Jyoti Structures price surges as lenders decide to convert loan into shares

The share price of the loss making company Jyoti Structures Limited surged by 9 percent today. According to a media report, the consortium of 21 lenders led by State Bank of India (SBI) have decided to convert Rs.307.6 crores of loans into shares. The share price will be Rs.26.90 per share, at premium to the current market price. The move is a part of strategic debt restructuring (SDR) between the lenders and company.

SDR is a scheme outlined by the Reserve Bank of India (RBI) earlier this year which allows banks to convert debt to equity at a value not less than its face value. Under this scheme lenders have 18 months from the date the SDR scheme becomes effective to find a buyer for the company. Should banks fail to usher in a new promoter, the asset would be classified as a non-performing asset.

In terms of financials, the total debt of the company for year ending March 2015 was Rs.2355.96 crores an increase of 86 percent on yearly basis. The total operating revenue of the company for year ending March 2015 stands at Rs.3111.36 crores a decrease of 14.43 per cent on yearly basis. The EBITDA margin is 0.88 per cent as compared to 6.53 percent for the same period last year. The increase in the total debt raised the interest burden by 73 percent for the company. Now, the debt of the company stands at Rs.425.61 crores because of an increase in debt and reduced sales. The company faced a net loss which stands at Rs.395.75 crores.

Jyoti Structures pays around 13.68 percent of its net revenue in interest costs. This move of SDR will help the company in reducing interest burden and improving financials.

The stock of the company is trading at Rs. 19.40 an increase of 9.60 percent from the previous close.

Jyoti Structures Limited is an India-based engineering, procurement and construction (EPC) contracting company in the power transmission and distribution networks. The Company operates in India and all over the world with its presence in Asia, Africa and North America. The Company is engaged in the power transmission and distribution business.