Even as it hopes to deleverage its balance sheet by selling assets, the debt-laden Jaypee Infratech, developer of the Yamuna Expressway Project, is looking to get R10,300 crore of loans refinanced under Reserve Bank of India’s (RBI) 5/25 scheme, bankers close to the development told FE.
The company is among several other firms that are seeking more lenient repayment terms from bankers since cash flows from their projects have been under pressure. FE had earlier reported that borrowings of Essar Steel and Adani Power may be refinanced.
Bankers say that Jaypee Infratech is also hoping to sell some parcels of land to pare debt. The company had total land reserves of approximately 6,092.79 acres, as on June 30, 2014, of which it has sold 100.99 million square feet of the permissible developable area in Noida, Mirzapur and Agra. The combined debt of three listed firms of the diversified infrastructure conglomerate Jaypee Group — Jaiprakash Associates, Jaiprakash Power Ventures and Jaypee Infratech — stood at over R57,000 crore in 2013-14.
The 5/25 scheme offers companies easier loan repayment schedules and additional financing in some instances. Banks also benefit as they can avoid classifying such loans of companies that may be facing a cash crunch as non-performing assets.
From April 2015, the option of ‘restructuring’ stressed assets and categorising them as standard loans under the CDR (corporate debt restructuring) cell is no longer available to banks with the RBI having withdrawn the forbearance. While the central bank had earlier insisted that a certain number of new lenders must participate in any refinancing that is no longer a condition.
Jaypee Infratech has a debt of close to R8,300 crore with a debt-equity ratio of 1.39. The company’s performance has been under pressure with net profit for 2013-14 dropping 132% to R293 crore and revenues staying virtually flat at R3,318.7 crore. For the first nine months of FY15, revenues fell 5% to R2,424 crore and the profit by 10% to R259 crore.
In an non-convertible debentures (NCD) prospectus dated September 2014, the company said, “We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt facilities, either upon maturity or if accelerated upon an event of default, or that we would be able to refinance or restructure the payments on those debt facilities.” The company managed to raise R200 crore through NCDs in December 2014, according to Bloomberg data.
Jaypee Infratech did not respond to phone calls made to the company’s offices in Noida nor to email questions sent by FE.
The group’s flagship company, Jaiprakash Associates (JAL), had a net debt of R27,267.9 crore at the end of FY14. In a concerted effort to reduce debt, the company sold its two cement plants to UltraTech Cement for R5,400 crore in December 2014. Further, the company also offloaded two hydropower plants to JSW Energy for R9,700 crore. The JSW deal followed the collapse of talks with Abu Dhabi National Energy in July 2014 and with Reliance Power in September 2014.
Jaypee Infratech was incorporated on April 5, 2007, by parent company Jaypee Group as a special purpose vehicle (SPV) for implementation, operation, and maintenance of the 165-km six-lane access-controlled Yamuna Expressway connecting Noida and Agra. The SPV also undertakes the development of 6,175 acres at five locations along the expressway for commercial, industrial, institutional, residential and recreational purposes.
The Jaypee Group has a concession agreement with the Yamuna Expressway Industrial Development to operate and maintain Yamuna Expressway for a term of 36 years, after which the expressway will be transferred to the government of Uttar Pradesh. Jaypee has real estate development rights for the remaining land for 90 years. This consists of five parcels of real estate located along the expressway.
Jaypee Infratech’s business model is based on revenues from toll collections on the Yamuna Expressway for a 36-year concession period. The company also sells real estate either in the form of constructed properties or developed and undeveloped land leased under the concession agreement. The company has launched five real estate projects under the brand “Jaypee Greens” brand in Noida.
“The low real estate demand has meant that apart from the Noida land parcel, the other real estate development projects have been slow to take off. The toll income earned from the expressway will not be enough to service loans going ahead,” said an analyst at a domestic brokerage.
The analyst added that the prospects for the company look a little muted over the next one to two years as several of the company’s development projects are located in interior locations, where demand for real estate will not be very high.
A November 2014 Motilal Oswal report on Jaypee Infratech noted that weak market conditions have hurt operations. The uptick in market sentiment has not yet translated to Jaypee Infratech’s core operations, “with momentum remaining slow in newer land parcels”, the report noted. It added that the near-term operational performance, which is largely dependent on the success of monetisation in one of the parcels in Noida and Agra, could disappoint if the real demand growth surrounding the Yamuna Expressway gets delayed due to slow economic activity.