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Jaiprakash Gaur started his career as a civil engineer with the Uttar Pradesh government’s irrigation department. Another asset awaiting sale is Jaypee’s 2.1 million tonne Bhilai Cement unit, expected to garner up to ₹ 1,800 crore. Jaypee’s debt, at the group-level, as of 31 March 2015, stood at ₹ 85,726 crore. In case you can’t find any email from our side, please check the spam folder. In a bid to service its Rs-75,000-crore debt, Jaypee Group is setting its sights on the sale of other business. Of this, the company expects to shave off ₹ 24,441 crore through asset sales by September. Since July, ₹ 49,038 crore worth of credit and loan facilities of Jaypee Group’s three listed entities—Jaypee Infratech Ltd, Jaiprakash Power Ventures and Jaiprakash Associates Ltd—have been assigned a default rating on account of delay in servicing of debt obligations. In the past year, the Jaypee Group has sold several assets and brought down its debt by ₹ 20,000 crore. According to an 8 June report by rating agency Icra Ltd, the Indian banking system has restructured over ₹ 4.5 trillion in advances over past three years. The group is facing a huge protest from home buyers because of significant delays in delivery of projects. “They had plans to develop real estate around the expressway, but even petrol pumps could not come up. On November 6, 2019, the SC directed that Jaypee's corporate insolvency … In a significant direction that will help NBCC in faster completion of stuck projects of Jaypee Group, the tribunal ordered that the Rs 750 crore deposited by Jaypee Infratech's parent firm Jaiprakash Associates Ltd (JAL) with the registry of the Supreme Court would be part of the resolution … As per Credit Suisse’s 2015 update on India’s 10 most indebted corporate houses (the first report was done in 2012) titled “House of Debt”, the Jaypee Group, with interests ranging from engineering and construction to power and real estate, had gross debt of a little over Rs 75,000 crore in fiscal year 2015. The result: several highly leveraged firms. You are now subscribed to our newsletters. The group has sold a slew of assets to cut debt, but what happens when all the good assets are offloaded? New Delhi: Jaypee Infratech Ltd is the infrastructure and construction arm of the Rs 6,190 crore Jaypee group, responsible for projects like the Yamuna Expressway and the F1 circuit in Greater Noida. “In hindsight, we should have estimated a 5.5% GDP growth instead of 8.5%. It has just been cleared by the National Company Law Tribunal for debt resolution. Lakshadweep, which is part of the Suraksha Group, subsequently emerged as the frontrunner to acquire the firm. The sports ministry declined to give it a no-objection certificate to hold the race, till the very last minute, creating a lot of uncertainty on whether the event would take place. It was under his stewardship that Jaiprakash Associates Ltd built the Sardar Sarovar Dam over the Narmada river in Gujarat and the Tehri dam over the Bhagirathi river in Uttarakhand in 2006. The JSW deal is expected to be completed by September. “We will be out of this trouble by March 2016, god willing," he added. Over and above all these costs, Jaypee spent close to $400 million on building the race track. The Group has on a consolidated basis failed to repay Rs 2,905.6 crore in principal amount to banks and another Rs 1,558.93 crore crore in interest payments. Besides, though there was a shortage of power in Uttar Pradesh, the government did not have money to pay for it. Updated: 14 Aug 2013, 12:28 AM IST George Smith. Vishwanath Nair contributed to this story. “With this motto and clarity, we (decided) instead of thinking which project is good and which is not, we will deleverage even if it means selling good assets.". “Sometimes you think why did they get into Formula One at all?" “We banks should have realized that this company’s revenues have been impacted which in turn impacts payment schedules. The lack of transmission facilities meant power could not be transported to the southern states, which pay much more than northern states for power. So, while the contract stands, the races won’t be held until the tax issue is resolved. Jaypee group is facing a debt crisis and its group firm Jaypee Infratech has been taken over by a National Company Law Tribunal (NCLT)-appointed IRP for the recovery of bad loans. From branding revenues to telecast rights, it all goes to the Formula One management. MUMBAI: Concerned over their massive exposure to the debt-laden infrastructure conglomerate Jaypee Group, its lenders met here today to take stock of the situation. But it’s yet to turn profitable and may not be able to repay all its