UltraTech Cement ltd on Sunday announced acquisition of debt-ridden JP Group’s cement plants for Rs16,500 crore, making it the biggest deal in the sector.

UltraTech Cement said it entered into a binding Memorandum of Understanding with Jaiprakash Associates limited for the acquisition of its identified cement plants having total cement capacity of 22.4 MTPA (million tons per annum) situated in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka. Under the deal, these plants have been valued at Rs16,500 crore.

The deal would further include a 4 MTPA plant under implementation at a cost of Rs470 crore, UltraTech said in a statement. A number of Indian and foreign players were said to have been in the race for these cement plants.

UltraTech said the assets will give it access to the newer markets of Satna, UP East, Himachal Pradesh and Coastal Andhra where it does not have a presence as of now.

“Upon consummation of the proposed transaction, the company’s cement capacity will stand augmented to 90.7 MTPA (current 68.3 MTPA),” it added.

The two groups have agreed to an enterprise value of Rs16,500 crore for the deal, which is subject to definitive agreements and necessary regulatory approvals, the statement added.

The new MoU follows calling off an earlier deal wherein UltraTech was to acquire two cement plants in Madhya Pradesh from Jaiprakash Associates, which has been selling its cement and power assets to pare debt and improve balance sheet.

JP Associates said in a separate statement that headwinds of the economy have impacted all companies which had borrowed to invest in brick-and-mortar segment, currently reeling under severe pressure.

The power sector is witnessing never-seen-before challenges with capacity utilisation and tariffs at all time lows.

It further said that Jaypee group has taken steps to deleverage its balance sheet through sale of two hydropower projects in HP, sale of cement assets in Gujarat, Jharkhand and Haryana, and also sale of wind power assets in Gujarat and Maharashtra.

In January 2015, JP Associates had signed an agreement with UltraTech to sell two of its MP-based cement plants. However, pending amendment to the MMDR Act, the proposed transaction ran into rough weatheIn pursuit of reducing debt, the group has now signed abinding MoU with UltraTech for part of its cement business comprising identified plants in UP, MP, HP, Uttarakhand, AP and Karnataka, and a grinding unit under implementation in UP.

“The enterprise value for the operating capacity of 18.4 MTPA has been agreed at Rs 16,500 crore. An additional amount of Rs 470 crore shall be paid by the purchaser for completion of the grinding unit under implementation,” it said.

“The group has taken these steps to effectively address the subject of debt reduction but notwithstanding Government’s focus on ease of doing business, JAl would be dependent on the regulatory framework, including the proposed amendment in the MMDRA, for different options available to it for consummating the proposed transaction expeditiously,” it added.

JAl’s Executive Chairman Manoj Gaur said that earlier proposed divestment of two cement plants in MP could not take place “for reasons not attributable to the company”, which was a matter of great concern.

“In the given situation, it has now been considered appropriate to divest a significant portion of the total cement capacity in favour of a company which is not only India’s largest cement player but also the first cement company in India to achieve the coveted 100 million tonne mark in the cement segment,” he said.

Gaur further said that Jaypee group would leverage its expertise in the fields of engineering and construction, real estate and project execution and such steps would “further cement its credentials of being a trust worthy organisation in the long run”.

Interestingly, last month Government said it will take views from the public, states and industry on amending the MMDR Act to include provisions allowing transfer of captive mines granted through procedures other than auction.

Mines Ministry has prepared the draft Mines and Minerals (Development and Regulation) (Amendment) Bill, 2016 to amend Mines and Minerals (Development and Regulation) Act, 1957.

As part of consultations, government invited suggestions from public, state governments, mining industry and entities concerned, on the draft Bill. The last date for sending comments and suggestions was January 26, 2016.

The transfer of captive mining leases, granted otherwise than through auction, would facilitate banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged.

The move will allow M&As worth billions of dollars in the domestic market, especially in the Cement sector where several such deals are stuck.