JAL Lowers Its Debt Burden, Sells 74% stake to Dalmia Cement

Jaiprakash Associates (JAL) has taken one more step toward reducing its debt burden by selling its 74% stake (9,89,01,000 equity shares owned by it) of Bokaro Jaypee Cement to Dalmia Cement. From selling of its stake in Bokaro Jaypee Cement the company will be able to raise Rs 689.74 crore. Bokaro Jaypee Cement is a joint venture between JAL and Steel Authority of India, thus above stake sale is subject to the approval of SAIL and other approvals, which are necessary from lenders of Bokaro Jaypee Cement and the concerned authorities. 

As per annual report FY' 14 of the company, it has a debt burden of approximately Rs 56000 crore that is eating profitability of the company and to reduce the same company is selling its assets and investment. Previously the company has sold 4.8 mtp cement unit to Ultratech Cement for Rs 3800 crore, 300 acres of land in Noida for Rs 1500 crore, and 2 hydro-power projects in Himachal Pradesh for Rs 10,500 crore to Abu Dhabi National Energy. If the said deals are successful the company will be able to meet its target of cutting debt burden by Rs 15000 crore till March 31, FY14.

Currently, the finance cost for the company after 9MFY14 stood at 21% of total operating income where it was 15.5% of total operating income in 9MFY13 that is causing losses for the company. From above mentioned deals the company will be able to reduce approximately one-fourth of its loan burden by the end of current financial year. 

Due to stagnant growth in infrastructure sector and huge debt burden JAL performance was not satisfactory in 9MFY14 and recorded a profit of Rs 313.47 core as compare with Rs 377.78 core in 9MFY13. During 9MFY14, its top line showed a marginal increase of 2.15% but bottom line dropped by 17% due to increase in finance cost. At present the stock is trading at it’s 24 times of its trailing 12-months earning.