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The F1 racetrack in New Delhi, built by Jaypee Group

India’s Jaiprakash Associates has agreed to sell its cement plants to UltraTech Cement, part of the Aditya Birla group, for the equivalent of $2.4bn in the latest deal by an indebted corporation to cut its borrowings by offloading assets.

UltraTech, consolidating its position as India’s biggest cement maker, said on Sunday that it had signed a binding memorandum of understanding with Jaiprakash to buy plants with a capacity of 22.4m tonnes per year in the states of Madhya Pradesh, Uttar Pradesh, Uttarakhand, Himachal Pradesh, Andhra Pradesh and Karnataka.

The Rs165bn deal, which includes debt, would increase UltraTech’s total annual capacity by a third to 90.7m tonnes and give the company access to some new markets — in eastern Uttar Pradesh, for example — just as the government of prime minister Narendra Modi is poised to announce increased infrastructure spending in the national budget on Monday.

The heavy and often unserviced debts of Indian infrastructure and industrial groups such as Jaiprakash have left the country’s banks with alarming levels of stressed assets, a problem that in turn has constrained new lending and crimped private investment.

Public sector banks, which account for most of India’s lending, classified 14 per cent of their assets as “stressed” — bad and restructured loans — at the end of September, and the government is obliged to recapitalise them regularly.

According to Credit Suisse, Jaiprakash has accumulated debts of Rs753bn ($10.9bn), had interest cover of zero in the latest quarter, and has failed for 11 consecutive quarters to earn enough to service its debts. Only Tata Steel and Vedanta Resources have bigger debt loads.

Jaiprakash is the flagship company of patriarch Jaiprakash Gaur and his Jaypee Group, which built hydropower dams in north India and the Yamuna Expressway from New Delhi to Agra, as well as the little-used Formula One racing track and a vast suburb of residential apartment blocks in Noida outside the capital.

Kumar Birla and his Aditya Birla group are among the few large conglomerates with a healthy appetite for new investments.

Both the Reserve Bank of India and the finance ministry are struggling to find ways to relieve the commercial banks of their bad assets and so promote new lending and investment, without allowing wealthy tycoons to walk away from their debts. Metals, including steel, and infrastructure account for most of the stressed assets.

Arvind Subramanian, the government’s chief economic adviser, said on Friday that India’s previous two-pronged problem of its budget and current account deficits had now been replaced by a “twin balance sheet challenge” affecting banks and the large corporations that have borrowed from them.

“Corporate profits are low while debts are rising, forcing firms to cut investment to preserve cash flow,” reported India’s latest annual economic survey. “This situation is not sustainable.”