The Jaiprakash Group has undertaken a restructuring which will see the promoter's stake in flagship Jaiprakash Industries Ltd increase by 4.68 per cent from 42.18 per cent to 46.86 per cent.
Jaiprakash Group chairman Jaiprakash Gaur said: "We think it is in the interests of the shareholder of the company."
As per the restructuring proposal, Jaiprakash Industries will take over the 8.84 per cent shares held by Jaiprakash Enterprises and 49.99 per cent shares held by Jaiprakash Ventures Ltd in Jaypee Hotels Ltd. Jaiprakash Industries already holds 13.34 per cent in Jaypee Hotels. Its stake is now proposed to be raised to 72.17 per cent.
In return for the Jaypee Hotels shares, Jaiprakash Enterprises and Jaypee Ventures will be issued 139,34,300 Jaiprakash Industries shares on a preferential basis. These shares will represent 4.68 per cent of Jaiprakash Industries' expanded capital base. Both Jaiprakash Enterprises and Jaypee Ventures are companies owned by the promoters of Jaiprakash Industries. Thus, the transaction will improve the promoter's stake in Jaiprakash Industries by an equivalent amount.
The restructuring has been approved by the board of Jaiprakash Industries. "From the view point of Jaiprakash Industries shareholders, it is important that there will be no cash outgo in consolidating the hotels business," Gaur said.
The valuation for the swap was carried out by Bansi Mehta & Co. On the basis of assets, market capitalisation and earnings potential, Jaiprakash Industries was valued at Rs 35.85 per share and Jaypee Hotels was valued at Rs 15.30 per share. DSP Merrill Lynch was the advisor to the deal.
After the restructuring, Jaiprakash Industries' equity capital base will expand from Rs 158.23 crore to Rs 172.10 crore. According to Gaur, the move will also lead to an enhancement in shareholders' value by bringing the hotel business of the group under the Jaiprakash Industries' umbrella.
Jaypee Hotels owns three hotels, two in Delhi and one in Agra. Jaiprakash Industries owns one hotel at Mussoorie. Earlier, Gaur had plans to put all the properties under Jaypee Hotels. "Now we have no such plans as all the hotels are under the same umbrella," he said.
ICICI Ltd, the lead institution for Jaiprakash Industries, has given its in-principal approval to the above scheme.
Jaiprakash Industries expects to close the current financial year (2001-02) with a turnover of Rs 1,450 crore and a profit before tax of Rs 160 crore as against a turnover of Rs 1,250 crore and a PBT of Rs 135 crore during the previous financial year.
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