Why Jaiprakash Associates Share Price is Rising

Snatching away some sheen from the timeless charm of bluechip stocks, small-cap stocks have managed to outperform Nifty in the six months of FY23.

The Nifty Smallcap 250 index has not only fared better than Nifty in each of the last six months but has also given positive returns throughout.

Fifty small-cap stocks logged double-digit moves, in the range of 12-40%, last week. The BSE Sensex, on the other hand, ended October's second week with a modest gain of 0.5% after five volatile sessions.

This upward trajectory continues, with Jaiprakash Associates, another small-cap stock, surging by 21% in the past two sessions.

Let's delve into the reasons behind this remarkable surge.

Adani Deal Reports

The share price of Jaiprakash Associates went up by 12% on Wednesday on media reports suggesting that the Adani Group is looking to acquire its cement plant in Shahabad in Karnataka, with a capacity of 1.2 million (m) tonnes per annum.

The Adani Group is acquiring rivals and is in talks with several companies to expand its capacity from 70 to 140 mtpa in the next five years.

The news of the sale of assets by Jaiprakash comes at a time when petitions filed by ICICI Bank and State Bank of India (SBI) for a debt resolution under the Insolvency and Bankruptcy Code, 2016 are still pending before the Allahabad Bench of the National Company Law Tribunal (NCLT).

ICICI Bank filed its plea in September 2018, while SBI moved the NCLT in September last year.

The delay in the debt resolution in the NCLT has prompted lenders to initiate negotiations for selling part of the loans to the National Asset Reconstruction Company.

Notably, in December last year, Jaiprakash Associates entered into an agreement for the divestment of its cement, clinker, and power plants, collectively possessing capacities of 9.4 mtpa, 6.7 mtpa, and 280 MW, respectively.

These assets were intended to be divested to Dalmia Bharat at an enterprise value of Rs 55.86 bn but as of now the deal remains pending and unconcluded.

What Next?

In April, it had expressed its intention to sell 150 acres along the Yamuna Expressway to raise about Rs 15 bn to pay Yeida.

However, Yeida objected to the plan on the grounds that the parent company of the group, JAL, has already mortgaged 80 acres of the 150 acres to banks. Thus the company cannot sell the same to raise funds.

Notably, this land parcel is part of the core area of the Sports City project that is coming up along the Yamuna Expressway. Sports City is a mega project as part of which a consortium of developers will construct housing units, sports facilities, and commercial spaces.

JAL's proposal included securing the outstanding amount against 61.4 acres of housing land, 81.8 acres of commercial land, and 5.2 acres of institutional land, totaling 150 acres in the core area.

The value of the land parcel was estimated to be Rs 27.6 bn, and JAL intends to sell or sublease the land within a year from the date of the high court order and deposit the proceeds into an escrow account.

Yeida will be entitled to withdraw up to Rs 14.8 bn from the escrow account, while the remaining amount will remain in the account until the court proceedings are concluded.

As the situation unfolds, it will be interesting to see how these factors continue to shape the company's trajectory.

How Jaiprakash Associates Shares have Performed Recently

In the past six months, shares of the company have rallied over 77%.

On a year-to-date basis, Jaiprakash Associates has surged 20% while in the past five days, shares are up 11%.

The company touched its 52-week high of Rs 14.5 on 7 September 2023 and its 52-week low of Rs 6.6 on 27 March 2023.

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.

They are also engaged in the business of manufacture and marketing of cement, power, fertilisers, real estate, and also owns five star hotels.

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

You can compare Jaiprakash Associates with its peers:

Jaiprakash Associates vs JK Lakshmi Cement

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