Jaypee-UltraTech cement sale in limbo as banks invoke SDR

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With the lenders invoking the strategic debt restructuring (SDR) option against debt-laden Japyee Group earlier this week, sale of its cement business to UltraTech for Rs 15,900 crore has come under a cloud.

Jaiprakash Associates, the flagship of the Group, owes over Rs 30,000 crore to a consortium of lenders led by ICICI Bank and the sale of its 21.2-million tonne cement business is very crucial for the promoters (the Gaur family) to continue in business.

The Jaypee Group had a consolidated debt of Rs 58,250 crore as of March 2016.

"The Jaypee Group is already an NPA (non-performing asset) for SBI. The lenders have already invoked the SDR. The JLF (joint lenders forum) will shortly consider the cement sale. Our steering committee which will look into the Jaypee- UltraTech deal whether to accept it or not," a senior SBI official told reporters here.

The country's largest lender has an exposure of Rs 7,000 crore to JP Associates, which for long has been struggling to service its debt after its infra, led by roads and power business, had cash flow issues.

The company sold most of its power plants over the past two years and the sale of the cement business got stuck due to restrictions on mine leasing.

But the recent modifications in the Mines and Minerals (Development and Regulations) Act have paved the way for the company to transfer its coals mines along with the cement plants, which led to the Birlas agreeing to snap up the cement business late March.

The SBI official further said the lenders invoked the SDR, which allows banks to convert their loans into equity, after their request to treat this account as a standard one was turned down by the Reserve Bank earlier this week.

The banks were seeking a special treatment for the account, citing the ongoing sale of the cement business.

The regulator reportedly asked the lenders to make provisions for the account in the June quarter and write back the provisions into profit once the cement business sale is completed.

If the lenders convert their loans into equity, the company will be majority owned by banks.

Following this, the Aditya Birla Group firm UltraTech, which in late March agreed to buy the cement business of the Group for Rs 15,900 crore, has reportedly written to the Gaurs questioning non-disclosure of the development (invoking SDR by banks) to them as well as to the regulators and exchanges.

When contacted, a Birla Group spokesperson denied any such development, saying "our transaction with Jaiprakash Associates is on course".