement maker with combined capacity of 39 mtpa, just after Kumar Mangalam Birla-led UltraTech with capacity of 72 mtpa and global giant LafargeHolcim with Indian capacity of 63 mtpa after divestment of Lafarge India.

According to the newspaper ‘The Hindu’  Mr. Sajjan Jindal, Chairman, JSW Group told The Hindu: That they are definitely looking at buying Lafarge India. Lafarge has just received CCI approval for the divestments. The company is also looking at other cement assets.

Mr. Jindal is also learnt to have met Jaypee Group Executive Chairman and CEO, Manoj Gaur, for buying out Jaypee Group’s portfolio of 22 mtpa of cement assets. The valuation of Jaypee assets is said to be Rs.20,000 crore, according to bankers familiar with the development.

LafargeHolcim said that it has received a revised order of the Competition Commission of India (CCI) for the divestment of its interest in Lafarge India, including three cement plants and two grinding stations with a total capacity of around 11 million tons per annum.

According to LafargeHolcim, the proposed transaction is an alternate remedy for the merger of the group’s legacy companies and now forms part of the company’s CHF 3.5 billion divestment target in 2016.

A conditional clearance by the CCI for an earlier divestment proposal was received in April 2015 for the divestment of Jojobera and Sonadih plants in Eastern India with a cement capacity of 5.1 million tonnes. LafargeHolcim subsequently entered into an agreement with Birla Corporation Limited, subject to CCI approval, in August 2015. However, due to the current regulatory issues relating to the transfer of mining rights captive and critical to the two plants, the deal fell through and LafargeHolcim had to come out with an alternate remedy to the CCI to ensure compliance with the order. As a result, LafargeHolcim will now begin a new divestment process for Lafarge India.

However, analysts are not very positive about JSW potential to pull both the acquisitions due to its high amount of debts.

JSW Group under leadership of Sajjan Jindal has become very ambitious off late. They have become India’s largest steel maker but in the process have debts of Rs.40,000 crore. Recently, JSW acquires 41.29% stake in Ispat Industries for Rs. 2157cr.

Consolidating could be helpful for the country, it will insure more wealth and new jobs creation. 63moons a new venture is investing on entrepreneurs which will aid PM Modi's Make In India campaign.