Jaypee Group may sell more assets to cut debt

Expects Rs 21,000-cr enterprise valuation for cement unit

The Jaypee group - which is set to sell its cement unit for Rs 21,000 crore enterprise valuation - may have to sell others assets to retire its massive Rs 75,000 crore of debt, which is eating into its earnings and delaying recovery of loans, said bankers.

Lenders, who are worried about the group's repayment capacity, want Jaypee to sell assets like real estate and stake in Yamuna Expressway soon after its cement unit sale, which is expected to be concluded by March. Bankers said the situation was grim as almost two-thirds of the group debt is now in the default category including standalone parent company's debt.

Media reports earlier indicated that the 24.5-million tonnes per annum cement capacity would be sold at zero equity value to the bidders, but top Jaypee group officials said ascribing zero equity for its shares was not correct. Private equity firm, KKR, Aditya Birla group's UltraTech, Dalmia Cement and JSW Cement are among the bidders for Jaypee's cement units - scattered all over north India.

The company blamed worsening performance of core sectors and a shaky economy for the fall in its financial metrics.

With no signs of the Indian infrastructure sector recovering in the near future, analysts said it would be tough for the company to service its finance cost worth Rs 7,300 crore a year. When contacted, a group spokesperson denied selling any other assets including stake in Delhi Agra Yamuna Expressway.

In the past two years, the group was aggressive in selling assets to raise about Rs 22,000 crore but debt levels are estimated to be still up 18 per cent over the past two years (see chart). The asset sales included 8.4 mtpa of cement capacity for Rs 5,000 crore and another 4.9 million tonnes of cement capacity for Rs 5,400 crore. Group firm, Jaiprakash Power, also sold two hydro plants of 1,391-Mw capacities for Rs 9,300 crore to JSW Energy and is in talks for sale of its 500-Mw Bina project. However, in December analysts at Credit Suisse said as the 1,391-Mw hydro plants contributed 59 per cent to its fiscal 15 earnings before interest and tax, the loss of Ebitda from these projects would result in debt-to-Ebitda for the company moving up further.

Besides, to make matters worse the two residual thermal plants at JP Power have been operating at low 35 per cent capacity.

Post its mine getting cancelled by the government, the group had acquired mines in the auction that will be a drag on its profitability, according to a report by Credit Suisse. Jaypee Infratech has also been facing liquidity crunch even post completion of its expressway project owing to its real estate exposure, it said.