Recent Cement Mergers & Acquisitions May Go On Hold
The new Mining Act that has a clause that bars the transfer of mines that were not allotted via auctions. Prior to this new act, hundreds of mines had been allocated for captive use by industries in the past. However, under the new act, when these businesses change hands via mergers and acquisitions, it could be an issue if the captive mines linked to production capacities are not transferable as most of the M&A take place with the intent of transfer of the associated mining and mineral rights.
In the amended Mines & Minerals (Development & Regulation) Act 2015, Sub Section 6 of Sec 12A says that only mines which have been allocated through auctions can be transferred. "The transfer of mineral concessions shall be allowed only for concessions which are granted through auctions". But it is unclear if it covers historically allocated mines given via nominations or only ones in future. This ambiguity in the law makes it open to different interpretations. The core question here is "Does the new rules apply prospectively or retrospectively?".
This confusion directly impacts 2 major cement industry M&A of recent days. One, the takeover of Jaypee Group's cement plants in MP by KM Birla's Ultratech Cement which has been stuck for months on this issue. Two, the recent deal by Lafarge-Birla Corp. in which Birla Corp. part of the MP Birla Group is to take over 2 of Lafarge India's cement units.
Read more on Cement Mining and Mineral Rights here...
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