Lenders to Jaiprakash Associates have decided to take control of the company’s vast land bank to recover their loans worth Rs 13,000 crore. The land bank will, however, be liquidated at a later date, the lenders decided at a meeting in Mumbai on Thursday.
Jaypee Group’s three listed companies, which reported Rs 40,157 crore of debt as of September last year, were defaulting on bank loans, leading to asset sales in the last three years. In a joint lenders’ forum meeting held on Thursday, the banks took into account the company’s financial metrics, on the basis of which the Jaypee management reported that they expected Rs 10,000 crore of debt to move to Ultratech Cement, which has taken over its cement plants in central and western India.
Of the Rs 6,000-crore “sustainable” debt to be retained on the JP Associates books, the operating assets, including a power plant, will be used to service debt. Another Rs 13,000 crore debt will move to a special purpose vehicle (SPV) that will house the land bank in Uttar Pradesh’s Noida. “While the SPV would be technically owned by JP Associates for tax purposes, the lenders will control it. The banks would work out a plan to liquidate the land bank and how to use it to recover their loans,” said a source. Three leading banks — ICICI Bank, State Bank of India, and Axis Bank — are driving the debt recast package, which will now be circulated among all lenders to the company for final approval in 15 days. The stock of JP Associates reacted positively to the JLF meeting as its shares closed five per cent up at Rs 13 a share.
In October last year, the CK Birla group firm, Orient Cement, acquired a 74 per cent stake in Bhilai Jaypee Cement and Nigrie cement grinding unit in Madhya Pradesh from Jaypee Group companies at an enterprise valuation of Rs 1,950 crore.
The sale of assets by Jaypee Group was necessitated as in its 2015-16 results statement, Jaiprakash Associates had revealed that it had defaulted on bank loans, interest and statutory payments of Rs 4,539 crore.
In February 2016, Jaypee sold its cement unit with a capacity of 17.2 mtpa to Aditya Birla group’s Ultratech at an enterprise value of Rs 16,000 crore. Earlier, in November 2014, Jaiprakash Power had sold its hydropower projects to JSW Energy for Rs 9,300 crore.
Analysts said the group fell into financial trouble as it tried to grow too fast with diversification into real estate and infrastructure sector without worrying about any slowdown. Two of its marquee projects – Delhi-Agra Expressway and Formula 1 stadium – turned out to be white elephants with zero visibility of earnings. To make matters worse, Axis Bank took over the group’s headquarters in Delhi as the group failed to repay loans.