JP Associates, lenders breathe easy after deal; should you buy
By Rahul Oberoi
Shares of the debt-ridden Jaiprakash Associates more than doubled investor wealth in last one year. The scrip has surged 190 per cent to Rs 22.70 as of June 29 from Rs 7.83 on the same day last year.
The jump in share price indicates that an investment of Rs 1,00,000 a year back would have now become nearly Rs 2,90,000.
However, market experts say there was a lot of speculative trading on the counter.
Jaiprakash Associates (JAL) is once again hogging limelight after UltraTech Cement completed the Rs 16,189 crore acquisition of the company’s six integrated cement plants and five grinding units, having a capacity of 21.2 million tonnes.
Market experts say the country’s biggest asset resolution may give some respite to banks and Jaypee Group stocks. The deal will help the Jaypee Group to reduce debt, which runs into thousands of crores of rupees.
While the deal is likely to create some fresh buoyancy on the counter, some analysts remain cautious.
AK Prabhakar, Head of Research, IDBI Capital, for one, has maintained an ‘avoid’ rating on Jaiprakash Associates.
Ambareesh Baliga, independent market analyst, said, “One needs to work out what performing assets are left after the restructuring exercise. If it is left with small income-generating assets and real estate, then it may not be worthwhile.”
“In case of Jaiprakash, the debt on the books is pretty high. There has been a lot of positive news in terms of selling of assets as well as monetisation on the Noida area with now a new airport coming up near Noida. So if those kinds of news flow continue, then there may be some respite,” Abhimanyu Sofat, VP-Research, IIFL, told ETNow before the announcement of the deal.
“However, considering the amount of debt in the books, one would not venture and ask people to invest in such companies,” he said.
JP Associates had last year announced the sale of its cement business to the Kumar Mangalam Birla-led Ultratech, making the biggest consolidation in the cement sector.
After the deals, a consortium of lenders led by ICICI Bank would be able to write back Rs 3,000 crore of provisioning they had made against bad loans after UltraTech Cement completed the takeover of Jaiprakash Associates’ cement business just a day before the end of the quarterly accounting period.
Banks including ICICI, State Bank of India, IDBI Bank, Yes Bank and IndusInd had to set aside money against the outstanding loan to the financially stressed Jaypee Group business as the deal got delayed. They would now be able to write back the amount, boosting their June-quarter earnings, analysts said.
Among other JP group stocks, JP Power Ventures has risen 14.50 per cent in last one year, while the benchmark BSE Sensex gained 15 per cent.
For the quarter ended March 31, 2017, Jaiprakash Associates reported a net loss of Rs 1,882.40 against a net loss of Rs 1,387.30 crore reported for the corresponding quarter last year. Net sales of the company slipped 9 per cent for the quarter on a year-on-year basis to Rs 1,720.45 crore.
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Via:: Economic Times – Stocks