J P Associates ,will it recover ?

I have discussed J P Associates few times.I also discussed J P Associates in my thread -Non performing stocks.J P Associates is badly meshed up in huge debt.Actually J P Associates believed heavily on Shining India slogan and BRIC story .Result it fall flat like those who started India Shining slogan and Bric story. It planned and executed huge infra spendings,which are master piece for India .It includes Yamuna express way,huge capacity in hydro power to reduce Indian import of petrol,huge Cement capacities to build India at competitive cost,huge land devolpment on Yamuna express way,Budha racing circuit.But what is good for India proved to be bad for JP Associates and its share holders.It also brought some banks on weak wicket and one of them ICICI bank has been sold badly in its name.But those who think that all is lost in JP Associates and its supporting bank and sold it badly may not end happily as they wish.I had maintained that J P Associates has hard assets and has not blown debt in thin air like King Fisher .It has attractive hard assets which has huge replacement cost and may be sold .If economy recover in next one year,even sale price of assets including land bank can create huge value.So a invester like me who has not exited timely ,will stay invested for anticipated pull off by JP Associates along with its backing pvt sector bank.Can JP group do it,looks difficult presently, but I am cautiously optimistic .What is view of Dear members ?

 

JP main problem is Heavy Debt .....
nearly Rs. 31000 Cr.
total market cap is Rs. 28362 Cr. ....that is lower than entire debt of this company ....
per Annam they are paying interest Rs. 3584 Cr.
Profit before interest and depreciation march 2015 year is Rs. 2300 Cr.
so they are not even reach interest level also ...
if they improve profit further Rs .1284 Cr.... to reach complete interest level .....
and main point is cash on hand is Rs. 3773 Cr. only
Contingent Liabilities are also 3947 Cr.

so their main projects are " Hydro power " , " cement " , " Toll gate " and some real estate
they are willing to sell their projects ..but no body is interested and price they are quoting very low ...they know
it is a sick company they will surely quote very low price ......in future no bank will not give any loan it is clear ...
and main point is book value is only 75 ....

Promoters complete stake is nearly 39.38 %
Value in Rs. 11340 Cr.
at present value ....
if company is willing to give debt convertibility to equity like " IVRCL " Company
problem is banks may not accept this proposal ..in IVRCL issue problem solved because private lenders are agree that proposal ....

in my view this company turn around is a big question for me .....

 

Yes Debt is issue.But it has hard assets which are some what depreciated also. Book value is 75 as mentioned by you .So we need to consider some depreciation also which will increase the sale value as assets are sold at market value which is very less discount to replacement value.So Dispose value is higher than book value after debt .Till now JP has been selling asstets at reasonable value inspite of deley in process ,as there are few large players like Ultratech,Shree Cement,Dalmia and Heidelberg ,JSW are believed to be in race.Till now I don't have reports that books are unrealistic.

 

Risky bet in my opinion. The main problem I see is that it is selling its core assets. Yamuna Expressway is up for sale, Cement plants etc. I mean what kind of business will the company be left with after these sales? Will that business justify the valuations? Will they even get the right price for their real estate given that the real estate market is down? I feel you can still look into Amtek group of companies if you are looking for a decent risk/reward ratios. Over there, the company is at least selling subsidiaries which are profit making and therefore have buyers. My 2 cents.

 

yes , in my view heavy debt may be eat all profits and assets of this company .... because common seance point is
surroundings of JP real estate lands price is also fall down due to huge selling chance of JP Lands .... Hydal Power projects and cement plants are not demand because they are not giving high profit margins ....so after
all assets sales investors may not get any benefit .... may be debt will eat all assets in future .....

 

Last few years JP Associates company management is not focusing on business growth .... they are completely
involved in heavy debt clearing activity ..... business is neglected ... and more over company diversification is weak due to all assets diversified into low profit margin business like .... power , cement , hotels , and more over in "Noida" there is lot of residential and commercial space in realty is not selling at ..... at that region JP reality is located .... is another bumper offer ......

 

@RAMA MURTHY SASTRY CHALLA -and other members -J P Associates is selling it's Cement plants to Ultratech.What is view of members,can company recover.Any hope of recovery .With Modi govt focus on infra and JP Associates willingness to sell hard assets to reduce its debt ,can turn around this company.What are present views of knowldgeable members.What is the best option left now for long term share holders( including me ) who are sitting in huge loss.Should they hold on in hope of recovery or just book the loss considering it one more instalment of learning fee,which we keep on depositing for every folly,in this case making mistake of believing Great Indian Infra Story.

 

Total debt of JP ASSO is Rs. 60000 Cr. according to bloomberg data


annual Interest burden on JP ASSO in 2015 Rs. 3584.94 Cr.

