CARE downgrades Jaypee debt rating to default

Jaiprakash Associates owes Rs 60,000 cr to banks

CARE Ratings has lowered Jaiprakash Associates' debt rating to default category after the Delhi-based infrastructure company failed to repay its non-convertible debentures in time. According to a report by UBS, ICICI Bank, State Bank of India, Axis Bank, and Yes Bank have significant exposure to the Jaypee Group.

CARE Ratings said Jaiprakash Associates' liquidity position had been affected by a deterioration in the company’s financial performance and delays in receipt of funds through asset sales.

Jaiprakash Associates' total debt is Rs 60,000 crore, according to Bloomberg. UBS estimates the Jaypee Group’s debt approvals at Rs 96,000 crore in 2014-15.

The Jaiprakash Associates stock closed 9.3 per cent down at Rs 10.52 on the BSE on Friday.

The scrip has lost 60 per cent of its market value since January and 85 per cent of its value in the past year (see chart). On Friday, the company’s market capitalisation was Rs 2,558 crore.

Rahul Kumar, director and chief financial officer of Jaiprakash Associates, said business sentiment, in all the sectors in which the company operated in, continued to be sluggish. “There has been some delay in servicing debt obligations. We remain committed to completing our disinvestment programme at the earliest,” he said.

In a statement to the BSE, the Jaypee group said it had made a representation to CARE Ratings for a review.

CARE Ratings said Jaiprakash Associates reported net loss of Rs 1,110 crore on operating income of Rs 10,854 crore in 2014-15.

In 2013-14,  the company had posted profit after tax of Rs 414 crore on operating income of Rs 13,328 crore.

On a consolidated basis, Jaiprakash Associates reported a net loss of Rs 1,543 crore on operating income of Rs 19,650 crore in 2014-15 against a net loss of Rs 703 crore on operating income of Rs 20,007 crore in 2013-14.

The group had sold its cement units in Gujarat and Madhya Pradesh to the Aditya Birla Group and its hydroelectric power projects to the JSW Group. But these sales are yet to show up in the company’s financial metrics.

Morgan Stanley said CARE Ratings’ lowering of JP Associates rating was negative for Indian banks.