An Expressway for sale: Jaypee seeks relief from loan burden

Jaypee Group is in initial talks to sell its entire holding in the 165 km long six-lane Agra Yamuna Expressway project, according to recent media reports. This move comes after the company’s initial efforts to sell a partial stake failed to materialise.

The debt-laden multi-diversified group is in talks with infrastructure-focused funds IDFC Alternatives and I Squared Capital to sell the toll-based project in Uttar Pradesh that connects Noida with Agra along the Yamuna river. Of late the debt-laden entity has been trying to sell its various business ventures in order to raise cash to pare down its huge pile of debt.

The integrated Yamuna Expressway project includes construction, operation and maintenance of the Expressway and rights for developing over 6,175 acres of land along the Expressway. Jaypee Infratech is developing five townships on this land. Company is likely sell its few land parcels along the road project.

Built at a cost of Rs 12,000 crore the project has not lived up to the expectations of the company due to mismatch in traffic volume estimates. Company has not been able to earn more than Rs 200 to Rs 300 crore versus earlier expectations of more than Rs1,000 crores. Company recently increased toll rates two times in the last 3 months for the vehicles on expressway, which too could not help the performance of the expressway project as initially expected. Government recently made it easier for road developers to divest their holdings in operational projects, which led to a spurt in deals in the roads sector.

Jaypee Group's entire debt as the end of Q2FY16 stood at Rs 61,285 crore, which has led to soaring interest burden levels. Recently in June 2015 group company’s defaulted on interest payments leading to rating downgrades from major rating agencies. Therefore, it becomes important for Jaypee Group to complete this deal.

According to Credit Suisse, the Jaypee Group companies has defaulted couple of times in repaying loans in 2015. In February, JP Power defaulted on repayment on USD 200 million foreign currency convertible bonds and had to renegotiate with lenders. JP Associate's too defaulted on repayment in July. CARE Ratings downgraded the ratings of Jaypee Cement Corporation to the default category as it failed with its interest payment. The Jaypee group has been downgraded to default category by most of the credit assessment agencies.

Though the group plans to undertake major debt reduction steps, but still it would find extremely difficult to repay its existing interest obligations as company is not being performing operationally. Company has been unable to generate cash flows in order to pay off its interest claims.

The group is not alone in selling assets to repay debt. A host of Indian groups like Essar, Videocon, Lanco, GMR, GVK and Reliance ADA are selling assets as lenders exert pressure for timely repayment.