Stocks of several highly-leveraged realty, power and infra companies crashed on Wednesday amid speculation a couple of them were on the verge of a default, reports fe Bureau in Mumbai. Shares of Unitech and Jaiprakash Associates came under heavy selling pressure and by afternoon were trading down by 52% and 32%, respectively.
Both companies issued media releases denying any default on loan obligations, clarifying the reports were “false and misleading”. The plunge, they said, could not be attributed to “any development linked to the performance of the company or the action of any of our esteemed lenders”. However, Unitech closed the session down 35% at Rs 8.70 while Jaiprakash Associates ended at R3.40, lower by 20.7%, at R13.05. The sudden crash in these scrips generated margin calls in derivatives trades, which exacerbated the situation. Data from the National Stock Exchange show several block deals in Unitech with close to 10.3 crore shares or 3.94 % of the equity being sold in the range of Rs 7.53 to Rs 8.24 per share.
Shares of firms like Suzlon Energy, Lanco Infratech, and Punj Lloyd, which have a higher net debt than market capitalisation, also lost 5% to 9%.
In FY15, Jaiprakash Associates reported a consolidated net loss of Rs 1,727 crore on account of lower revenues in its cement and constructions divisions. High interest costs on a staggering net debt of Rs 59,197 crore weighed on the bottom line. In FY14, company’s net loss stood at Rs 825 crore. The interest outgo for FY15 grew by 19% to Rs 7,229 crore while Ebitda for the year was Rs 6,000 crore. Kotak Institutional Equities notes the firm’s interest coverage ratio remains uncomfortably poor and that it need to continue with its asset sale strategy to de-leverage the balance sheet.
Last year, on two occasions, the stock had come under intense selling pressure. In early September, the stock fell after Jaypee Infra Ventures, a promoter entity, sold a substantial stake in the company while in late December, rumours of delayed repayments to investors of its fixed deposits also weighed on the stock, taking it to a more than nine-year low. Last month FE reported that Jaypee Infratech, a subsidiary of JP Associates, is looking to refinance Rs 10,300 crore of loans under Reserve Bank of India’s 5/25 scheme.