ULTRATECH ACQUISITION OF JAYPEE CEMENT

CORPORATION
 CEMENT SECTOR

• The Indian cement industry, since liberalization in 1992, has shown enormous
growth with development activities buzzing around the sector.
• After the pricing de-control in 1989 and with the economic liberalization adding
momentum, the Indian cement industry has been expanding at a very brisk
pace.
• The speed of growth has helped India to become second largest cement
producer in the world.
 INTRODUCTION TO THE COMPANIES

• Ultratech-
 Largest manufacturer of grey cement in India
 Leading cement producer globally

• Jaypee Cement Corporation-

 Third largest cement producer in the country
 Largest private sector hydropower company
 INTRODUCTION TO THE DEAL

• Acquisition of Gujarat unit of Jaypee Cement Corporation by Ultratech for Rs.

3,800 crores.
• Ultratech took over a debt of Rs.3,650 crores.

• Acquisition raised Ultratech’s capacity to 59 million tonnes.

• The deal helped Jaypee Group reduce its mounting debt of Rs.55,000 crore by
around Rs.3,650 crore.
• It further strengthened the market leadership of Ultratech in the Indian cement
sector.
 TYPE OF ACQUISITION

• Horizontal Acquisition is the type of acquisition that takes place between two

companies operating in the same industry. These companies are usually competitors
and merge to gain higher market power and economies of scale. It helps to create
larger customer base, reducing employment cost.

• Ultratech and Jaypee Cement Corporation entered into an horizontal acquisition.

 ACQUISITION MOTIVES

• Gain Market Access:

This merger helped UltraTech enter into the high growth markets of India. With this
deal, UltraTech had its presence across regions (except North East).The acquisition
gave UltraTech access to newer markets of Satna (11.4 MT) and coastal Andhra
Pradesh (5 MT).

• Benefit from Efficient Gains in the Form of Synergy:

The operations of UltraTech was strengthened by the consequent technological
upgradation and enhancement in capacity, post-acquisition. It lead to create synergies
in manufacturing, distribution and logistics area of the company. Economies of scale
and reduced lead time to markets was achieved.
 SYNERGIES GAIN & ADDED VALUE

• Operational Synergy:
1. Geographic market expansion- post acquisition 4th largest cement player globally in
terms of capacity (excluding Chinese players) 93MTPA
2. Enabling UltraTech's entry and reach into the high growth markets of India where it
needed greater reinforcement (access to UP, MP and Coastal Andhra markets)

• Cost Synergy:
1. The acquired capacity has sufficient reserves of limestone (key raw material for
cement) and also have combined captive power capacity of 325 MW which is likely
to result in saving operating cost and hence boosting the EBITDA per tonne in the
medium to long-term.
2. Manufacturing, distribution and logistics will offer many advantages
3.Economies of scale and reduced lead-time to market will be achieved
• Financial Synergy:
1. UltraTech expects the newly acquired assets to become earnings per share accretive
in the next eight quarters
2. UltraTech will also benefit from the tax perspective on account of carried forward
business losses and unabsorbed depreciation of the acquired unit
 SOURCE

• http://www.indiancementreview.com/News.aspx?nId=J8ixkTjaNhZplubyBKowbA==
(Cement Sector Slide)
• https://economictimes.indiatimes.com/industry/indl-goods/svs/cement/ultratech-compl
etes-acquisition-of-jaiprakash-group-cement-business/articleshow/59372842.cms?from=
mdr
(Introduction to the company and deal)
• https://www.wallstreetmojo.com/horizontal-integration-examples/ (Type of acquisition)

• http://www.indiancementreview.com/News.aspx?nId=J8ixkTjaNhZplubyBKowbA==
(Acquisition Motives)
• https://www.livemint.com/Companies/VQ5pHRyLvOlZd81yJILCTL/Jaypee-UltraTech-lookin
g-to-cement-Rs16189-crore-deal-by-J.html
(Synergies Gain & added values)