By -
Sep 26, 2014
Jaiprakash Associates Ltd. (JPA), the
builder of India’s only Formula One race track, agreed to sell
some of its assets to JSW Energy Ltd. (JSW) in its third attempt to
raise funds and pare debt.
JSW signed a memorandum of understanding to acquire one thermal and two hydropower plants operated by Jaiprakash Power Ventures Ltd., the companies said in statements late yesterday, without disclosing terms. Shares of both the Jaiprakash companies rebounded after the announcement.
Two failed attempts earlier had eroded confidence in Jaiprakash’s ability to find buyers, and investors will watch closely if the latest preliminary agreement will translate into a real deal, said Deepak Agrawala, an analyst at Elara Securities Pvt. in Mumbai. Success may help Chairman Manoj Gaur to cut debt after expanding the cement maker’s power, sports and construction businesses, including an F1 race track on the outskirts of India’s capital, New Delhi.
“As has happened in the past, there is and will be skepticism on whether or not the deal can fructify,” Agrawala said. “Everyone would wait for the actual transaction to happen before they start building this in their earnings estimate.”
Jaiprakash Associates’ debt climbed 64 percent over three years to 726 billion rupees ($11.8 billion) in March, according to data compiled by Bloomberg.
A unit of billionaire Anil Ambani’s Reliance Power Ltd. scrapped a deal on Sept. 24 to buy three of Jaiprakash’s hydropower plants, citing regulatory uncertainties and tariff issues.
In July, Abu Dhabi National Energy Co., known as Taqa, withdrew from an agreement to buy two hydropower projects after having signed a deal in March to take over the assets at an enterprise value of $1.6 billion along with a Canadian institutional investor and Indian infrastructure finance fund, IDFC Ltd.
Kim Eng Securities Pvt. cut its rating on Jaiprakash Associates to “hold” from “buy” yesterday and reduced its target price by 58 percent to 39 rupees. Deutsche Bank AG also cut its target price to 32 rupees.
JSW will add 1,891 megawatts of generating capacity from the deal. Currently, JSW produces 3,140 megawatts of power, with a capacity for another 8,630 megawatts under implementation, according to the company’s website.
JSW Energy’s balance sheet allows it to raise as much as 100 billion rupees, assuming a 3:1 net debt to equity ratio, Bhargav Buddhadev, an analyst at Ambit Capital Pvt., said on the phone from Mumbai. “If they want to raise further they will have to dilute equity.”
The Mumbai-based company’s debt fell to 91 billion rupees in March as against 95 billion rupees last year, according to data compiled by Bloomberg.
The cancellation of the four coal blocks alloted to Jaiprakash Associates was “negative as it takes away the captive mines linked to its power and central India-based cement capacities, and in turn, takes away its supply of inexpensive fuel,” Pulkit Patni and Mohit Soni, Mumbai-based analysts with Goldman Sachs Group Inc., wrote in a research note yesterday.
“There are gray areas and whether JSW is able to successfully close it or not, only time will tell,” Ambit’s Buddhadev said. “There could be regulatory issues and knowing JSW they have so far stayed away from assets that are not clear in terms of regulatory requirements.”
Jaiprakash Associates sold its Gujarat cement unit to billionaire Kumar Mangalam Birla’s UltraTech Cement Ltd. for 38 billion rupees. It also sold its 74 percent stake in Bokaro Jaypee Cement Ltd., a joint venture with Steel Authority of India Ltd., to Dalmia Bharat Ltd. for 11.5 billion rupees in March.
To contact the reporters on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net; George Smith Alexander in Mumbai at galexander11@bloomberg.net
To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Daniel Ten Kate at dtenkate@bloomberg.net Sam Nagarajan, Abhay Singh
JSW signed a memorandum of understanding to acquire one thermal and two hydropower plants operated by Jaiprakash Power Ventures Ltd., the companies said in statements late yesterday, without disclosing terms. Shares of both the Jaiprakash companies rebounded after the announcement.
