Mumbai: Jaiprakash Associates Ltd intends to sell Rs.10,000 crore worth of assets in 2014-15 to cut debt, after successfully divesting assets totalling Rs.15,000 crore in the six months ended 31 March.
The infrastructure firm wants to sell a cement factory, a thermal power plant, some of its real estate assets, and a part of its stake in the Yamuna Expressway, three people close to the development said on condition of anonymity.
It is looking to exit its cement joint venture with Steel Authority of India Ltd in Bhilai, Chhattisgarh, and is in talks with Aditya Birla Group’s Ultratech Cement Ltd, said one of the people. Jaiprakash Associates holds 74% in the plant capable of producing 2.2 metric tonnes of cement every year.
Ultratech declined to comment.
“The Jaypee Group is also in talks with NTPC Ltd to sell one of its thermal plants in Madhya Pradesh and Uttar Pradesh,” said the person cited earlier. “The group has also decided to partly sell its stake in the 165km Yamuna Expressway, which connects Noida and Agra.”
Emails sent to NTPC and the Jaypee Group did not elicit any response.
This fiscal year will see more asset sales, which will ease pressure from banks to repay borrowings, said a Jaypee Group executive, one of the three people cited.
Since September last year, Jayprakash Associates has sold assets worth Rs.15,000 crore, meeting its debt-reduction target for fiscal year ended 31 March.
Indebted firms have been selling assets to pare debt as economic growth in India has sputtered in recent times.
Videocon Group topped the list of asset sales in the last 9-10 months with Rs.14,450 crore, followed by the Jaypee Group with sales amounting to Rs.14,300 billion, according to an 11 March report by Standard Chartered Bank.
On 24 March, Jaiprakash Associates agreed to sell its stake in a cement joint venture in Jharkhand to Dalmia Cement (Bharat) Ltd for about Rs.690 crore. This put the Jaypee Group in the top slot in terms of debt reduction.
Indian companies have sold assets worth 13% of debt in the past two years and assets worth 12% of debt are on the block, the Standard Chartered report said. The debt of corporations account for 13.9% of the banking system’s loans, it said.
Jaiprakash Associates is also open to selling either of its thermal power plants in Uttar Pradesh and Madhya Pradesh. “Depending on the valuation we get for the thermal plants, we will decide which one to sell,” said the group executive.
Jaypee is building the first phase of a 1,200 megawatts (MW) thermal power plant in Bina, Madhya Pradesh. It is also implementing the second phase of a 3,300MW thermal power plant at Bara in Allahabad district of Uttar Pradesh. The first phase of a 1980MW plant is also under implementation in Bara, whereas coal linkages are being secured for the second phase.
The firm is in talks with NTPC to sell one of the two plants.
“NTPC is an expert in the thermal power generation space and has its own coal mine. Hence, coal linkages will not be an issue,” said the second official. While coal linkages for the plant at Bara have been secured, coal availability is yet to be secured for the plant in Bina.
The Jaypee Group is also looking to sell a minority stake in the Yamuna Expressway Project. According to the Yamuna Expressway Industrial Development Authority, the total project cost is about Rs.13,000 crore. The six-lane expressway that can be extended to eight has a concession period of 36 years.
The possibility of a stake sale in the Yamuna Expressway was first reported by moneycontrol.com on 9 April.
Jaypee is also keen on getting a buyer for its real estate assets.
The group holds 4,900 acres of land in Uttar Pradesh. Out of this, 2,500 acres is part of the Jaypee Greens Sports City, which houses the F1 motor racing track, while two plots of 1,200 acres each are situated in Mirzapur and Dankaur areas of the state.
“Jaypee is interested in finding large buyers for its real estate projects who will be able to buy the projects in bulk,” said the first person cited above. In May 2013, Jaypee sold 300 acres of land in Greater Noida to realty firm Gaursons India Ltd for Rs.1,500 crore.
A surge in non-performing loans in India’s Rs.84 trillion banking system has pushed banks to take an aggressive stance in recovering dues from borrowers by pushing them to sell assets. The Reserve Bank of India (RBI) has asked banks to take prompt steps to recover their money.
Gross bad loans at 40 listed banks rose 35.8% to Rs.2.43 trillion at the end of the December quarter from Rs.1.79 trillion a year earlier. About Rs.4 trillion of bank loans are being restructured, both through the central bank’s corporate debt restructuring mechanism and on a bilateral basis.
The weakest economic growth in a decade, high interest rates, slowing demand and delayed project approvals have hurt the ability of many corporate borrowers to repay debt. Growth slowed to 4.5% in the year ended 31 March 2013. In the fiscal year just gone by, growth is estimated by RBI at less than 5%.