Displaying items by tag: Mines & Minerals (Development & Regulation) Act

India: The cabinet has cleared an amendment in a mining law to permit the transfer of captive mines granted on discretion. Major deals between cement companies including UltraTech, Reliance Cements and Lafarge have been affected because the Mines and Minerals (Development and Regulation) (MMDR) Amendment Act, 2015 restricts the transfer of mining leases to auctioned mines only. The amendment will now need approval by the Indian parliament to become law.

In January 2016, the government proposed the amendment to "spur merger and acquisitions in the mining sector and help in checking the stressed and non-performing assets of banks by allowing them to liquidate assets where a firm or its captive mining lease is mortgaged.”

India: UltraTech will create a separate corporate structure for the cement assets of Jaiprakash Associates it has agreed to buy if a key mining law is not amended by June 2016. An amendment to the Mines & Minerals (Development & Regulation) (MMDR) Act in 2015 suggested that the transfer of mining rights could only be passed by auction, leading to delays in several mergers and acquisitions in the cement industry.

"We have considered both scenarios. If the amendment goes through, it is a clear asset purchase. If not, there are structures we have in mind, with which we will be able to do the deal," said Atul Daga, chief financial officer of UltraTech to the Hindustan Times. He added that the deal is not entirely linked to the mining amendment. "The agreement is for specific assets. It's more about how you structure it. I do not want to comment on the structure until the closure of the definitive agreement."

If the MMDR Act amendment is not approved, Jaiprakash Associates will need to create a separate entity out of the assets being sold to UltraTech, for the deal to proceed. However, it will refinance Jaiprakash's borrowings at lower rates if the MMRDA amendments get approved.

UltraTech announced in late February 2016 that it was purchasing the majority of Jaiprakash Associates’ 22.4Mt/yr cement portfolio instead for US$2.4bn.