2015 year total loss of the company after all taxed : Rs. - 1278.74 Cr.
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so annual burden increase every year after all taxes Rs . 1278 Cr.
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JP ASSO cement business in Northern, Southern, Central, Eastern and Western parts of the country and has achieved 41.40 MnTPA in total cement capacity (commissioned/under commissioned)

UltraTech acquires Jaiprakash Associates' cement plants for Rs 16,500 crore



Nigrie Thermal Power Project 1320 MW
Bara Thermal Power Project(Phase 1) 3300 MW
Bina Thermal Power Project (Phase 2) 1200 MW
Bara Thermal Power Project (Phase 2) 3300 MW

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TOTAL THERMAL POWER GENERATION 10120 MW

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hydro power generation :

Baspa II 300 MW
Vishnuprayag 400 MW
Karcham- Wangtoo 1000 MW
Arunachal Pradesh projects (Lower Siang ) 3200 MW
Meghalaya projects 720 MW
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TOTAL HYDRO POWER GENERATION 5620 MW
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Real estate value of company 1162 acres

Yamuna Expressway project – a 165 km

The Group has made investment in Fertilizer business through its subsidiary, namely, Jaypee Fertilizers & Industries Limited (JFIL).

1200 bed tertiary care multi specialty healthcare



TOTAL POWER GENERATION : 15740 MW

APPROX TOTAL COST OF 15740 WM is Rs. 45,000 Cr.
UltraTech acquires Total Jaiprakash Associates' cement plants for Rs 16,500 Cr.

remaining all real estate and other projects value approx value may be Rs. 10,000 Cr.

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Total all assets aprox value is Rs. 71,000 Cr.

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Latest Total Debt according to bloom berg is Rs. 60, 000 Cr.
Approx Total asset value of the company is Rs. 71,000 Cr.

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If all debts clear with in one year company value approx : 11,000 Cr.

and also company having Contingent Liabilities are Rs. 3947 Cr.

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Free assets After all debts clearance is approx : Rs. 7053 Cr.
cash on hand maximum aprox Rs .1500 Cr.
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after crossing all difficulties company net value is Rs. 8553

Fair Value of each share value aprox is : Rs. 3.65

if these asset sale process delay in future loss per every year 1278 Cr.

Eat these assets with in 7 years





NOTE : I AM NOT A SEBI REGISTERED ANALYST , THESE CALCULATIONS ARE BASED ON SOME ASSUMPTIONS AND ESTIMATIONS , DONT TAKE IT AS IT IS , THIS IS ONLY FOR LEARNING AND DISCUSSION PURPOSE , DONT TRADE OR INVEST BASED ON THESE CALCULATIONS , DEPEND UPON YOUR OWN CALCULATIONS BEFORE TAKE POSITION IN JP ASSOCIATES STOCK

ALL THE BEST

 

V. Good analysis.

 

Very Good analysis,this also gives some additional clearity on ICICI bank exposure to JP group,which seems recoverable .

 

but in future main problem is asset selling of power projects and toll projects for reasonable valuations

 

If they sell assets in a discount price there is a big problem for company , if they not sell assets in next 2 years
they may be declared as defaulters by banks

so in my view they will face very difficult situation in future

 

All deley /under recovery will give additional hit to JP expected residual 11000 Crore as per calculations.So first risk is more to JP comparatively and expected haircut to bank is low.

 

yes , it is like " cancer " removal of affected part is needed ....
company selling of assets is vital point

 

If you were I (Long term share holder sitting on huge loss),what you would have done with JP Associates share as of Now.I know you as smart invester will never be in that situation, but at least you can assume ,you were I in case of JP.

 

i will not wait for this situation for my investment .... i will exit at long back if i have this type of stock ...

but my suggestion is exit half quantity of this stock in this rally or positive news about company
and with that same amount purchase good company in infra with good fundamentals stock in a dip

 

if management take good deals in selling all projects and with balance amount they start business in good sector
and after that it may take 5 years at lest time is needed for good shape ...

 

@kharb as @RAMA MURTHY SASTRY CHALLA sir's analysis it is very difficult for JP to create value in future. since real estate is in mess the assets of co. may not get higher value if sold. 15000 mw power projects may be valued at 5 cr per mw so it comes 75000 crores.plus real estate 1000 acres = 12000 crores. total comes to 87000 crores. - debt 71000 = 16000. also power prices are down 30%. so in long term it is quite difficult it seems that JP will pay off its debt and create value for shareholders.
so i thnk it will be better to sell JP in next oppurtunity you get. if the debt is manageable it is worth holding. but when debt is extreme there is very few chances of coming back strongly.

 

if we add yamuna express way it will b another 7000 crore. and hospital at 750 crores.net value = 24000. add cement at 16500 it come 40500.
JP will get this value only if company is able to sell all assets.

 

but thermal plants are not demand due to coal prices and other environment problems , people will
no JP condition so large players are bargain to buy ...

in my view at this world economy situation 1MW may sold Rs. 2.5 -3 cr . maximum that to hydro projects only
thermal may be very low depend up on long term coal imports agreements with coal suppliers and with out any environmental problems

realty is not that much price in JP group 1100 acres

last 4 years JP Group successful only to sell cement plants
that is the main problem .... if power plants not sale in next 2 years company may get huge problem

i have one idea to solve this huge problem :
but only thing is government will co operate with them

1. Buy all Hydro projects with " NHPC " they are expanding new projects , if they buy these hydro projects some problems will clear
2. Buy all Thermal projects with " NTPC " with reasonable valuations is another solution

and that money government repay some debt to banks directly