Jaiprakash Associates Ltd raised $150 million (Rs 835 crore today) from foreign currency convertible bonds (FCCBs) on Wednesday, but the stock plunged 9% after the announcement on concerns over mounting debt and worries about a delay in selling a stake in the cement business.

Yamuna expressway before independent day its newly open by JP group. Pradeep Gaur/Mint

Net profit plunged 25% to 139 crore, while consolidated debt widened to 50,300 crore in first quarter of FY13 from 44,000 crore at FY12-end. If the company is unable to raise funds, the debt-to-equity ratio is likely to rise to 4.2 by the end of FY13 from 3.9. Also, replacement of FCCBs with domestic debt will lead to an increase in interest costs by 400 basis points, said Kim Eng Securities India Pvt. Ltd in a recent note. A basis point is 0.01%.

Last week there were unconfirmed reports that an Irish building material company was in talks to pick up around 51% in JP Associates, which could fetch around 1,200 crore, but again this is not enough for the latter to repay bonds due in September and take care of the coming capex requirement for FY13. Even the new projects are not providing any sigh of relief. The Yamuna Expressway that started operations in August, will only earn around 300 crore by March, say analysts. Also, its first coal-fired power plant that will become operational in September is expected to run at less than half capacity because of fuel shortage.

For now with the sell-off after the fund-raising news, most of the negatives surrounding the high debt seem to be priced into the stock. JP Associates was up 2.11% on Thursday and analysts said any positive outcome on the asset sale or an interest rate cut will lift the stock.

Close