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Which bank has most exposure to debt-laden JP Associates?

The News International Team

Investors of  Jaiprakash Associates have had a tough time swallowing the promoters selling shares for “social cause” reasoning, which is evident from its around 30 percent crash since the news broke out. On Thursday, Jaypee Infra Ventures sold 1,34,89,693 shares of Jaiprakash Associates for Rs. 62.40 crore through open market sale route.

The company later said the “small share holding” was disposed off by a promoter company to meet needs of funds including for social cause. “It is understood that rumours are being planted in the market by the persons with vested interests suggesting that the promoters are selling their share holding in the company. Such stories seem to have lead to a sharp drop in the share price…,” the company said in a filing to the BSE.

“It is clarified in the interest of stakeholders that one of the promoters holding 72.36 crore shares, constituting 29.75 per cent of the company’s shares capital, has sold only 1.45 per cent of such share holding and continues to hold 68.83 crore shares, constituting 28.30 per cent of company’s share capital,” it said.

JP Associates is struggling under huge debt. According to Thomson Reuters data, the company has a net debt of Rs 63,111 crore and a debt-to-equity ratio of nearly 6 times. To de-leverage, the company has been trying to dispose some of its assets.

According to research firm Nomura, Indian banks have around USD 10 billion of exposure to the JPA Group. It says while there could be some cashflow mismatches, JPA is currently servicing all its bank debt on time and most of the bank exposure is backed by hard assets and ultimate write-downs (if any) will be lower.

Nomura says ICICI,  IDBI and  SBI are the 3 largest lenders to JPA Group with total exposure of Rs 128 billion, Rs 79 billion and Rs 64 billion, respectively. Even their ex-power exposure to JPA is high at Rs 88 billion, Rs 67 billion and Rs 27 billion.

Below chart highlights of various banks exposure to JPA

The research firm report says: “Feedback from banks still suggests that debt-servicing is on time and the probable hydro asset sale deal will ease cashflows for the group. But a sale at low valuations (~30-40 percent lower than the recent public issue) would be a negative and hence we highlight each bank’s exposure to JPA.

Of our top picks,  ICICI has very high exposure to JPA Group, and Axis Bank ‘s exposure is negligible. It’s too early to run sensitivities on probable losses but we will closely monitor newsflow relating to debt servicing of JPA as ICICI’s exposure is the highest.”

Posted by Sagar Salvi


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