Wednesday, January 11, 2017

Jaypee Infratech : From Rs 112 to Rs 8.

Jaypee Infratech IPO hit the street in May 2010, at Rs 102 a piece. 

The IPO was lead managed by Morgan Stanley India Company Private Limited, DSP Merrill Lynch Limited, Axis Bank Limited, Enam Securities Private Limited, ICICI Securities Limited, IDFC Capital Limited, JM Financial Consultants Private Limited, Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited.

In the last 7 years, the stock has lost more than 90% and it is now trading in single digit.

While analysing the IPO this is what we wrote.


The company’s sole business is development of the Yamuna Expressway Project pursuant to the Concession Agreement. Following the Concession period, which will expire 36 years after the award of the certificate of completion for the Yamuna Expressway, the Yamuna Expressway will be transferred to the government.

Furthermore, pursuant to the Concession Agreement, if construction of the expressway is not completed by April 2013 or within such extended period as may be approved by the YEA, the Concession period may be shorter than 36 years, in which case the aggregate toll revenues would suffer a corresponding reduction. 

Expressway faces high market risk given the competition from the existing National Highway 2(NH2),although this is not significant given that ICRA expects that profit from sale of real estate will be the key revenue driver for the company. Out of the five land parcels available to JIL, the land parcels in Noida and Greater Noida have high marketability. So far the company has received a satisfactory response to its real estate launches in Noida, however, achieving similar sales on a sustained basis over the long term can prove to be challenging. This is particularly so given the sizeable developable space that JIL plans to sell (58 million square feet in Noida and 87 million square feet in Greater Noida). In addition, the company faces competition from numerous other players which have sizable real estate development plans in Noida and Greater Noida. Apart from the Noida and Greater Noida land parcels, the Concession Agreement (CA) also provides JIL rights for development of similar land parcels in Mirzapur, Tappal and Agra. The market risks for these land parcels are higher given the low current demand and lack of adequate physical and social infrastructure in these areas. Going forward, timely completion of the expressway and delivery of existing real estate projects would be crucial for sustained real estate sales. 

RECOMMENDATIONS - Investors are advised to stay away from the issue, since there may not be any listing gains, considering long gestation period and the risks associated with the project,particularly uncertain revenue generation.

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