Jaiprakash Associates shares soar 217% in 2017, still down 92.47% from life highs
Mumbai: Beleaguered Jaypee Group company stocks are on fire this year. Share prices of Jaiprakash Associates Ltd jumped 217.22%, while shares of group companies Jaypee Infratech Ltd rose 165% and Jaiprakash Power Ventures Ltd gained 72% so far in 2017.
In this period, benchmark indices Sensex and Nifty are up 19.4% and 21%, respectively.
However, even after steep rise in share prices of these companies, they are far from their respective record highs. For instance, Jaiprakash Associates is still down 92.47% from its record high at Rs340 it touched in 2008.
Similarly, Jaypee Infratech and Jaiprakash Power Ventures are down 80.35% and 95.30% from life highs at Rs100 and Rs144 they hit in 2010 and 2008, respectively.
In 2016, Jaiprakash Associates slipped 32.18%, Jaiprakash Power Ventures fell 43.43% and Jaypee Infratech Ltd lost 42.14% as debts piled on the companies. Lenders have been insisting to sell some of the group’s best assets, and transfer ownership to cut debt.
Now as the group is addressing its debt issue via restructuring and other measures, investors are lapping up shares, analysts said.
“JP Associates is seeing buying interest this year due to massive debt restructuring the company has undertaken but it is yet to be even near its peak,” said an analyst who did not wish to be named.
Prakash Diwan, director at Altamount Capital Management, said that the group’s interest to pare its debt is an indication to investors that the company is willing to clean up its book. “The deal with UltraTech Cement Ltd instilled confidence among investors,” he added.
In June this year, UltraTech Cement closed the acquisition of cement plants of Jaiprakash Associates for Rs16,189 crore.
According to a Mint report, 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).
As of March 2017, Japirakash Associates has a total debt of Rs30,188.84 crore, while Jaypee Infratech has a debt of Rs7,922.19 crore and Jaiprakash Power Venture has a total debt of Rs21,098.02 crore, according to company filling at the exchanges.
Also, billionaire investor Rakesh Jhunjhunwala bought a stake in JP Associates which drove the stocks rally. According to BSE data, Jhunjhunwala owns 1.01% in the company as on June 2017.
Another reason for the stock’s stellar performance is its firm quarterly earnings. JP Associates posted a profit in the June quarter for the first time in 12 consecutive quarters.
It posted a net profit of Rs764.99 crore in the June quarter against a net loss of Rs866.65 crore a year ago due to lower interest cost and higher revenues. Net sales rose 42.32% from a year ago to Rs2,585.44 crore. Interest cost fell 53.45% to Rs404.79 crore in the second quarter of FY18.
In a latest development, the Allahabad bench of the National Company Law Tribunal (NCLT) on Wednesday admitted insolvency proceedings against Jaypee Infratech, one of the 12 companies referred to the tribunal following the Reserve Bank of India’s (RBI) directive to banks, according to two people aware of the matter, as per a Mint report.
Calls made to Jaypee Group executive chairman and chief executive officer Manoj Gaur remained unanswered.