Resolution plan: Why Jaiprakash Power is soaring while JAL shares slip?

Jaiprakash Power Ventures shares jumped 11.8 per cent in trade on the BSE, logging an intra-day high at ₹15.64 per share. However, Jaiprakash Associates shares fell 4.7 per cent to the day’s low at ₹2.41 per share. The movement in the respective stocks came after the National Company Law Tribunal (NCLT) cleared Adani’s resolution plan for the company’s promoter, Jaiprakash Associates (JAL). 

Why were JAL shares falling?

The NCLT, Allahabad Bench, orally approved the resolution plan submitted by Adani Enterprises for JAL under the Insolvency and Bankruptcy Code, according to exchange filings.

 

In its disclosure, Jaiprakash Associates said the approved plan provides for the company’s securities to be delisted from the stock exchanges.

 

 

The company further said that, based on the successful resolution applicant’s assessment, the liquidation value is insufficient even to fully satisfy secured creditors’ claims. As a result, existing shareholders will receive nil consideration, and the exit price for shareholders has been fixed at zero as part of the delisting process.

 

JAL added that on the effective date under the approved resolution plan—expected no later than 90 days from the date of NCLT approval—the company’s entire pre-CIRP issued share capital, including equity shares, preference shares, unallotted capital, and convertible or exchangeable instruments, will be fully cancelled and extinguished for zero consideration.

 

The filing clarified that the disclosure is based on the oral pronouncement of the order and that a more detailed disclosure will be made once the written order is made available.

 

In a separate filing, Jaiprakash Power Ventures, which referred to JAL as its promoter company, also informed the exchanges about the NCLT approval of Adani Enterprises’ resolution plan for Jaiprakash Associates. 

Why are Jaiprakash Power Ventures’ shares surging?

Balaji Rao Mudili, research analyst, Bonanza, said, “The resolution plan grants Adani access to JAL’s major assets, including the 24 per cent stake in Jaiprakash Power Ventures. With JAL carrying a massive debt of over ₹57,000 crore, Jaiprakash Power Ventures can benefit from better management with Adani, deep pockets for expansion, and easier access to cheaper loans.” 

 

He added: Jaiprakash Power Ventures' stock was risky because there was an uncertainty whether the parent company would be forced to dump the shares or if its assets would be frozen. With a clear winner announced right now, the “uncertainty discount” is vanishing due to which there is buying interest seen again.