Jaiprakash Associates has entered into an agreement with Dalmia Cement for the sale of JP Super. Nevertheless, the asset is subject to arbitration between Jaiprakash Associates and UltraTech - the prior buyer - due to a dispute concerning redemption tied to the JP Super transaction. Read complete report on SURFACES REPORER (SR):
UltraTech Cement has illustrated its intentions to acquire the Dalla Super cement asset, previously known as JP Super, located in Uttar Pradesh. This comes following the completion of the arbitration process and Jaiprakash Associates' recent agreement with Dalmia Cement Bharat for the same asset.
Atul Daga, executive director and chief financial officer at UltraTech, stated during a post-earnings call for the March 2023 ended quarter that the deal consists of a 2.3-million-tonne clinker capacity and a limestone mine capacity of 100 million tonnes.
These were acquired as part of a larger cement transaction between UltraTech and Jaiprakash Associates in 2016.
The Battle for JP Super: UltraTech vs. Dalmia Cement
In their quarter results for the December 2023 period, both Jaiprakash Associates and UltraTech reported an arbitration. However, the explanation for this dispute depends on who you consult. At its core, this arbitration is about the non-realization of redeemable preference shares (RPS) by UltraTech to Jaiprakash Associates in June 2017, worth Rs 1,000 crore. The RPS had been placed in escrow and were contingent on certain conditions related to the Dalla Super deal.
At the close of December 2022, Jaiprakash Associates announced an enterprise value worth Rs 5,666 crore for a larger deal involving Dalmia Cement. This was followed by the signing of definitive agreements in April. In an effort to exercise due diligence, Dalmia Bharat is executing the agreement in three stages with the third one including Dalla assets.
The Dalla asset has been gaining attention due to its limestone reserves. In a March 2023 report, Asian Markets Securities commented that without Super Dalla complex UltraTech Cement cannot set up additional clinker capacity in Uttar Pradesh. Their argument is echoed by other analysts who deem the deal essential for Dalmia Cement.
Uttam Kumar Srimal of Axis Securities noted that it would aid the company in attaining higher cement production from the central region, given that most of the assets involved are located in this area, though the situation remains uncertain pending a final verdict.
* Image for representation purpose only
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