BackJaypee selling land, promoter stakes to service loans, cut debt
To generate cash, Jaypee has also started focusing on its engineering and construction business
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Mumbai: The debt-laden Jaypee Group is selling land and promoter stakes in group companies to service its loans and reduce debt, until it concludes a ₹ 12,500 crore deal to sell three hydropower assets to Reliance Power Ltd (R-Power), two group executives said.
To generate cash, Jaypee has also started focusing on its engineering and construction business, which was the mainstay of the group at one point of time.
The measures come against the backdrop of a short-term cash flow crisis the group is battling because of the unexpected termination in May of a ₹ 9,689 crore deal to sell two hydropower plants to a consortium led by Abu Dhabi National Energy Co. PJSC, or Taqa, one of the executives quoted above said on condition of anonymity.
Days after the scrapping of the deal with Taqa, R-Power, controlled by Anil Ambani’s Reliance Group, agreed to buy all the hydropower assets of Jaiprakash Power Ventures Ltd for an undisclosed amount.
Even so, the termination of the deal, which Jaiprakash Power Ventures attributed to a change in the business strategy and priorities of the Taqa-led group, has made it imperative for Jaypee Group to generate short-term cash to ensure it does not fall behind on interest payments on debt that totalled ₹ 60,000 crore as of 30 June.
“This is a short-term crisis for the Jaypee Group as Taqa pulled out of the deal. Reliance Power is currently doing the due diligence. The deal is expected to conclude in two-three months," said the first person quoted above. “The current crisis is just a matter of two-three months. Banks are not worried as we have at least 6,000 acres of land parcels."
The person added that the group had started selling land parcels to real estate firms to develop land in Jaypee Greens Sports City on the 165km-long Yamuna Expressway that connects Noida, on the outskirts of Delhi, with the Taj Mahal city of Agra.
The group’s engineering and construction unit has recently secured big orders in Bhutan and is expecting more. It will look at more such opportunities to revive the business, which can help in generating cash.
Jaypee Group chairman Manoj Gaur didn’t answer calls and text messages on his mobile phone.
A senior analyst at a domestic brokerage firm, requesting anonymity, said the Jaypee Group had offered many guarantees and counter-guarantees, and promoters were selling their stakes in the companies to pay for these. There seems to be a lot of pressure on the promoters, he added.
As of 31 March, the total net worth of the three listed group firms was around ₹ 22,669.82 crore against ₹ 25,193.34 crore a year ago, according to Capitaline, a corporate database.
On Friday, shares of Jaiprakash Associates Ltd (JP Associates) ended at ₹ 33.80 on BSE, down 10.34%, while the benchmark Sensex fell 0.22% to 27,026.70 points. Shares of Jaiprakash Power Ventures ended unchanged at ₹ 13.55, while Jaypee Infratech Ltd fell 7.23% to close at ₹ 26.95.
Over the last two days, JP Associates has fallen 26.12%, Jaypee Infratech 17.33% and Jaiprakash Power Ventures 5.9%. The sell-off has been triggered by news of promoters selling some of their equity. Between 1 and 3 September, the promoter, Jaypee Infra Ventures, sold 13 million shares of JP Associates for ₹ 62.4 crore, BSE data showed. This is equivalent to 1.45% of JP Associates.
In a statement issued to BSE after market hours on Thursday, JP Associates clarified that “one of the promoters holding 72.36 crore shares, constituting 29.75% of the company’s shares capital, has sold only 1.45% of such shareholding and continues to hold 68.83 crore shares, constituting 28.30% of the company’s share capital. This small share holding has been disposed of by the promoter company to meet its requirement of funds including for social cause".
The promoters of JP Associates have full faith in the company and hope that investors would retain confidence in the company and its management, the statement added.
The second group executive cited above said there is no cause for concern because the group has quality assets including land and power assets. He said the group has already commissioned 650 megawatts (MW) of power plants and will commission another 1,350MW in the next five months.
“Once the deal with Reliance Power is done, the group will swing back. We have land assets, power assets, and we are now going to focus on our engineering and construction vertical," he said, adding that the company is aiming to reduce debt to ₹ 42,000-45,000 crore by June 2015.
Analysts, however, remain cautious.
“The group has sold some assets over the past few months, but there is still a lot of debt on the books. Selling more assets is the only option left for them if they want to cut their debt," said Nitin Bhasin, head of research at Ambit Capital Pvt. Ltd.
pr.sanjai@livemint.com
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