Jaypee Group, owner of India’s most indebted cement maker, plans to sell some of its plants and real estate in a bid to cut liabilities by about 25%.
The builder of the country’s only Formula One racing track seeks to reduce debt by R15,000 crore ($2.5 billion) by selling its cement plants in southern and western India, some of its power generation units and property in a year, Suren Jain, managing director at Jaiprakash Power Ventures, said in an interview. The flagship Jaiprakash Associates has $10 billion of total debt, according to data compiled by Bloomberg.
The group’s liabilities increased fivefold in five years as Chairman Manoj Gaur took on debt to expand the cement maker’s power, sports and construction businesses. Gaur is selling assets to cut costs and revive profit, which has fallen for two straight years, as a central bank engineered cash crunch prompts lenders to raise interest rates for the first time in two years.
“The cash flows from operations won’t be sufficient in the next one to two years to bring down the debt,” said Anubhav Gupta, an analyst at Kim Eng Securities in Mumbai. If the company had sold a cement plant “12 months back the troubles might not have been what they are today.”
Jaiprakash Associates had a net debt of about R61,200 crore, the highest among Asian makers of the construction material after China National Building Material Co., according to data compiled by Bloomberg.
The Indian company will need R8,100 crore to service its debt in the year ending March 31, Ankur Kulshrestha, an analyst with HDFC Securities, said in a note to clients on July 30.
Jaiprakash Associates’ shares have dropped 70%this year, making them the worst performing stock in the CNX Nifty index. Jaiprakash Associates fell 0.3%to R31.35 at 10:07 a.m. in Mumbai.
The company’s convertible bonds yield 14%, said Hemant Dharnidharka, the Bangalore-based head of credit research at SJS Markets. “The higher yield shows that the investors want a higher return for the comparatively higher risk for the name.”
The group plans to sell about 30%of its cement capacity of 35 million metric tonne, Jain said without elaborating. Gaur is looking to cut debt at Jaiprakash Associates and its two subsidiaries Jaiprakash Power Ventures and Jaypee Infratech, he said.
Billionaire Kumar Mangalam Birla is in talks to acquire the Gujarat cement unit of Jaiprakash Associates, three people with direct knowledge