Debt Recast, Govt’s Infra Push Spark Rally in JP Stocks
Stock up 50% in a month; Jaiprakash Power Ventures surges over 55% since January 1
Mumbai: Jaiprakash Associates has been brimming with activity on the bourses since the beginning of this year, thanks to debt restructuring of JP Power Ventures, in which the debt-ridden company holds around 60.69%; election machinations in UP; and the government’s infrastructure push in the Budget.
Such has been the activity that JP Associates stock hit fresh 52-week highs for two straight sessions, on FridayandMondayintradaywhen it hit ₹ 15.7, up 50% over the past month. While Jaiprakash Power Ventures stock closed at ₹ 6.16, up 3.18%, JP Associates ended at ₹ 15.14, up 1.34%. JP Power stock hassurgedover55%sinceJanuary 1. Analysts said the momentum coulddrivethestockupbyanother 30% in the next few weeks. Jaiprakash Power Ventures on Saturday allotted 305.8 crore shares to its 23 lenders as part of debt restructuring scheme, which hasreducedthedebtof powercompany by ₹ 3,058 crore. Following the allotment, financial institutions’ holding has increased to 51%, while t hat o f Jai p r a kash Associates fell to 29.74%. Jaiprakash Associates on Saturday also announced that due to the restructuring of equity, the JP Power Venture ceases to be its subsidiary, which would reduce its consolidated debt burden by nearly ₹ 25,000 crore. JP Associates has a total debt of ₹ 67,528 crore as on March 31, 2016.
“Debt re-structuring would benefit both the companies in long term” said AK Prabhakar, head of research, IDBI Capital. “JP Power will benefit from lower interest cost, while JP Associates with better consolidated balance sheet without the numbers from JP Power.”
Volumes of the JP Associates have risen to 10 crore shares traded a day from the 6-month average of 2.5-3 crore prior to Jan 4. On the derivatives counter, the stock en-
tered the ban period on February 20 as position limits exceeded 95% of its market-wide position limit.
In the ban period, if one wants to initiate fresh positions, exchanges levy a penalty of ₹ 1 lakh to do so. Whilecautioningclientsaboutthe extreme volatility in the counter, analysts like Hemant Nahata of IIFL are not ruling out the stock havingashyat ₹ 1820 levels over the short term. “Weekly charts point at 12.5 as a strong support and resistance around 23 levels,” said Nahata, adding that the buildup of positions recently pointed to a “bullish sentiment” on the counter.
It is also one of 63 counters in which the top 7 clients on NSE F&O segment hold over 3% each of its market-wide position limits.
Independent analysts like Aadil Sethna emphasise that trading by retail in stocks such as JP Associates, which are considered shaky due to their weak financials, could be fraught with risk.
To trade one futures lot of JP, a client has to place almost 27% margin, including a 5.3% extreme loss margin. At Friday’s closing that is a margin of ₹ 2.8 lakh on a contract of ₹ 10.3 lakh as the daily volatility is 5.7%.
Jaiprakash Power Ventures on Sat alloted 305.8cr shares to its 23 lenders as part of debt restructuring