Italian cement maker Italcementi denied it was in talks to buy a cement plant owned by Jaiprakash Associates as part of plans to expand in India.
Two sources with direct knowledge of the situation said on Friday Italcementi was in talks to bid for one of the two cement plants owned by Jaiprakash in a deal worth about $500 million.
In the first quarter, India accounted for 6 percent of revenues at debt-laden Italcementi, which is being reorganised as sales are dragged lower in Europe by the economic downturn.
"Italcementi denies having any talks under way with Jaiprakash Associates in India, even though we confirm the interest of the group in evaluating any opportunities for growth in the country," an Italcementi spokesman told Reuters.
Jaiprakash plans to raise up to $1.6 billion from selling the two cement plants in western Gujarat and southern Andhra Pradesh states to pay down part of its $8 billion debt.
According to one of the sources, Italcementi, whose India unit is one of the top producers in the southern region, is likely to offer about $100 per tonne for the factory in Andhra Pradesh, which has the capacity to produce 5 million tonnes of cement a year.
Jaiprakash - which has interests in cement, construction, real estate and hospitality - is seeking about $150 million per tonne for the two plants, the sources said.
The sources declined to be named as they are not authorised to speak to media. Jaiprakash declined to comment.
Zuari Cement, Italcementi's wholly owned Indian unit, increased its annual production capacity to about 6 million tonnes in 2010 from 500,000 tonnes in 1995, according to the company's website.
Irish building materials group CRH and UltraTech , India's No.1 cement maker and part of the diversified Aditya Birla Group, are also in the race to buy the Jaiprakash cement plants, a source said last month.
UltraTech, which has an annual capacity of 52 million tonnes, is interested in buying only the Gujarat plant, while CRH, which has a 50 percent stake in another cement plant in Andhra Pradesh, is looking to buy both, the source said.
Jaiprakash's approximately $355 million worth of dollar bonds are due on September 12, and the company will have to redeem or restructure them since the price at which the bonds can be converted into equity is sharply higher than the current value.
Shares in Jaiprakash, whose standalone net profit dropped 24 percent in the June quarter, fell 2.5 percent to 73.10 rupees on Friday, while the dollar bonds have a conversion price of 165.17 rupees a share.
Analysts said Jaiprakash could use some of the proceeds from the cement plant sale to redeem the convertible bonds, as the company's high debt pile had made it tough to raise fresh funds.