Dec 07, 2012 03:54 PM IST | Source: CNBC-TV18

JP Asso mulls $160-170/tn valuation for cement stake sale

Manoj Gaur, Executive Chairman of Jaiprakash Associates said they undertook a call to pare its debt on a consolidated level by selling stake in one of its plants. However, they have still not considered a sale of its Andhra unit to Ultratech, informed Gaur.

Jaiprakash Associates is in talks with cement major Ultratech to buy stake in its Gujarat plant. Manoj Gaur, Executive Chairman of Jaiprakash Associates said they undertook a call to pare its debt on a consolidated level by selling stake in one of its plants. However, they have still not considered a sale of its Andhra unit to Ultratech, informed Gaur.

At the moment, valuations of USD 160 to 170 per tonne seems attractive levels for the stake sale, added Gaur. He also noted that the company will strike a deal only when the valuations look comfortable.

Moving ahead, Jaiprakash Associates is looking to start the Amelia coal mine in January 2013 and it will be commissioning its first unit of the Nigrie power plant in October 2013, said Gaur.

Here is the edited transcript of the interview on CNBC-TV18.

Q: Have you reached some kind of conclusion in terms of valuation for the Gujarat plant with Ultratech or is it likely to take more time, you have differences in opinion there?

A: You just talked about our disinvestment program. More than a year back we had taken a call that we would be reducing our debt and accordingly, various steps were initiated. Yes, I would say all these transactions take a little time and sometimes, it takes more time than what we anticipate it would take.

But, I do not think that there are a lot of differences in valuation. It is a question of the process and as soon as we would be finalizing the details, we would let you know.

Q: You are confirming though that Ultratech is the buyer in any potential deal that you strike, because Ultratech's last communication indicated that this was speculative talk?

A: I am telling you that the disinvestment program of our cement asset, as part of debt reduction is on and yes we are undoubtedly in talks with them.

Q: We hear that you are not in discussion with them for the Andhra plant. What is the resolution on that front? This is only for Gujarat, but you also had to sell your Andhra plant. On that have you made any progress at all? By when can we expect some conclusion?

A: I do not think that we require to conclusively do this and that. I think it is a matter of opportunity, because some people might take it as an opportunity and some may not take it as an opportunity. But, as far as Andhra is concerned, we had no discussions with them at all.

Q: As you indicated though the stated objective is to pare down the debt that the company has been ridden with in the last few years, how much immediate relief do you expect to see in terms of your debt levels?

A: I think this is something which will be in public domain in times to come. But, there is no desperation to do any deal just for the sake of it. If there are comfortable valuations, then it would definitely be done.


Q: What is comfort valuation for you? We have got a disparate range of prices at which deals have been done. The Holcim-ACC deal got done at USD 200 a tonne. Would you say USD 180 is comfort price for you? Anything below that would not tempt you?

A: No, I think we all know that those were different times. ACC-Holcim was a deal, Ambuja-Holcim was a deal and even down south, where people are a little more pessimistic than what they should be for a variety of reasons, not just for cement but because of other political reasons as well. However, there is a difference from what happened six years back. There is a difference in the exchange ratio of dollar-rupee.

In my opinion, for the opportunity in Gujarat, something around USD 160-170 a tonne at this present rate should be a reasonable valuation.

Q: Is it the best time though to be selling your cement assets? Realizations have improved. There was a 20 percent jump in terms of revenues from your cement side. EBIT performance also jumped quite significantly. Is this the best time to be ridding some of your cement assets?

A: As I speak, all the three companies Jaiprakash Associates, Jaiprakash Power, Jaypee Infra all have been doing well and in cement, our growth has been more than 20 percent better than any other player. I have reason to believe that we are obviously one of the best assets in the country, but at the same time on the corporate level, we have taken a call that we would be reducing debt and would improve on other indicators of the balance sheet.

At this moment, as I mentioned to you it is not something we need to do at any cost. If it is a comfortable valuation we would definitely take steps to reduce our debt.

Q: That decision of paring down debt by doing some asset sales has gone down pretty well with your investors. You just told me that it is not necessary that you sell your Andhra plant. Can you just give us a list of what assets you are looking to sell, maybe over the next six to nine months so that your investors get a sense of how much deleveraging they can be expecting from pure asset sales?

A: I appreciate your incisive style, but I would rather refrain myself from talking about my disinvestment program on a TV talk show. I am sure investors have the faith and we have demonstrated after executing some of the toughest projects in the country, in some of the most difficult circumstances.

The debt reduction plan is something which is not a very difficult program to achieve and I can tell you that we would exchange our thoughts as we make some progress.

Q: JP Power is one of the group stocks that have done extremely well ever since news of that forest clearance for the mine came. There is some concern though on whether or not you can move fast enough to get to that March 2014 target. Could you update us on what is happening with one of the key assets of JP Power?

A: I was listening to what Chanda Kochhar of ICICI Bank was talking about. She said that every power asset has its own strength and weakness and it is the vision of our Founder Shree Jaiprakashji that three hydropower plants are operating. It is reflected in the growth of revenue and also profitability.

As far as our thermal power asset is concerned, we have worked hard for the last five years in getting this coal block clear and I can tell you that we will be starting our coal mine sometime in January 2013. The Nigrie thermal power plant which is a 1320 MW thermal power plant and is 50 km from this coal block is in a very advanced stage of completion.
L&T, Mitsubishi are the suppliers for the boilers and turbines and almost Rs 5,000 crore has been spent out of Rs 9,000 crore allocated for it. We are on our way. We would be commissioning the first machine for the Nigrie thermal power plant, that is the 660 MW plant, sometimes in October 2013. The second machine will be commissioned around February 2014.

That is something which will not be a cause of concern for anybody. At the same time, the first machine for Bina which is the 500 MW plant with two machines of 250 MW each, is running satisfactorily since August 2012 and the second machine will be commissioned in January 2013.

Q: You said the process sometimes takes longer. For the Gujarat plant do you think it will get done by this calendar year, by January 1 or could it take longer for you to arrive at a final conclusion on that deal?

A: We have more than three weeks in this calendar year and I think we should have something very positive shortly. We require the good wishes of everyone.

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