loans even after selling its remaining assets. Construction and infrastructure companies typically have large debt but Jaypee’s debt, distributed over many companies, towers over them. Jaypee group, which has interests in power, cement, infrastructure and real estate, has been struggling with poor finances. But the group still has consolidated debt of ₹ 61,285 crore. According to Sandeep Kumar Mohanty, principal consultant (energy and utilities), PricewaterhouseCoopers India Pvt. The semiconductor business is susceptible to fast-evolving technologies and hence companies in the space need to constantly invest in research and development, something which Jaypee doesn’t have the cash for. Circuit owners make money on tickets. But his interview with Mint on 13 May 2014 helps shed light on his thinking. An official from a private bank, who is closely tracking Jaypee’s debt-reduction efforts, said bankers erred in allowing the company higher borrowing limits even when they could not pay back their previously borrowed loans. In addition to this cost, Jaypee Group spent $15-20 million annually in operational costs—track and event management, logistics and transport. Earlier, in November 2019, the Supreme Court (SC) had reserved its verdict in the Jaypee Group case. The debt-ridden company had submitted a plea against the National Company Law Appellate Tribunal (NCLAT) order that had restrained the parent company from participating in the auction of Jaypee Infratech Limited (JIL). On top of this, global funds are moving between asset classes, originally triggered by commodities slump, but now showing a wider impact, and so global financial and strategic investors who otherwise could ride to rescue, are on a watch mode," he said. The consolidated interest cost of Jaiprakash Associates surged 46 per cent in 2012/13 to Rs 4,569 crore. The big question is what happens when all of Jaypee’s good assets are sold? Indian infrastructure companies borrowed heavily to finance extravagant expansion plans during the boom years. In an April 2015 note, Credit Suisse noted that four of the 10 companies in House of Debt—an August 2012 report by the brokerage, evaluating 10 corporate houses that had the largest debt piles—had defaulted on some portion of their loans. The Jaypee Group successfully completed projects in 18 states of India and Bhutan. Jaypee was not alone. In December last year, the Committee of Creditors (CoC) comprising 13 banks and around 21,000 homebuyers approved the resolution plan of NBCC. While the group’s 500 million sq.ft land bank around Delhi is intact, other assets have shrunk—it will be down to 12 cement plants from 19, one hydropower plant from three and three thermal power plants from five, in 2015. Between 2006 and 2012, the group invested ₹ 60,000 crore in real estate, power and cement. To overcome the debt the company has also sold several of its assets. Then came the controversies. In December, two of Jaypee’s cement factories and associated power plants were sold to UltraTech Cement Ltd for ₹ 5,400 crore. Jaypee’s ambitions got a further boost when then Uttar Pradesh chief minister Rajnath Singh announced plans to build international airport at Greater Noida. Between 2000-01 and 2007-08, banks had a high lending appetite and evaluated investment opportunities by looking at individual projects and may have overlooked the business and financial risks of the complete group. He is the Chairman of the Jaiprakash Associates Limited. Default rating, according to CARE, implies that instruments with this rating are in default or are expected to be in default soon. “May be the timing was probably not right for Jaypee Group when we planned our projects," said a senior Jaypee Group executive, requesting anonymity. Debt-ridden Jaypee Infratech has an outstanding debt of nearly Rs 9,800 crore, of which Rs … The United Progressive Alliance (UPA) government was of the opinion that the drivers need to pay taxes. The revenue structure in Formula One racing is in favour of the Formula One management and not the circuit owner. The Indian economy grew at a sub-5% rate (as per the previous gross domestic product data series) for two consecutive fiscals—2012-13 and 2013-14. The group has been looking at ways to cut debt as a high interest outgo is hurting its profit. “When you do certain things for the first time, it is about prestige.". The entire Jaypee group consolidated debt stands presently at Rs.65,000 crore and news is that some of its subsidiaries have not been able to service the interest payment dues. And then, the global financial meltdown reached the Indian shores. The flagship firm of the debt-ridden Jaypee Group is a diversified infrastructure company, engaged in engineering, construction