Two failed attempts earlier had eroded confidence in Jaiprakash’s ability to find buyers, and investors will watch closely if the latest preliminary agreement will translate into a real deal, said Deepak Agrawala, an analyst at Elara Securities Pvt. in Mumbai. Success may help Chairman Manoj Gaur to cut debt after expanding the cement maker’s power, sports and construction businesses, including an F1 race track on the outskirts of India’s capital, New Delhi.
“As has happened in the past, there is and will be skepticism on whether or not the deal can fructify,” Agrawala said. “Everyone would wait for the actual transaction to happen before they start building this in their earnings estimate.”
Shares Recover
Jaiprakash Power (JPVL) jumped as much as 15 percent after tumbling 14 percent yesterday to a 13-month low. It traded at 12.65 rupees as of 11:25 a.m. in Mumbai, up 8.1 percent from yesterday’s close. Jaiprakash Associates climbed 4.7 percent to 27 rupees after plunging 19 percent yesterday, the most since January 2009. JSW Energy slumped 8.3 percent to 66.15 rupees.Jaiprakash Associates’ debt climbed 64 percent over three years to 726 billion rupees ($11.8 billion) in March, according to data compiled by Bloomberg.
A unit of billionaire Anil Ambani’s Reliance Power Ltd. scrapped a deal on Sept. 24 to buy three of Jaiprakash’s hydropower plants, citing regulatory uncertainties and tariff issues.
In July, Abu Dhabi National Energy Co., known as Taqa, withdrew from an agreement to buy two hydropower projects after having signed a deal in March to take over the assets at an enterprise value of $1.6 billion along with a Canadian institutional investor and Indian infrastructure finance fund, IDFC Ltd.
Target Cut
The sale of the hydro units would have helped bring down the debt of the Jaiprakash group by 58 billion rupees, according to a company presentation in June. Jaiprakash aims to reduce its debt to 450 billion rupees by the end of this fiscal year in March 2015, it said in July after the Taqa deal fell through.Kim Eng Securities Pvt. cut its rating on Jaiprakash Associates to “hold” from “buy” yesterday and reduced its target price by 58 percent to 39 rupees. Deutsche Bank AG also cut its target price to 32 rupees.
JSW will add 1,891 megawatts of generating capacity from the deal. Currently, JSW produces 3,140 megawatts of power, with a capacity for another 8,630 megawatts under implementation, according to the company’s website.
JSW Energy’s balance sheet allows it to raise as much as 100 billion rupees, assuming a 3:1 net debt to equity ratio, Bhargav Buddhadev, an analyst at Ambit Capital Pvt., said on the phone from Mumbai. “If they want to raise further they will have to dilute equity.”
The Mumbai-based company’s debt fell to 91 billion rupees in March as against 95 billion rupees last year, according to data compiled by Bloomberg.
Coal Permits
Jaiprakash Associates also had coal mining permits canceled Sept. 24 by India’s Supreme Court, which annulled 98 percent of extraction licenses issued from 1993 until now.The cancellation of the four coal blocks alloted to Jaiprakash Associates was “negative as it takes away the captive mines linked to its power and central India-based cement capacities, and in turn, takes away its supply of inexpensive fuel,” Pulkit Patni and Mohit Soni, Mumbai-based analysts with Goldman Sachs Group Inc., wrote in a research note yesterday.
“There are gray areas and whether JSW is able to successfully close it or not, only time will tell,” Ambit’s Buddhadev said. “There could be regulatory issues and knowing JSW they have so far stayed away from assets that are not clear in terms of regulatory requirements.”
Jaiprakash Associates sold its Gujarat cement unit to billionaire Kumar Mangalam Birla’s UltraTech Cement Ltd. for 38 billion rupees. It also sold its 74 percent stake in Bokaro Jaypee Cement Ltd., a joint venture with Steel Authority of India Ltd., to Dalmia Bharat Ltd. for 11.5 billion rupees in March.
To contact the reporters on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net; George Smith Alexander in Mumbai at galexander11@bloomberg.net
To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Daniel Ten Kate at dtenkate@bloomberg.net Sam Nagarajan, Abhay Singh
Posts
No comments:
Post a Comment