ACQUISITION BETWEEN ULTRATECH

AND JAYPEEE
Group No. - 05

NAMES ROLL NO

BHAVISHA PRAJAPATI 32

SACHIN RAUT 58

YATIN SALIAN 36

KINJAL BHADRESHWARA 04

TEJAL GOVEKAR 09

NEHA 48

SANKET PARAB 26

Date of Presentation 21st September, 2019

ULTRATECH - JAYPEE
 OVERVIEW OF ULTRA TECH
INCORPORATION :-
1) In 1980s, Grasim’s cement plant at Jawad in Madhya Pradesh.
2) In 2001-2003, Acquired the stake in L & T Cement Ltd.
3) In 2004, Name changed to Ultra tech Cement as a result of
demerger between both the company.
PRODUCT:-
1)Grey cement:- Ordinary Portland cement, Portland Blast Furnace Sag cement, Portland
Pozzalana Cement
2)White cement :- Wall care putty & other white cement based product.
3) Concrete & other product:- Ready Mix Concrete(RMC),Aerated autoclave Concrete(AAC
Blocks),Waterproofing Soultion, Plasterting Solution etc
PARENT COMPANY & SUBSIDIARIES COMPANY:-
1) Parent Company :- Aditya Birla Group.
2) Subsidiaries Company:- Dakshin Cement Limited, harish Cement Limited, Gotan limestone
Khauj Udyog Private Limited, Bhagwati Limestone Company Private Limited, Ultratech Cement
 OVERVIEW OF ULTRA TECH

Lanka (Pvt) Ltd.,UltraTech Cement Middle East Investments Limited, PT UltraTech Mining
Indonesia & PT UltraTech Investment Indonesia.
PLANTS :-
1) 20 Integrated Plants
2) 1 white Cement plant
3) 25 Grinding Units
4) 7 Terminals
EXPORT :-
1) Over 2.5 Million tonnes Per annum.
2) Countries like Africa, Europe & middle East.
CEMENT CAPACITY :-
1) 54 MTPA (51 MTPA in India + 3 MTPA overseas)
 OVERVIEW OF JAYPEE CEMENT
HIERARCHY
JAYPEE GROUP

JAIPRAKASH ASSOCIATES LTD

[JAL] - Parent Company

JAYPEE CEMENT CORP. LTD

[JCCL]- Wholly Owned Company

Andhra Pradesh Unit Gujarat Cement Unit

PRODUCT:- Special Blend of portland pozzolana Cement.

 OVERVIEW OF ACQUISITION
Acquiring Company :- UltraTech Cement Ltd.

Target Company :- Jaypee Cement Corporation Limited.

Consideration :- Total consideration 3800 Crore.

1) Take over of debts Rs 3650 Crore.
2) Issue of equity Worth Rs 150 Crore.

Main reason of For Ultratech Cement

Acquisition:- 1) Expansion of Business
For Jaypee Cement
1) To Reduce its Debts.
 Debt retained
(Long Term Debt Fig. in Cr.)

UltraTech Jaiprakash
Year Cement Associates
Ltd Limited
Mar-15 6512 24126
Mar-16 5007 22546
Mar-17 5216 18396
Mar-18 16566 5573
Mar-19 17582 5309

Debt of 10,189 Cr transferred to UTCL from JAL & JCCL

 Leverage
(Fig. in Cr.)
Company Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Net Worth 18858 21632 23941 25923 27948

UltraTech
Long Term Debt 6512 5007 5216 16566 17582
Cement Ltd
Debt Equity Ratio 0.3 : 1 0.2 : 1 0.2 : 1 0.6 : 1 0.6 : 1

Jaiprakash Net Worth 18396 11924 7427 10306 8753

Associates Long Term Debt 24126 22546 18396 5573 5309
Limited Debt Equity Ratio 1.3 : 1 1.9 : 1 2.5 : 1 0.5 : 1 0.6 : 1

• Debt to Equity of UTCL is around the average although it has increased post acquisition to some extend and
appears to be the strong position in handling debt for growth of the company in the business activities

• whereas Debt to Equity of JAL was above average before disinvestment which appears to be highly
leveraged in 2017. The ratio has reduced post disinvestment
 Growth
(Fig. in Cr.)
Ultra Tech Cement Jaiprakash Associates
Year Ltd Limited
Gross Sales % Gth Gross Sales % Gth
Mar-15 25990 11674
Mar-16 26947 4% 9170 -21%
Mar-17 27162 1% 6616 -28%
Mar-18 30252 11% 6143 -7%
Mar-19 35704 18% 6833 11%
CAGR 15-19 8% -13%

• Gross Sales of UTCL had been grown below 5% pre-acquisition but with help of inorganic growth they
were able to reach at 8% CAGR during previous 5 years.

• W.r.t. Sales Turnover, the size of UTCL is 2.5 times more of JAL, so considerable small size of JAL, made
it as Target Company for Horizontal combination in Cement Business.
 Profitability
(Fig. in Cr.)

