Rs 12000 cr debt will be transferred to UltraTech: JP Associates

Jaiprakash Associates and UltraTech on Monday approved an amendment to the draft sale agreement that was signed in March this year to sell JP Associates cement business to the latter. UltraTech will buy JP’s cement five operating units, amounting to a capacity of 17.2 million tonnes per annum for Rs 16,189 crore and pay an additional Rs 470 crore for a grinding unit. JP Associates current debt stand's at Rs 28,000 crore alongwith Rs 2,000 crore in a subsidiary. Of this, Rs 12,000 crore will be transferred to UltraTech, says Rahul Kumar, Director & CFO of JP Associates. The company will have close to Rs 15,000-16,000 crore debt left post the deal. Post yesterday’s amendment, Kumar does not expect the lenders to invoke structural debt restructuring (SDR) guidelines. He is expecting to close the deal by 2016-end.The company will continue to look at options to pare its remaining debt. It still has 10 million tonnes of cement assets alongwith assets in power.Below is the verbatim transcript of Rahul Kumar’s interview with Sonia Shenoy & Anuj Singhal on CNBC-TV18.Anuj: Can you tell us what the delay was about and whether you have the lenders approval now in place for this deal?A: There was no delay, we had signed the definitive agreements with UltraTech Cement on March 31st and this was the next logical step, this scheme which is to be filed with the courts and the stock exchanges that has been prepared in the interim and was approved by the respective boards yesterday.Sonia: Can you tell us little bit about debt position now? What is the total debt on the books of Jaiprakash Associates and how much debt will you be transferring to UltraTech out of that enterprise value of around Rs 16,200 crore?A: Total debt in Jaiprakash Associates is closed to about Rs 28,000 and we have another Rs 2,000 crore debt in a subsidiary company and asset of which is also part of the entire portfolio, which will be divested in favour of UltraTech. So, against this debt of Rs 30,000 crore about Rs 12,000 crore of debt will get paid off or transferred to UltraTech. The remaining consideration will be used to pay off some other liabilities and fulfilling other obligations of the company.Anuj: Let me go back to my original question are lenders on board and what is the status with the strategic debt restructuring (SDR)?A: Lenders in the last meeting of the Joint Lender Forum (JLF) in the last week of the previous month had proposed to invoke the SDR guidelines keeping in view the time which is taking for the entire divestment process to get completed. That proposal in any case is subject to approval of all the lenders. Now this one more concrete step having been taken yesterday on the divestment should bring a lot of clarity around the value and timeline. I think post this there should really be no need to invoke the SDR.Anuj: The reason I asked this question is yesterday we had a couple of people raising question mark over the way this deal has been structured, the valuation looked a bit low. Could that have been the reason that the lenders got involved and invoked the SDR?A: In the current circumstances and given the spread of the portfolio, it is a fair value that one has got for the assets and it is fair for both sides. It is about a Rs 1,000 crore in terms of capacity which is by all standards a fair valuation.Anuj: A lot of people believe UltraTech is getting it way to cheap?A: I think that is their perception but like I said Rs 1,000 crore per million tonne of capacity including capacities in South India where you know the capacity utilisation is significantly lower than the rest of the country I think it is fair valuation.Sonia: Can you give us any rough timeline on when you hope to get the lenders approval because the fear is that in the whole consortium there are 40 lenders so it may take a lot of time to get the approval? Can you give us any kind of timeline?A: The lenders have been involved in this entire process throughout once we started last year. Personally, we don’t see any resistance from the lenders on this deal but like you said given the large number of lenders, it is of course going to take some time but it would happen concurrently along with the other approvals that we need to take. Together, I think we should be able to obtain all the approvals and complete the transaction in about nine month’s time from now, so maybe by the end of the financial year.Anuj: What is next in terms of your debt reduction drive? Is there anything left to monetise that you will be doing over the next say 9 to 12 months?A: The company still has a lot of assets including over 10 million tonne of cement capacity besides it has assets in the power and real estate portfolio. However, we have already taken a lot of initiatives on a proactive basis of disinvestment to deleverage. Now we would also be examining the brief and guidelines issued by the Reserve Bank of India (RBI) to make sure that we have the best possible solution to manage the total debt of Jaiprakash Associates also as well as the total group.Sonia: The total debt of Jaiprakash Associates now that Rs 12,000 crore will be transferred to UltraTech Cement will stand at just Rs 18,000 crore, is that correct?A: It is about close to Rs 16,000 -- I said Rs 28,000 is the total out of which about Rs 12,000 will get paid off or transferred so it will be left with about Rs 15,000-16,000 crore of debt.Sonia: Is there any internal target of how much debt you plan to reduce out of this Rs 16,000 crore over the next one year?A: No specific target or guideline but obviously the efforts are on to make sure that debt is at a manageable or sustainable level. So, we will see whether through the new guidelines or further disinvestment by at least over the next 9 to 12 months we bring the debt to that sustainable and manageable level.Sonia: You were telling my colleague about the kind of assets that you have. You also own some property some land in terms of hotels etc, so any plans to monetise that?A: No, nothing as of now.