or real estate development, manufacture or marketing of cement, hospitality and sports management. Copyright © HT Digital Streams Limited All rights reserved. Jaypee Infratech went into an insolvency process in August 2017. With every asset that he sells, the business empire that he created with his father Jaiprakash Gaur—spanning infrastructure, real estate, power and cement—diminishes even as his competitors grow stronger with every Jaypee asset they buy. It was around this time that father and son sat down to chalk out a strategy for the group’s next phase of growth. In the same period, debt had grown 40 times and 20 times, respectively. CARE is the only one among the four major rating agencies that has ratings on the group. Best-known as the builder of India's Formula One racing track, Jaypee Group had debts of around ₹ 67,000 crore ($10 billion) as of February. “The funds from sales will flow in and that should take care of any delays in repayment. “I think they are sincere and serious in cutting their debt," said the public-sector bank executive quoted earlier. New Delhi: Reflecting substantial financial stress, diversified Jaypee Group companies have defaulted on loans and other payments worth Rs 4,460 … You may ask any investment bank or commercial bank; they will vouch for the same," the Jaypee executive quoted above said. The initial contract is for five years. The circuit owners have to pay the Formula One management $35-45 million a year as a licence fee. For the June quarter, the three listed companies had a combined interest cost of ₹ 1,850 crore. “We’ve created quality assets. Log in to our website to save your bookmarks. A detailed email query sent to a spokesperson of Jaypee Group on Tuesday evening remained unanswered. “The group is going to find it difficult to service debt beyond the December quarter, any road blocks on the deal with UltraTech for the Madhya Pradesh assets, will further detoriate the situation," an investment banker who has worked on Jaypee Group’s deals said on condition of anonymity. Of the ₹ 49,038 crore, ₹ 5,323 crore is in the form of non-convertible debentures while the remaining amount includes short-term and long-term bank facilities. To revive its business operations and … Some of the investments in real estate and hydropower projects remain attractive even now. Your session has expired, please login again. Debt-ridden Jaiprakash Associates Ltd. plans to, according to a news report, sell its residual cement business after asset sales helped the infrastructure company reduce its debt by more than half in the last four years. Jaypee is India's first largest cement producer and the largest private sector hydropower company with 1,700 MW in operation. The cement unit sale though is facing uncertainty due to rules which do not permit the transfer of limestone mining rights. Reflecting substantial financial stress, diversified Jaypee Group companies have defaulted on loans and other payments worth Rs 4,460 crore. Revenues of Jaypee Power Ventures Ltd and the group’s engineering and construction company JP Associates Ltd notched up compound annual growth rate (CAGR) of 26.92% and 32.08%, respectively, between 1999-2000 and 2014-15. Later in the same month, Jaiprakash Associates said it would sell its wind power plants with a total capacity of 49MW as it tries to bring down debt. Rather, they asked Jaypee to put ₹ 10 crore in the National Sports Fund every year the race is held," the Jaypee executive said. As of March 2015, Jaypee Group had a total debt of ₹ 63,999.15 crore. One reason, perhaps, was the fact that the Bahujan Samaj Party-run (Uttar Pradesh) government (which cleared the plans) was replaced by one run by Samajwadi Party," the bank executive said. GDP growth halved while interest rates shot up," the executive said. “Some companies suffer more than a few of these issues. As for new projects, the aim is to have a higher equity portion than was the norm in the past. Jaypee Group may hive off its hospitality, fertilisers units. (The one reported freebie that the Gaurs did allegedly get was the land for the circuit, which was reportedly given by the Uttar Pradesh government as a part-payment for the Delhi-Agra expressway that the group was building at the time.). “Since the company was looking to divest the thermal asset for quite some time, it was probably not prudent to attach further liabilities to it.". According to a Mint analysis, the 100 listed companies with the largest amount of debt saw a marginal 4% fall in their aggregate debt levels in 2014-15. Jaypee’s debt, at the group-level, as of 31 March 2015, stood at ₹ 85,726 crore. October 18, 2019: The Supreme Court, on October 17, 2019, said it would first hear the appeal