JP Associates tanks 8%, UltraTech up 5% on Guj cement deal

Moneycontrol Bureau

Shares of JP Associates tanked 8 percent in early morning trade on Thursday, reacting to the sale of its Gujarat Cement unit announcement last evening.

Jaypee group sold its Gujarat cement unit to UltraTech Cement for Rs 3,800 crore. As part of the deal, UltraTech will pay Rs 150 crore in stock, Rs 1,650 crore in cash and assume debt worth Rs 2,000 crore.

Jaypee Group has said that the deal will help JP Associates reduce it's outstanding debt by 15 percent. Kumar Mangalam Birla, the chairman of Aditya Birla Group said that the deal, which has been in the making for the better part of a year, will increase UltraTech's production capacity significantly.

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Brokerages such as HSBC have retained their 'Underweight' rating on the stock stating that, while the deal will allow JP to buy more time for further asset sell offs, keeping hopes of a turnaround alive, the stock is unlikely to rerate meaningfully.

Meanwhile, UltraTech Cement was up 5 percent in early trade as analysts believe the deal is a long term positive.

At 10:54 hrs UltraTech Cement was quoting at Rs 1,756.50, up Rs 24.20, or 1.40 percent on the BSE. Jaiprakash Associates was at Rs 40.45, down Rs 2.95, or 6.80 percent.