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JP Associates falls 14% again, debt concerns worry analysts

Goldman Sachs is concerned about its high leverage, with 4.5X consolidated net debt to equity and 0.7X interest coverage (EBIT/interest expense) as of March-end.

The News International Team

Even before it got time to lick clean its bruises, shares of  Jaiprakash Associates were hammered down in trade today. The stock fell to a 52-week low at Rs 32.30 per share losing over 14 percent intraday on Friday, after it lost 20 percent yesterday. 

Investors are concerned on promoters’ stake-sale even though the company has clarified that the fund was meant for social cause. Jaypee Infra Ventures which held 29.75 percent has sold 1.45 percent equity shares in the open market.

Despite having a ‘buy’ rating, brokerages too have turned bearish on the stock as debt concerns for the company loom large.

Goldman Sachs is concerned about its high leverage, with 4.5X consolidated net debt to equity and 0.7X interest coverage (EBIT/interest expense) as of March-end. Besides, the promoter stake-sale some recent events have raised questions about its profitability. On July 24, Abu Dhabi National Energy (TAQA) pulled out of an announced deal to acquire two of Jaiprakash Power Ventures’ hydro power plants.  Also on August 25, The Supreme Court has declared allocations of all coal blocks made during 1993-2010 as illegal, including 4 of Jaiprakash Associates and its subsidiaries.

Deutsche Bank has retained hold rating but reduced target by 5 percent to Rs 53 per share. The brokerage has also lowered its FY15-16e earnings by 12-18 percent to factor in lower cement volumes.

“There appears to be no near term triggers either in the form of accelerated asset sale or a cyclical turnaround of real estate and cement business in its areas of operations,” it says in a report.

At 13:13 hrs Jaiprakash Associates was quoting at Rs 33.35, down Rs 4.35, or 11.54 percent on the BSE.

Posted by Nasrin Sultana

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