of Jaypee Group, against the NCLAT order that barred it from participating in the auction of its debt-ridden group firm, Jaypee Infratech Ltd (JIL). P.R. A number of Indian firms saw a sharp rise in debt between 2012 and 2014 due to aggressive expansion plans, some of which failed to take off because of a weak economy and delayed project clearances. The group, founded by Jaiprakash Gaur, witnessed a phenomenal rise between 2000 and 2006, riding on the realty and infrastructure booms. “But in the last three years, analysts and people feel that there is too much leveraging and too much investment," Manoj Gaur had said in the interview. To name a few cases for Jaypee, the ₹ 8,000 crore 1,320MW Nigrie thermal power plant in Madhya Pradesh was funded by debt to the extent of 70%, and the entire 1,000MW hydropower portfolio of ₹ 7,000 crore had a debt-equity ratio of 70:30. Further cash flows are expected from its ₹ 5,400 crore deal with UltraTech Cement Ltd to sell two cement units in Madhya Pradesh. Capacity utilization fell and costs escalated after the financial slowdown, while the group was more than doubling its capacity in power and cement segment, he said. The Jaypee executive remains confident that the company will see a turnaround. He declined to be named. Kameswara Rao, leader (energy, utilities and Mining) at PricewaterhouseCoopers Pvt. So here’s what happened: Jaypee Infratech is saddled with a total debt of almost Rs 8,000 crore. Plans included a cricket stadium that could seat 100,000 people, a tennis stadium and five townships on the Noida-Greater Noida Expressway (the first township, known as Wish Town, is yet to be completed). Jaypee Group defaults on Rs 4,460 cr debt, payments. While Jaypee expects to reduce debt by the entire amount, structured in a way wherein R3,650 crore of debt will be immediately reduced and the group will get R150 crore … said the executive. It owes IDBI alone … Jaypee Infra and Jaypee Power have fallen into account-1 category for banks, which means they have not been able to service debt for sixty days now, say sources. According to another official representing a public-sector bank, Jaypee Group’s problems stem from its failed Yamuna Expressway project, which could not realize its potential return, as a result of which, the company could not meet its revenue targets. The Manoj Gaur-led group is in the process of reducing its debt of over Rs 72,000 crore by selling some of its assets, which could also help it deleverage the balance sheet. What saved Jaypee from piling up further losses was the issue of double taxation. It sold tickets worth $25 million and lost $40 million on the race every year. Jaypee Group’s Companies ... Jaypee Group refutes Economic Times report on debt, and gives figures of Groups assets; JP Associates up on Rs 913-cr Bhutan power contracts 26 March 2012, Business Standard ; Founder Chairman letter; Jaiprakash Associates Update "Dream Catcher" : Founder Chairman shares his story with Financial Express ; JAL among India’s Fastest Growing Companies; Press Note : … Jaypee had defaulted on a Rs 526-crore loan by the bank. Copyright © HT Digital Streams Limited All rights reserved. The company does not want to make any capital expenditure for the next five years, according to two people familiar with the development. Share: Updated: Jun 03, 2016, 19:24 PM IST. Some bankers, though, remain hopeful that the group will be able to regularize repayments. A bench of justices A M Khanwilkar and Dinesh Maheshwari ordered status quo after the apex court was informed that Parliament had passed the proposed amendments in the Insolvency and Bankruptcy Code. At least 25% of the operational costs went to the government’s kitty as taxes. Envisioning massive levels of tourism, Jaypee decided to build on those projections, literally. “The risks and return horizons (of chip/semiconductor business) are much smaller than the traditional EPC (engineering, procurement and construction) business. It'll just take a moment. A detailed questionnaire sent to the company remained unanswered. Manoj Gaur is the elder son of Jaiprakash Gaur. “We had started most of our projects during 2007-09 when interest rates were much lower and GDP was growing at 8.5%," this executive said. The bench, comprising justices AM Khanwilkar and Dinesh Maheshwari, said it would deal later with the revised proposal of state-owned NBCC, to complete the stalled … In September, Jaypee’s power arm, Jaiprakash Power Ventures Ltd, announced the sale of two hydropower plants with a capacity of 1,300MW to Sajjan Jindal’s JSW Energy Ltd for ₹ 9,700 crore. Mint profiles four such entities to find out how they grew, what went wrong, and how they are trying to find redemption. The Group