Ultratech and JP stocks surge

Ultratech Cement hit a new 52-week high today at Rs.3600 though it has since then slipped into the red now. On the other hand, the JP group stocks are all holding strong. JP Associates, JP Infra and JP Power remain the top three gainers on the BSE since morning.

This surge is obviously in celebration of both the companies – JP Associates and Ultratech inking the deal for sale of the former’s cement unit. Ultratech will buy this unit from JP Associates for Rs.16,189 crore.

With this, Ultratech gets a cement plant of 21.1 MTPA capacity. Earlier, the enterprise value had been calculated at Rs.15,900 crore, which did not include the 1.2 MTPA plant at Karnataka. Now an additional sum of Rs.470 crore is being paid (over and above Rs.16,189 crore) to JP for completion of grinding unit which is under implementation.

This deal is expected to be completed with the next 12 months. Post this, JP group will be left with a cement making capacity of 10.6 MTPA and plants located in MP, UP, AP and Karnataka. Ultratech’s cement capacity would stands increased to 91.1 mtpa.

The debt of JP Associates currently stands at Rs.28,000 crore and of this Rs.12,000 crore debt will be transferred to Ultratech, leaving a debt of Rs.16,000 crore with JP Associates. The word on the street is that it might looking at selling the balance 10.6 MTPA cement capacity and bring down its debt considerably.

This also means that the lenders will no longer invoke the SDR in JP Associates.