Brief Buzz

The trading in the shares of J P Associates Ltd (Rs.9.20) was restricted due to IBC. The stock hit the lower circuit in the last trading session, even though positive news abounds in the counter. This shows how maximum investors are guided by YouTube Videos which are prepared by amateurs. Let's recapitulate some of the recent events surrounding the company.

On June 3, 2024 the NCLT initiated insolvency proceedings against Jaypee Associates Limited (JAL) following a petition by a consortium of lenders led by ICICI Bank. The lenders turned to the NCLT because JAL failed to meet its financial commitments. Let's now take a few FAQs. 

Q. Why was the insolvency procedures initiated?

Ans. The insolvency process is intended to address JAL's debt challenges and find an appropriate solution for the creditors. 

Key issues included: 

💢 Dispute with land authorities.

💢 Principal repayment due in 2037. 

Q. How is J P Associates Ltd addressing the issue?

Ans. The company plans to refinance its debts and sell assets, including real estate and cement plants, and a Formula One racetrack to reduce its financial liabilities. 

Q. What are other methods, J P Associates Ltd's management is considering to cut down the debt in the short term?

Ans. Jaypee Group seeking high cost funding of Rs.10,000 crore from global credit funds such as Varde Partners, Area Cerberus, and Hillhouse to rescue its flagship company Jaiprakash Associates (JAL) from insolvency.

Q. Will it be able to get out of the NCLT initiated insolvency procedures?

Ans. Yes JAL might be able to exit the insolvency process, subject to creditor approval, under certain legal provisions.

Company Profile: Jaiprakash Associates is a leading infrastructure conglomerate in India, specializing in hydropower projects. It is the only integrated solution provider in this sector, known for strong project execution. The company also operates in cement, power, fertilizers, real estate, and hospitality.

In April, JAL planned to sell 150 acres along the Yamuna Expressway to raise Rs.15 billion to pay Yeida, but Yeida objected since 80 acres were already mortgaged. This land is part of the Sports City project, a major development along the expressway.

JAL proposed securing the outstanding amount against 150 acres, valued at Rs.27.6 billion, intending to sell or sublease the land within a year and deposit proceeds into an escrow account, with Yeida entitled to withdraw up to Rs.14.8 billion.

JAL's total borrowing is Rs.29,277 crore, with Rs.3,956 crore overdue as of April 2023. 

Positive Points: After restructuring and divesting its cement business, the debt could be nearly eliminated. JAL is contesting an insolvency case filed by ICICI Bank, with the matter pending alongside a proposed real estate transfer to a special purpose vehicle (SPV). Recently, JAL announced the sale of its remaining cement assets to Dalmia Bharat Ltd for Rs.5,666 crore to reduce debt.

Conclusion: When the price stabilizes or starts to move up, start accumulating the scrip of J P Associates Ltd, for targets of Rs.20+.