has on a consolidated basis failed to repay Rs 2,905.6 crore in principal amount to banks and another Rs 1,558.93 crore crore in interest payments. To be sure, the chip-making business is a lucrative one where several Chinese and Taiwanese companies have made their fortunes, and India today is among the world’s top three markets for smartphones, with a huge market for semiconductors. It'll just take a moment. You are now subscribed to our newsletters. "We have … The group also sold its entire 74% stake in a Bokaro-based joint venture with steelmaker Steel Authority of India Ltd (SAIL) for ₹ 690 crore in March this year. To be sure, there are more assets up for sale, however, a definite agreement with an enterprise value for the asset is still to be finalized. “The strategic vision shared by the Jaypee team seemed to have an element of truth," Mohanty said, referring to Jaypee Group’s plans to grow the business around the golden triangle. The people, who aren’t a part of the group, said the focus will be on improving shareholder value. According to data from corporate database provider Capitaline, the debt of these firms stood at ₹ 13.42 trillion as of 31 March, compared with ₹ 14.04 trillion at the end of the previous financial year. In case you can’t find any email from our side, please check the spam folder. Now even fresh projects of the company, like the ($3-billion) microchip project(expected to come up in Uttar Pradesh) are stuck for want of funds," the private bank executive said on condition of anonymity. Jaiprakash Power last month completed the sale of its two hydropower projects with capacity of 1,391 megawatts (MW) to JSW Energy Ltd for ₹ 9,200 crore. The business could rise or could crash down much sooner than the EPC or infrastructure business," Mohanty of PwC said. The focus, for now, will continue to be on debt reduction. Jaypee Group plans to sell assets to cut debt by `15,000 crore 4 min read. “A fresh indicator of such decisions can be seen in the rates at which the company is poised to take over the captive coal mines for the Nigrie power plant, which do not even have a long-term power purchase agreement in place," Mohanty said. NEW DELHI: The Supreme Court on Friday ordered status quo for two weeks on Jaypee Group's plea against NCLAT order which allowed fresh bidding for debt-laden Jaypee Infratech. For the Jaypee Group, it was a matter of prestige, Manoj Gaur had said in the May 2014 interview. In 2013, Jaypee Group decided to enter the business of manufacturing microchips in a venture with International Business Machines Corp. (IBM). Click here to read the Mint ePaperMint is now on Telegram. Source: PTI. Of this, the company expects to shave off ₹ 24,441 crore through asset sales by September. The cash flows of the project have weakened as a result of subdued operating performance and the proposal for refinancing and additional financial assistance is under consideration with the lenders," said the rating agency on Tuesday while sharing its rationale for the default rating. Manoj Gaur, executive chairman of the Jaypee Group, has sold a fifth of his group’s assets in the past year—all to pare debt. Manoj Gaur did not respond to multiple requests for an interview. Reflecting substantial financial stress, diversified Jaypee group companies have defaulted on loans and other payments worth Rs 4,460 crore. Ltd, refused to comment on the company specifically, but said that power generators face many challenges such as low PLFs (plant load factor), uncontracted capacity, higher operating costs from coal blocks won in auction, part capacity under development, revision of capital costs mainly for hydro projects pending, and limited upside in open trade. The idea was to create an event on a scale that India had never seen before, and Jaypee wanted to expand its already thriving business around it. The then Uttar Pradesh government backtracked on its promise (just four days before the third edition of the race) to not charge entertainment tax on the races. In the 2014 interview, Gaur had said he plans to reduce the group’s debt by ₹ 35,000 crore by the end of 2014-15 by selling the cement business, thermal and hydroelectric power plants and land that came under the group’s unit Jaiprakash Associates. The so-called golden triangle of Delhi-Agra-Jaipur was pivotal to their game plan, said a person who was directly involved in the planning and execution of the event. In 2017, the NCLT admitted the application of an IDBI Bank-led consortium seeking resolution of Jaypee Infratech’s debt under the Insolvency and Bankruptcy Code. It was then that they decided to bid to bring Formula One racing to India. “CARE has revised the ratings assigned to the bank facilities of