Jaypee Group looks to exit Yamuna Expressway

Mumbai: Jaypee group is in talks to sell its entire holding in the 165km Yamuna Expressway project, after a year-long effort to sell a partial stake in the asset failed to materialize, two people familiar with the discussions said.

The debt-laden group is in talks with infrastructure-focused funds IDFC Alternatives and I Squared Capital to sell the six-lane toll-based project in Uttar Pradesh that connects Noida with Agra along the Yamuna river, the two people cited above said, requesting anonymity. 

Clinching a deal would be critical for the Jaypee group, which is under pressure from its lenders to sell assets quickly to repay debt after it defaulted on payments. Across its three listed companies—Jaiprakash Power Ventures Ltd, Jaiprakash Associates Ltd and Jaypee Infratech Ltd—the group had debt of over ₹ 61,000 crore as on 30 September.

IDFC Alternatives, which had looked at Yamuna Expressway earlier but withdrawn from negotiations as it was not keen on acquiring a partial stake, has come back to the table, said one of the people cited above. The talks, however, are at an early stage, this person said.

The deal would be a complex one due to the land parcels attached to the expressway and the group may have to carve out the roads portion to sell it, this person said.

The integrated Yamuna Expressway project includes construction, operation and maintenance of the expressway and rights for developing over 6,175 acres of land along the expressway. Jaypee Infratech is developing five townships on this land.

Built under the private-public-partnership with the Uttar Pradesh government, the expressway had a project cost of over ₹ 12,000 crore.

IDFC Alternatives has estimated the expressway’s enterprise value at ₹ 3,300 crore, said the second person.

The bankers to the Jaypee group are pushing for asset sale “lock, stock, and barrel”, said a third investment banker who is aware of the discussions, asking not to be named as he is not authorized to speak publicly.

“I am not aware of any such thing,” said Sameer Gaur, joint managing director, Jaypee Infratech Ltd, which houses the integrated project. The Jaypee group declined to comment.

I Squared and IDFC Alternatives also declined to comment.

“Jaypee has a strategy of disposing of assets to deleverage its balance sheet. This deal could further help it reduce its debt. From a sector perspective, this is in continuation of the trend, where developers are monetizing their operational road projects by selling them to financial buyers, who have a lower cost of capital,” said Ashish Agarwal, director (infrastructure) at Equirus Capital Pvt. Ltd, an investment bank.

Earlier this year, the government made it easier for road developers to divest their holdings in operational projects, which led to a pickup in deals in the roads sector.

Infrastructure-focused firms such as I Squared Capital and IDFC Alternatives are among the few investors in the market with an appetite to buy out large operational assets across roads and power to build their own portfolio as opposed to picking up a partial stake.

The Jaypee group is among the country’s top 10 debt-heavy companies, according to Credit Suisse’s House of Debt report. About 75% of the group’s debt had a default rating, Mint reported on 7 October.

The Manoj Gaur-led Jaypee Group has been attempting to clean up its balance sheet. It has sold a fifth of the group’s assets in the past year to pare debt.

Group company Jaiprakash Power Ventures in September completed the sale of its two hydropower projects totalling about 1,400 megawatt (MW) to Sajjan Jindal-led JSW Energy Ltd for ₹ 9,275 crore. JSW Energy is also evaluating buying the 500MW Bina thermal power plant in Madhya Pradesh from Jaiprakash Power, the two companies had said.

The group is also looking to sell a cement plant and a small portfolio of wind power plants, apart from looking to monetize land parcels attached to the Yamuna Expressway. In May 2013, the group had sold a 300-acre plot along the expressway to real estate developer Gaursons India Ltd for ₹ 1,500 crore.

The expressway, which became operational in August 2012, had reported average daily traffic of 16,490 passenger car units (PCUs) for the year ended 31 March with aggregate toll collection revenue of ₹ 168.65 crore.

Jaypee Infratech’s standalone debt associated with the expressway and the linked real estate stood at ₹ 8,768.54 crore as on 30 September.

“The performance of the Yamuna expressway project has been below expectations because of the mismatch in traffic volume estimates. The company has been generating toll income revenue of not more than ₹ 200 crore per year versus the earlier expectation of more than ₹ 1,000 crore,” said Anubhav Gupta, an analyst at Maybank Kim Eng Securities India.

Gupta added that the upgradation of the Faridabad-Agra 6-lane expressway could be another factor that will keep traffic volumes in check on the Yamuna Expressway.

“The company’s efforts to sell smaller land parcels will be insufficient,” said Gupta.

P.R. Sanjai in Mumbai contributed to this story.