JP Group stocks strike a sorry note amid rally

Nearly a million small investors stuck in group stocks see value erosion

When the whole street was celebrating Holi with new highs, one counter was frowning. The stocks of the Jaiprakash Group, which has significant business interests in Uttar Pradesh and Uttarakhand, fell by up to 9.1 per cent.

Against a Sensex gain of 1.71 per cent, JP Power Ventures lost 3.97 per cent at Rs 5.57, Jaiprakash Associates ended 5.7 per cent lower at Rs 14.1 per share, and Jaypee Infratech fell 9.1 per cent to close at Rs 10.59 per share.

"They were the favourites of the Mayawati regime. What happened to Mayawati in the elections is reflected in the prices," said a Delhi-based broker. The Noida-based group, founded by former state government engineer Jaiprakash Gaur, which was once seen as close to the Mayawati regime, has been struggling with debt issues. The troubles have worsened after 2012, when a new government came to power in UP. The consolidated debt of the group, now headed by Gaur's son Manoj, stood at Rs 68,500 crore at the end of 2015-16.

The stocks had gained in the last few months on hopes of a favourable regime in the states adding to the efforts the group has been taking to clear the debts. Jaiprakash Associates, the group flagship had gained 34 per cent in the six month period ending Friday, while the power and infra arms had gained 18.4 and 22.6 per cent, respectively. In the same period, the benchmark Sensex was almost flat.

Though most analysts have stopped covering the group stocks regularly due to heavy value destruction in the past few years, lakhs of retail investors and institutions such as LIC have significant exposure to the group stocks.

While JP Associates has 558,000 small investors, JP Power Ventures has 312,465 small shareholders, whereas JP Infratech has 128,792 of these. In all three, LIC holds significant stake.

In February, a clutch of lenders have become majority owners of JP Power ventures after Strategic debt restructuring. Jaypee Infratech The company has also recently announced that its plan to sell its cement business to Ultratech has received the clearance of National Company Law Tribunal.

Once a darling of traders, Jaiprakash Associates stock had hit a high of Rs 300 at the market peak of January 2008. Though it had hit lows of around Rs 40 in the post Lehman collapse, it had recovered to around Rs 80 levels and even crossed Rs 100 in late 2012, after the Yamuna expressway was thrown open.

The group's move from being an executor of projects to owner of assets riding on significant leverage backfired and it began unwinding leverage by selling assets. Though the group has sold over Rs 30,000 crore of assets over the past couple of years, it still has about Rs 50,000 crore of dues left. In comparison, the combined market cap of the listed entities stood at about Rs 8,100 crore on Tuesday.

An old friend coming back to power would have been just what the doctor ordered for that kind of a balance sheet. But, the people of UP had other ideas.