Company Year 2015 2016 2017 2018 2019

Net Sales 22927 23709 23891 29358 35704

Ultra Tech EBITDA 4567 5107 5629 6483 6992
Cement Ltd
Profit Margin 20% 22% 24% 22% 20%

Jaiprakash Net Sales 11050 8656 6219 6049 6833

Associates EBITDA 2310 986 80 1211 769
Limited Profit Margin 21% 11% 1% 20% 11%

Profitability is constant in UTCL even the post merger whereas in JAL it is uneven growth due to
operational inefficiencies.
 Earning per Share

Jaiprakash Associates Limited UltraTech Cement Ltd

Particulars Mar'15 Mar'16 Mar'17 Mar'18 Mar'19 Particulars Mar'15 Mar'16 Mar'17 Mar'18 Mar'19
EBITDA 2310.32 986.46 80.37 1210.73 768.91 EBITDA 4566.81 5107.26 5628.9 6477.98 6991.72

Depreciation 948.89 913.71 878.2 506.75 395.35 Depreciation 1133.11 1297.04 1267.87 1763.56 2010.27

EBIT 1361.43 72.75 -797.83 703.98 373.56 EBIT 3433.7 3810.22 4361.03 4714.42 4981.45

Interest 3436.84 3757.24 3567.28 967.54 723.8 Interest 547.45 511.66 571.39 1186.3 1419.15

EBT -2075.41 -3684.49 -4365.11 -263.56 -350.24 EBT 2886.25 3298.56 3789.64 3528.12 3562.3

Taxes -553.25 -1168.86 -483.88 0 0 Taxes 871.52 928.4 1148.23 1070.56 1106.58
Profit and Loss for Profit and Loss for the
-1522.16 -2515.63 -3881.23 -263.56 -350.24 2014.73 2370.16 2641.41 2457.56 2455.72
the Year Year

EPS - Annualised (Rs) -5.26 -11.6 -17.93 1.45 -3.18 EPS - Annualised (Rs) 73.42 86.37 95.72 81.25 89.42
 Stock Price

Share price is consistently growing in UTCL even after post acquisition it increased by 24% and is consistent whereas
in JAL it is uneven at every stage during these 5 years due to worst financial position in market
 Sequence of the merger
March 16 - Debt of Rs. 58250 crores
March 16 - In the board meeting, announcement of merger was done for Rs 16189
crores
May 16 - Ultratech’s shareholders and creditors meeting was held
June 16 - Agreed to pay Rs. 16189 crores and additional Rs. 470 crores
June 16 - Jaypee made a default of Rs. 4460 crores
Eagerness of JSW in the deal
 Sequence of the merger ( Contd)..

Approval from shareholder, creditors, high court and other regulatory approvals

Aug 16 - Approval from Competition Commision of India

March 17 - Approval from National Law Company Tribunal
July 17 - Deal was closed by Kumar Mangalam Birla
Funding calculation -
Rs. 3000 cr in cash
Balance on loan at 8% and equity
 Impact of the deal on UltraTech

• Acquisition of 21.2 mtpa capacity, installed capacity of UltraTech will increase to

85 mtpa. Its 28% increase of the capacity

•Meet the need of UltraTech to enhance capacity in Gujarat.

•Existing plant of UltraTech in Saurashtra, Gujarat is presently operating at 95%

•Increase the capacity utilization at the JCCL plants from 62% to 85% in the coming
years.
 Impact of the deal on UltraTech ( Contd)..
•Expecting synergy gain of approx. Rs 30-40 core a year.

•JCCL will help UltraTech cut its logistics expenses.

•Around 5479 hectares of land and 500MT of mining reserves.

•High quality recently commissioned cement plant with latest technology.

Benefit from the tax perspective.
 Impact of the deal on Jaypee Group
•Capacity will come down to 33 mtpa

•Third-largest cement manufacturer in the country after Aditya Birla

Group and Holcim Group.

•The deal will help Jaypee Group pare its mounting debt of Rs 55,000
crore by around Rs 3650 crore.
 Market Reaction
UltraTech Cement Ltd

Market of had suddenly improved post merger after Jul 2017 and consistently growing

Buying out Jaypee’s 21.2 - million tonnes of cement capacity will help the Aditya Birla flagship to improve its
market share in key north, central and south zones where currently its presence is either weak or non-
existent, without coming into the crosshairs of competition regulators over market dominance.
 Market Reaction

Jaiprakash Associates Limited

Stock prices of JAL had increased post merger after Jul 2017 and but later on it had declined

Shares of Jaypee Group companies such as Jaiprakash (JP) Associates, Jaypee Infratech and Jaiprakash
Power Ventures have raised up to 16% in an otherwise range bound market after UltraTech Cement has
signed the definitive agreement to buy JP Associate’s 21.2 million tonnes per annum (mtpa) Capacity.
 Reasons of Acquisition
STRENGTHENING MARKET LEADERSHIP
Ultratech wants to expand their new plans in Karnataka, Rajasthan, and Madhya Pradesh and
Ultratech capacity excepted to touch 70 mtpa.

STRONGER PRODUCTION
The deal will give the strong production in Gujarat to serve the local market.

STRENGTHENING COASTAL FOOTPRINT

Enable them to cater to other regions as well as exports.

INCREASE THE CEMENT CAPACITY

Ultratech group working on increasing its cement capacity
 Reasons of Acquisition ( Contd)..
 UNREALIZED DEPRECIATION AND TAX SET-OFF:
Ultratech will also benefit from the Rs.350-380 crores unrealized depreciation and
tax set-off against the losses incurred by Jaypee Cement.

 FOR COMPETITIVE POSITIONING:

This acquisition will not dilute the ranking for the company but it seems to
provide advantage to Ultratech in competitive positioning.

 RECOVERY OF DEBT:
Jaypee Group, which is sitting on a mountain of debt i.e. over Rs. 55,000 crores
(including around Rs. 23,000 crores of JAL), is targeting to reduce its debt.
 CONCLUSION

● Current status - Post Merger

● Advantage
● Re-Branding
● Post merger Investment plans
● Bankers relieved
● Debt-to-equity ratio
● Closure of Merger Deal
 ULTRATECH PHILOSOPHY
“Is to pursue growth organically as well as inorganically in a calibrated manner
financed by a prudent combination of debt and equity.”