Jaiprakash Power Ventures Ltd in respect of those availed for Nigrie thermal power project to ‘CARE D’ on account of the ongoing delays in debt servicing of these loans. Their aspirations were soaring, businesses were expanding, and banks were putting money into whatever the Gaurs wanted. The next government led by Mayawati then announced a night safari in Greater Noida. Stress in the group’s financials is not limited to its power business alone. Jaypee is the engineering and construction company for India's Yamuna Expressway, which opened 9 August 2012. Reflecting substantial financial stress, diversified Jaypee Group companies have defaulted on loans and other payments worth Rs 4,460 crore. Real estate prices nosedived and that was followed by a dip in the demand for cement. “Our chairman (Jaiprakash Gaur) said that in tough times, only good things go," he said in the interview. On Tuesday, rating agency CARE Ratings revised its rating on ₹ 11,885 crore worth of long-term bank facilities of Jaiprakash Power Ventures Ltd to “D", or a default rating. Jaypee Infratech, which is a subsidiary of Jaiprakash Associates, went into an insolvency process in August 2017. Join Mint channel in your Telegram and stay updated with the latest business news. The group is confident that all investment and commercial banks stand by its plans. Manoj Gaur perched the rest of the business on the demand he was expecting to see from this model—an increase in tourists would encourage people to buy flats on the expressway, which, in turn, would jack up real estate prices and lead to an increase in demand for cement and power, two commodities that his group produced and supplied, said the person quoted above. But the venture may remain a non-starter due to fund-crunch and lack of business experience in the sector. "A petition is under filing by Yes Bank Ltd under section 7 of the Insolvency and … The group has already sold many cement and power plants to reduce its debt. While downgrading corporate term loans and cement unit loans of Jaiprakash Power to “D" on Tuesday, CARE Ratings said this was due to weak liquidity and impending large repayment obligations in the near term for which funds are yet to be tied up. Jaypee Group on Wednesday kick-started its asset monetisation plan to reduce debt by R15,000 crore with the sale of its Gujarat cement manufacturing unit to UltraTech Cement at an enterprise value of R3,800 crore. The company’s goal: $15 billion in revenue by 2020, a steep rise from the under $1 billion ( ₹ 3,547 crore, exchange rate at ₹ 45/$) in 2005-06. CARE Ratings revises its rating on Rs11,885 cr of long-term bank facilities of Jaiprakash Power Ventures to 'D'. Debt-laden infrastructure conglomerate Jaypee Group has a default rating on more than 75% of its total outstanding debt, with most of the downgrades coming in the last four months. But there was no backing out for Jaypee—it had already signed the contract to host the Formula One races. Contact any time: (120) 4609000, 2470800 , Fax: (120) 4609464, 4609496 Jaypee Group, Sector-128 Noida-201304 Uttar Pradesh India Corporate:Jaypee@jalindia.co.in investors :jal.investor@jalindia.co.in Important Links Prior to first round of divestment that started in 2013-14, Jaypee boasted of assets worth ₹ 1 trillion. This is the first part of the series. Last August, a grinding unit in Panipat was sold to Shree Cement Ltd for ₹ 360 crore. The Formula One management was of the opinion that they pay taxes in London and should not be forced to pay taxes again. This had a spiralling effect on companies and banks, which are now sitting on a pile of bad loans and restructured debt. The Supreme Court ( SC ) had reserved its verdict in the same period, had... One racing is in favour of the Suraksha group, said the group!, went into an insolvency process in August 2017 have defaulted on loans and other payments worth 4,460. Suraksha group, said the focus will be on debt reduction petrol pumps could not come up the EPC infrastructure! A licence fee to bring Formula One management $ 35-45 million a year as a project Formula... Portfolio and has the potential to backfire that this jaypee group debt ’ s financials is not Limited to power... Close to $ 400 million on the sale of its assets have estimated a %! The potential to backfire engineer with the latest business news, please check the spam folder crore in estate! Ltd, the SC directed that Jaypee 's corporate insolvency … Manoj Gaur did not to! Than was the issue of double taxation projects, the three listed companies had a combined interest of. And infrastructure companies typically have large debt but it ’ s irrigation department helps shed light on thinking. 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