Today's Call

Buy the shares of Jaiprakash Associates Ltd (J P Associates Ltd) near the CMP of Rs.11.21, for short term targets of Rs.19/21. SL: Rs.9.70.

Founded by Jaiprakash Gaur, the group experienced rapid growth from 2000 to 2006, benefiting from surges in real estate and infrastructure. Jaypee Power Ventures Ltd and the group’s engineering and construction arm, JP Associates Ltd, saw their revenues increase significantly, with annual growth rates of 26.92% and 32.08%, respectively, from 1999-2000 to 2014-15. However, during this period their debts also grew substantially, increasing by 40 times and 20 times, respectively.

Recently, the Allahabad bench of the National Company Law Tribunal (NCLT) directed initiation of insolvency proceedings against debt-ridden Jaiprakash Associates (JAL). The insolvency plea against the company was filed by ICICI Bank and State Bank of India in 2018 and 2022 respectively.

Pronouncing the order, a two-member NCLT bench, comprising members Praveen Gupta and Ashish Verma also appointed an interim resolution professional (IRP). Photo: Just Dial.

Reduction or Debt: The company has been selling its cement plants to reduce debt. In December 2022, Jaiprakash Associates (JAL) and Dalmia Bharat had signed a framework for the acquisition of JAL's cement, clinker and power plants for an enterprise value of Rs.5,666 crore. In April 2023, a definitive agreement was signed between Dalmia Bharat and JAL to acquire the cement business as per the announcement.

Out of its substantial debt of ₹29,805 Cr, JP Associates (Rs.10.80) plans to transfer ₹18,955 Cr to a SPV. This transfer, which is part of a Scheme of Arrangement, awaits approval from the NCLT and has already been endorsed by all relevant stakeholders.

In order to reduce its debt, J P Associates Ltd in November last year, announced a deal to transfer about shares worth Rs.360 crore to ICICI Bank under a settlement agreement.

The company is thus slowly cutting down its debt and currently it needs around Rs.5000 crore to clear off the NCLT mess, which I believe is achievable, without much hassles.

I feel this NCLT move might speed up the process of Cement division sale, which is struck up since 2022.