The Jaiprakash Associates (JP Associates) scrip lost nearly 3% on Tuesday to its lowest level in nine-and-a-half years after research and ratings agency Credit Analysis and Research (Care) downgraded the company’s bank loan facilities as well as non-convertible debentures (NCDs).
Care downgraded JP Associates’ long-term bank facilities by three notches to Care BBB-, short-term bank facilities by one notch to A3, and long-term NCDs by three notches to Care BBB-.
JP Associates, in a stock exchange filing on Monday, said: “The rating committee of Care has revised the ratings on the basis of a review of the operational and financial performance of the company.”
The stock closed at R23.45, down 2.90% from the previous close amid hefty volumes. The counter lost 4.55% intraday to lows of R23.05 – the level last seen in July of 2005. More than 3.39 crore shares exchanged hands on BSE and NSE as against an average 3.17 crore shares in the past 10 sessions. Shares have lost 73.9% from the 52-week high of R89.85. The stock is down 9.1% from the all-time high of R340 in December 2007.
Nine out of 25 brokerages have a ‘buy’ rating on the stock, but concerns over high debt have resulted in bearish views on the stock. JP Associates’ consolidated debt stood at R70,400 crore as at the end of FY14.
Macquarie said the company’s earnings may continue to disappoint. “We believe that even after building in significantly higher cement business profitability and assuming most of the power plants are operational, ROE will remain subdued. The asset-based valuation has supported the stock price for a long time now. We believe a focus on earnings will lead to a re-rating,” Macquarie analyst Inderjeet Singh Bhatia said in his investor note.