Why JP Associates Share Price is Falling

Following a steep rally for the first two months of 2024 and for the better part of the past one year, Jaiprakash Associates shares have come under pressure.

In the past one month, shares of the company have fallen more than 30%.

Trading at under Rs 20 per share, you could imagine the excitement around investing in the stock at dirt cheap value.

A lot of retail investors who punted on the stock for a quick turnaround in 2024 have been proven wrong... at least for the time being.

Let's find out why Jaiprakash Associates share price is falling and whether the downtrend will continue.

#1 Unsatisfactory Valuation for Stressed Assets

Reportedly, the lenders of Jaiprakash Associates are planning to take the company to National Company Law Tribunal (NCLT).

This move comes after they were unable to garner a satisfactory valuation for the stressed assets of Jaiprakash Associates from the National Asset Reconstruction Company of India (NARCL).

The flagship firm of Jaypee group owes nearly Rs 290 billion (bn) including principal and interest to 32 banks, including SBI, ICICI Bank, IDBI Bank, and others.

This is not the first time the company is being dragged to the NCLT. Back in 2018, it was shortlisted for insolvency proceedings initiated by ICICI Bank and State Bank of India.

Last year in November, the company announced the deal to transfer about 189 million shares worth Rs 3.6 bn to ICICI Bank under a settlement agreement.

Now, bankers are concerned that going by its past track record, the actual amount of recovery from NCLT would not be very encouraging.

NARCL is the go-to option when lenders and companies are looking for satisfactory valuations.

#2 Weak Q3 Results

Last month, the company posted a consolidated net loss of Rs 4.8 bn in the third quarter of FY24 compared to Rs 3.1 bn in the year-ago period.

Swelling losses have remained a concern in recent years, leading to ongoing delays in debt servicing.

The company was one of the leading cement companies in the country, with an installed capacity of 10.58 metric tons.

However, mounting debt levels and low liquidity couldn't help the company grow its cement business.

The company restructured its debt in 2017 due to high debt levels. Despite the restructuring, there has been a delay in servicing its debt due to low liquidity.

What Next?

Investors were almost convinced with the company's recent track record and its plan to divest stake in cement business going well for the past three months.

However, swelling losses have added to worries and investors who bought shares recently have started to book some profits.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	92,103	70,355	64,057	57,518	72,631
Growth (%)	26%	-24%	-9%	-10%	26%
Operating Profit	9,307	5,271	9,084	3,369	8,403
OPM (%)	10%	7%	14%	6%	12%
Net Profit	-20,450	10,957	-6,615	-14,780	-13,418
Net Margin (%)	-22%	16%	-10%	-26%	-18%
ROE (%)	-43.2	113.9	-35.7	-129.5	0.0
ROCE (%)	-0.3	13.2	1.7	-0.3	1.6
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	26.2	9.0	12.0	221.0	-12.8

Data Source: Ace Equity

The company is currently in the process of selling its cement, clinker and power plants having aggregate cement capacity of 9.4 million tonnes per annum along with clinker capacity and a thermal power plant.

In an exchange filing yesterday, the company said it has been taking tangible steps to reduce the borrowings.

Post the proposed divestment of cement business and the restructuring under consideration, the borrowing will get almost nil upon implementation of revised restructuring plan.

In the most recent December 2023 quarter, institutional investor holding in the company went up from 1.26% to 8.97%.

FII holding is also on the rise for the past two quarters.

To know more, check out its detailed shareholding pattern here.

How Jaiprakash Associates Share Price has Performed Recently

In the past five days, Jaiprakash Associates share price has fallen around 11%.

In the month gone by, the stock is down over 30%.

Jaiprakash Associates has a 52-week high of Rs 22.2 touched on 12 February 2024 and a 52-week low of Rs 6.6 touched on Rs 27 March 2023.

In the past one year, shares of the company have rallied 108%.

Here's a table comparing Jaiprakash Associates with its listed peers.

Comparative Analysis

Company	JP Associates	H. G. Infra	IRB Infra	ISGEC Heavy	ITD Cementation
ROE (%)	0.0	29.4	5.6	9.3	10.5
ROCE (%)	1.6	25.4	9.1	11.2	19.4
Latest EPS (Rs)	-	79.7	0.9	35.2	12.9
TTM PE (x)	-	11.4	67.7	26.5	26.5
TTM Price to book (x)	-2.1	2.6	2.7	2.8	4.2
Dividend yield (%)	0.0	0.1	0.3	0.3	0.2
Industry PE	52.1
Industry PB	5.7

Data Source: Ace Equity

About Jaiprakash Associates

Jaiprakash Associates is a diversified infrastructural industrial conglomerate in India.

The company is the leader in engineering and construction of hydropower projects in India.

They are the only integrated solution provider for Hydropower projects in the country with a track record of strong project implementation in different capacities.

The company is engaged in the business of integrated engineering construction and operates at the locations of their clients and uses electric energy for implementation of various projects undertaken by them.

For more details, see the Jaiprakash Asso company fact sheet and quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...