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

The Economic Times - - Money - Ram Sah­gal & Ra­jesh Mas­caren­has

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

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