(Adds details from the news conference, management comments, background)
By Devidutta Tripathy and Aditi Shah
Sept 11 (Reuters) - India's Jaiprakash Associates Ltd has agreed to sell its cement plant in Gujarat state to UltraTech Cement Ltd for around 38 billion rupees ($594 million) including debt.
UltraTech, the country's largest cement maker by production capacity, will issue shares worth up to 1.5 billion rupees to Jaiprakash and assume debts of about 36.50 billion rupees , the companies said on Wednesday.
Jaiprakash Associates, which also has interests in power and infrastructure, has been trying to sell the plant for more than a year and was in talks with several potential buyers, including Ireland's CRH.
Including subsidiaries, Jaiprakash has total debts of 550 billion to 560 billion rupees which it plans to cut by 150 billion rupees by selling more assets including cement and power businesses this fiscal year ending next March, Executive Chairman Manoj Gaur said.
"The contraction in the economy has brought challenges to everyone," Gaur told reporters, after the company announced the sale of the cement unit. "Now we are focussed on debt reduction across all business."
Jaiprakash, which currently has a cement production capacity of 36.8 million tonnes, will remain the country's third largest producer, the company said in a statement.
Rising input and energy costs have been squeezing margins at cement companies, while demand remains a worry amid a weakening economy and high interest rates, which have slowed housing and infrastructure development in Asia's third-largest economy.
This has put pressure on cement makers, especially those with debt that has become expensive to service due to a sharp fall in the rupee against the dollar and high domestic interest rates, forcing some to sell assets.
Shriram EPC Ltd last month agreed to sell its stake in Sree Jayajothi Cements Ltd to My Home Industries Ltd, owned by CRH, for 14 billion rupees to reduce debt.
Production capacity at UltraTech, part of the $40-billion diversified Aditya Birla Group, will rise to 59 million tonnes after the acquisition of the 4.8 million tonnes Jaiprakash unit, said Kumar Mangalam Birla, the billionaire chairman of UltraTech.
"Despite the prevailing muted growth of the industry, we believe the long term fundamentals and growth prospects remain intact. We will add more capacities in the coming years," he said in a statement.
UltraTech plans to raise its capacity to 70 million tonnes by 2015, he said.
Jaiprakash and UltraTech expect their transaction, which is still subject to regulatory approvals, to close in seven to nine months.
Standard Chartered Plc advised both UltraTech and Jaiprakash, the companies said. ($1=63.9575 Indian rupees) (Writing by Sumeet Chatterjee; Editing by Greg Mahlich)