Jai Corp's showpiece projects remain on paper

The blueprint for a Mumbai makeover by Mukesh Ambani’s close associate is barely off the drawing board.

In early 2008, when the stock market was at a dizzying height, the Jai Corp stock almost hit Rs 1,400, while its market capitalisation nudged Rs 25,000 crore.

The Street believed Jai Corp was a good bet — after all, the promoter of the company was none other than Anand Jain, who also happened to be Reliance Industries Chairman Mukesh Ambani’s close friend and business associate.

Much has changed since then. At Rs 287 today, Jai Corp’s share price is just a fifth of its peak. Of course, the market too has tumbled in the same period, but the bigger reason for the collapse in the company’s valuation is that many of its showpiece projects are in limbo.

Jain and Ambani, who operate from neighbouring offices in Mumbai’s Nariman Point, had ambitious plans for a makeover for Mumbai.

The blueprint: To set up a couple of large Special Economic Zones (SEZs) across 17,500 acres in Mumbai and Navi Mumbai, build the 22 km Mumbai TransHarbour Link (MTHL), construct a new airport in Navi Mumbai, develop a port at Rewas on the outskirts of the city and pitch for a couple of stretches of the Metro Rail. Jain also had his own plans for a power plant and a dam for the SEZs.

With Ambani as a partner, the Street believed Jai Corp had a winner on its hands and the estimated Rs 34,000 crore financial outlay for these projects was no big deal. Jain’s share in this investment would have been anyway around Rs 2,600 crore.

The profit potential of these projects, in which Jai Corp’s stake would have been roughly 10 per cent, was large enough for a local investment bank to value the company at Rs 17,000 crore to Rs 18,000 crore.

In fact, Jai Corp’s stake of 10 per cent in each of the SEZs was together valued at close to Rs 14,000 crore and the company raised around Rs 1,600 crore from investors by placing shares at a price of around Rs 1,000 per share.

But those numbers seem to be distant now. Here’s why.

The Mumbai SEZ (MSEZ), for instance, has run into trouble with the Supreme Court not extending the time period for acquisition of land.
 

THE WAIT LIST
Project	Status

Mumbai SEZLand partly acquired, but no government
consent yet for transfer of land to MSEZ Navi Mumbai SEZMaster plan being finalised, boundary
walls being built AirportCIDCO yet to get okay to conduct
environment-impact study MTHLState government yet to call for bids after
two failed attempts Rewas PortMaharashtra port policy in place but no
financial closure Metro railBids not invited by the government yet for
next phase

According to reports, only 20 per cent of the total targeted 11,000 hectares in Raigad has been acquired as farmers are reluctant to sell their land.

 Jai Corp sources, however, said 5,000 acres had been acquired so far and although the Supreme Court hadn’t extended the time required for MSEZ to get the consent to transfer the land in its name, it would try and get it within the time frame of July 8 this year.

“We’re not saying there is no stress or pressure, but we have to push and get it done within the time frame,” says a person close to the development.

Jai Corp, according to sources, is understood to be banking on the Maharashtra government to help the MSEZ to acquire the additional land so that it can go ahead with the project.

Meanwhile, the Rs 6,300 crore Navi Mumbai SEZ is making some progress with the boundary walls coming up and the master plan due to be ready soon, according to senior executives in City Industrial Development Corporation (CIDCO).

Moreover, the project has achieved financial closure though CIDCO officials say “activity at the moment is slow” because not too many companies have evinced interest in the SEZ.

Although the difficult economic environment is one reason for this, the fact that the fate of the new airport in Navi Mumbai is uncertain also appears to be keeping prospective users of the SEZ away for the moment.

CIDCO officials said they have submitted the terms for the environment impact assessment study for the airport, but were yet to receive the go-ahead from the central government.

According to CIDCO, it start inviting bids for the Rs 5,000 crore project only after it gets an environment clearance.

The process of getting the clearance, it says, could take at least another six months.

Jai Corp’s proposed port at Rewas, to be constructed at a cost of Rs 5,000 crore, hasn’t got off the ground either.

The Maharashtra Maritime Board recently approved a port policy, but it could take a while for the project to begin because the finances haven’t yet been tied up.

Similarly, the Rs 6,000 crore trans-harbour link project is in troubled waters.

Jai Corp had wanted to participate  as part of a consortium in the Maharashtra government’s  project.

It is, however, yet to take off because even two rounds of bidding failed to throw up a winner.

The state government now proposes to call for fresh bids to develop the link, though officials are not clear when the process will get going.

As for the Mumbai Metro projects, the first two lines are being set up by the Anil Dhirubhai Ambani Group and the state government is yet to invite bids for the remaining six lines.

So here, too, it could be a long wait for prospective bidders.