Jaiprakash Associates, a company in which Rakesh Jhunjhunwalal holds more than 1%, maybe a debt-heavy company but the shares have returned a staggering 134% in the year so far. N Jayakumar, MD of Prime Securities told CNBC TV18, that the beleaguered Jaypee Group company has a lot more of assets than debt.
As of March 2017, Jaiprakash Associates had a total debt of Rs 30,188 crore according to company filling at the exchanges. In June this year, UltraTech Cement closed the acquisition of cement plants of Jaiprakash Associates for Rs 16,189 crore. According to news reports, as part of the deal, Rs12,000 crore of loans on the books of Jaiprakash Associates will move to UltraTech. From being classified as a non-performing asset (NPA), the debt will now be upgraded to AAA status (the highest credit quality).
Jaiprakash Associates shares spiked 15% in a single day, after the Indian investment maestro Rakesh Jhunjhunwala bought over 1% stake in the company in the April-June quarter. According to the news reports, Rakesh Jhunjhunwala’s total holding is worth Rs 57.5 crore. Rakesh Jhunjhunwala has picked up 2.5 crore shares in Jaiprakash Associates which accounts for 1.03% of the shareholding in the company, however, it is not known whether Jhunjhunwala owned any stake prior to the quarter as individual shareholding details show up in exchanges only if the total stake held is more than 1%.
Analysts say that the debt restructuring program of the company has attracted a lot of investor interest, especially after the completion of two crucial deals cement sale to UltraTech for Rs 16,200 crore and the Rs 13,000-crore land bank arrangement with the bankers. “After the completion of these two deals, JAL’s debt would be around Rs 6,000 crore, down from over Rs 30,000 crore at the end of March.The transaction with UltraTech is the country’s largest divestment in cement,” Manoj Gaur, the executive chairman of Jaiprakash Associates said after the deal.
“In case of Jaiprakash, the debt on the books is pretty high. There has been a lot of positive news in terms of selling of assets as well as monetisation on the Noida area with now a new airport coming up near Noida. So if those kinds of news flow continue, then there may be some respite for the shares,” Abhimanyu Sofat, VP-Research, IIFL, told ET Now before the announcement of the deal in July this year.
Jaiprakash Associates is a reasonably diversified conglomerate with interests in engineering & construction, power, hospitality, roads & highways, IT, sports, etc was brought down by its real estate business following the burst of the housing bubble in 2008 and was further weakened due to considerable pressure on its cement business as well. The pause in the sale of its housing properties led to the company getting stuck in a vicious cycle of revenue loss, lack of funds, projects stuck midway, and failed debt repayments leading to further shortage of financing.