Jaiprakash Associates Far From A Turnaround Despite Asset Sales

Debt-ridden Jaiprakash Associates Ltd. plans to, according to a news report, sell its residual cement business after asset sales helped the infrastructure company reduce its debt by more than half in the last four years. But it's yet to turn profitable and may not be able to repay all its loans even after selling its remaining assets.

Jaypee Group's debt-fuelled expansion unravelled after the 2008-09 global crisis, leaving it under a pile of unpaid loans. Infrastructure and power companies like Jaiprakash Associates have been big contributors to Indian banks' rising bad debt that the Reserve Bank of India expects to cross 12 percent of total loans by March—among the highest in large economies. The company was among the largest to feature on the central bank's second list of 29 stressed accounts.

What It Sold

The group has been selling assets spanning cement and power divisions since 2014 to turn around its fortunes. That helped it reduce its debt from about Rs 61,101 crore to Rs 26,401 crore in four years through March 2018.

Jaiprakash Associates, the holding company of the group, hasn't still turned profitable though. Losses widened from about Rs 825 crore in the year ended March 2014 to their peak of Rs 8,706 crore in 2016-17 before narrowing to Rs 1,949 crore in the previous financial year.

Another Cement Asset On The Block?

The Manoj Gaur-led group plans to sell its residual 5.5 million tonnes a year cement business to ACC Ltd. for Rs 5,200 crore, the Economic Times reported citing unnamed people aware of the matter. BloombergQuint wasn't independently able to verify the plan and emailed queries to the company remained unanswered.

On the face of it, at an enterprise value of Rs 5,200 crore for 5.5 MTPA, earnings before interest, tax, depreciation and amortisation per tonne works out to $138. The valuation appears to be higher than the sale of assets to UltraTech Cements and Dalmia Cements.

Vinit Bolinjkar, head of research at Ventura Securities, agreed that $138 seems a bit expensive considering recent deals in the industry. “But this would help ACC expand its capacity whenever required given higher cement-backed clinker capacity of 5.5 mtpa.” ACC has 4.5 MTPA capacity in the central region.

At the industry average of $100/ tonne, Jaiprakash Associates could command less than Rs 4,200 crore for the remaining cement business.

Remaining Cement Assets

The company reported a capacity of 11.65 MTPA—including Jaypee Cement Corporation Ltd —after UltraTech completed its buyout of assets and Orient Cement Ltd. cancelled its deal, according to Jaiprakash Associates' annual report for 2016-17.

Other Assets Worth Rs 9,400 Crore

Besides cement, the group also has assets from highways to hotels. Its tangible assets — plant, property and equipment — were worth Rs 9,467 crore as of March 2018, according to the holding company's filings. Here's a snapshot of its remaining assets:

Hospitality

• Five luxury hotels with over 800 rooms.
• Golf course, integrated sports complex.

Roads And Expressways:

• Yamuna Expressway project.
• Zirakpur Parwanoo Expressway.

Real Estate

• Jaypee Greens, Greater Noida (452 acres).
• Jaypee Greens Wish Town, Noida (1,063 acres).
• Jaypee Greens AMAN, Greater Noida Expressway (89 acres).

Power

The company has a power generation capacity of 2,220 megawatts comprising one hydro and two thermal units

• 400 MW Jaypee Vishnuprayag hydro power plant, Uttarakhand.
• 500 MW-Phase I (of 1,200 MW) Jaypee Bina thermal power plant, Madhya Pradesh.
• 1,320 MW Jaypee Nigrie Super-critical thermal power plant at Nigrie in Singrauli district of Madhya Pradesh

Sports

• Buddh International Circuit motor race rack in Noida

Other Assets

• Dedicated coal assets for cement and power
• 0.7 MTPA gas-based fertiliser plant in Kanpur, Uttar Pradesh