Why Jaypee may be better off after Taqa sale call-off

Written By Unknown on Jumat, 25 Juli 2014 | 23.25

With investor sentiment marking a stark improvement since the storming to power of the Narendra Modi-led BJP, Jaypee could now garner an even higher amount for the sale.

Moneycontrol Bureau

On Thursday, the  Jaiprakash Power announced that a deal between itself and a consortium led by Abu Dhabi National Energy Company (Taqa) for sale of two of Jaypee's hydropower plants stood cancelled.

The Rs 9,689-crore deal for the two plants based in Himachal Pradesh was announced in March was a vital link in the Jaypee Group's plans to bring down its massive Rs 56,000 crore debt burden (as of FY14).

"They (TAQA) have… stated that they have been constrained to take the said decision as a result of a change in the business strategy and priorities of the group," JP said in a statement to the stock exchanges Thursday. "We may add here that such withdrawal makes TAQA liable to payment of break fee in terms of the said acquisition agreement."

Also read: JP Power down 7%, TAQA annuls Rs 10500cr buyout transaction

While the break fee may not amount to much – a Mint report pegs it at Rs 54 crore – it could come as a blessing in disguise for the group, as it now stands a chance to get an even better deal.

The Taqa deal was announced in March, even economic conditions were not as upbeat as they are now and amid some nervousness over the impending general election.

With investor sentiment marking a stark improvement since the storming to power of the Narendra Modi-led BJP, Jaypee could now garner an even higher amount for the sale.

Unlike traditional coal-based thermal plants, which have been beset by fuel shortage and tariff issues in India, Jaypee's two hydro plants are functioning with strong operational parameters and power offtake agreements, Manish Aggarwal, a partner with KPMG, told Mint.

"I think the group will find buyers sooner or later for these assets," he added.

There are already reports Adani and JSW are in talks with the Jaypee Group to buy out its hydel business.

"In the past 8-10 weeks, several people have approached us for strategic discussions as India Inc is once again feeling upbeat about an economic turnaround," Jaypee Group chairman Manoj Gaur told the Economic Times.

"We are working on a plan B, which we shall announce in the coming days."

Gaur had earlier reiterated Taqa's cancellation will not have any impact on the group's plans to pare debt, which he hopes to bring down to Rs 45,000 crore by the end of the year.

Jaiprakash Pow stock price

On July 25, 2014, Jaiprakash Power Ventures closed at Rs 18.95, down Rs 0.25, or 1.3 percent. The 52-week high of the share was Rs 26.63 and the 52-week low was Rs 8.55.


The company's trailing 12-month (TTM) EPS was at Rs 0.07 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 270.71. The latest book value of the company is Rs 22.00 per share. At current value, the price-to-book value of the company is 0.86.


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