The Jaypee group—which had planned massive expansions in the 1990s, but landed up in a financial mess—is looking at growth over the next 10 years
The Jaypee group plans to ramp up its cement capacity up to 55 million tonnes (MT) by 2015, with an investment of around Rs8,000 crore-Rs10,000 crore. In addition, it also plans to expand its power capacity by 13,000MW over the next six years.
The group plans to increase its cement capacity from the current 22MT to 35MT by 2011. Going forward, it plans to further increase capacity to 55MT by 2015. The Jaypee group has interests in cement, power, engineering, hospitality and townships.
On being questioned on the total investment likely for this planned expansion in cement, Rahul Kumar, chief financial officer, Jaiprakash Associates Ltd, said, “To add 20MT of cement capacity, we would require an investment of close to Rs8,000 crore to Rs10,000 crore.”
The additional cement capacity which is being planned to take the total capacity to 35MT is already under construction. The remaining plants for the further planned expansion of 20MT are in the planning stage.
In the power segment, the company plans a total capacity of 13,000MW in the next six years. Out of this 13,000MW, 7,000MW has been planned in the thermal power segment, which is likely to be commissioned in the next four years. Work on the total 7,000MW capacity has already started.
Jaiprakash Gaur, founder-chairman of the group, expects the entity to grow at around 40% to 50% in the next 10 years. “To match a 9% gross domestic product growth, a few companies will have to grow at 40% to 50%. In the next 10 years, this group is poised to grow at 40% to 50%,” he said.
The group has announced the public listing for its infrastructure arm Jaypee Infratech Limited. Jaypee Infratech has set a price band of Rs102 to Rs117 per share for its initial public offer, aiming to raise up to Rs2,350 crore. The offer comprises fresh issue of shares to raise Rs16.5 million, as well as sale of 60 million shares by cement and construction firm Jaiprakash Associates.
Out of the total Rs2,350 crore, Rs1,650 crore will be utilised by Jaypee Infratech for project development and other corporate services. The remaining Rs700 crore would be utilised by the parent company, Jaiprakash Associates Ltd for expansion in various sectors.
Jaiprakash Infratech—which is developing the Yamuna Expressway—plans to open the route to traffic by 2011, before the commissioning date of 2013.
Most of the public issues in the past few weeks have failed to make a mark and are trading at substantial discount to the opening price
The performance of IPOs continues to be plagued with problems. Once again, new public issues of several companies have taken a nosedive after listing. In the past few weeks, about 14 new stocks have listed on the bourses, out of which eight are now trading below opening price; while others are barely trading at par.
Real-estate developer DB Realty opened at Rs452 on 24 February 2010. It is still trading flat at around Rs450 as on 22st April. Emmbi Polyarns, manufacturer of polymer-based products, got listed on the same day as DB Realty. It is now down a whopping 56% at Rs20 per share.
Cable television services provider Hathway Cable & Datacom too shares the same fate. After listing at a premium of Rs10 to its issue price, it is currently trading at Rs215, down 14% from its listing price.
ARSS Infrastructure Projects is the only stock to have posted healthy returns since listing. This stock listed at a whopping 42% premium to its issue price. It is now trading at Rs1,296, up 103% from listing price. However, market sources said that the gains are mainly due to interested buying which has had an enormous impact on the price because of the small floating stock.
Among the other significant underperformers are Texmo Pipes & Products, DQ Entertainment (International), Pradip Overseas and Shree Ganesh Jewellery House. Texmo is trading at a 27% discount to its listing price, while DQ is floundering at 19% below its listing price.
Pradip Overseas, which listed on 5th April, is down 25% while Shree Ganesh Jewellery House has taken a severe beating, down 44% from its listing price.
Stocks like Man Infraconstruction (up 6%), United Bank of India (up 1%), IL&FS Transportation Networks (up 1%) and Persistent Systems (0%) have barely inched above their respective listing prices.
However, some of these stocks have posted decent gains on their issue prices such as Persistent Systems (up 29%), Man Infraconstruction (up 40%) and DQ Entertainment (up 37%).
Two of the latest public issues have exhibited the same trend. Intrasoft Technologies, which listed on 12th April at Rs150 is now trading down 15% at Rs127. Goenka Diamond & Jewels opened on 16th April and has since gone downhill (-18%).
Such erratic performance is the main reason why retail investors are still shying away from the primary markets. Several of these public issues took place at a time when the stock markets were on a strong bull run. Even at such times, if public issues fail to deliver results, then one can’t blame the investors for not showing interest. Indeed, IPO performance is now completely determined by the interplay between the short-term market condition, greed of the promoters and aftermarket speculation. Given the fact that these factors put together can never ensure a rational offer price and traded price, retail investors are likely to stay away even more in the future.
Even as the bid price for the pan-India licence has gone up by 99%, three circles from the ‘C’ category have failed to receive a single bid
The pan-India licence fees for 3G have reached Rs6,967.55 crore on the 11th day at the end of the 64th round on Thursday, which is almost 99% from the base price of Rs3,500 crore. With this, the Indian government can garner a minimum of Rs50,000 crore as spectrum licensing fees. However, the auction is still not over. Earlier, the bidding was expected to get over in two weeks, although there is no time limit for the same.
“A lot of mixed response has been seen in the 3G auction space. On one hand, there has been aggressive bidding in certain metros and ‘A Circles’, while on the other hand, there has been lacklustre response in ‘B’ and ‘C’ circles. We expect the final price to settle within the $2-billion mark,” said Sangeeta Tripathi, research analyst, Sharekhan Ltd.
Given the supply-demand mismatch (for three 3G spectrum slots) and its importance from a long-term growth perspective, we expect significant overbidding to take place. “We expect the auction amount to reach Rs80,000 crore compared with the base price of Rs35,000 crore at a pan-India level. We expect all the leading operators to strive to get 3G spectrum in most of the key circles such as ‘Metro’ and ‘Circle A’ areas. Failing to win 3G spectrum in these areas could place them at a disadvantage versus competing players. As a result, operators will likely end up bidding aggressively, incurring higher cash outflows," said Ambit Capital Pvt Ltd, in a research note.
Telecom minister A Raja told reporters that with the reserve price increasing 99% over the base price, the government expects to raise Rs50,000 crore against the budget estimate of Rs35,000 crore. The government has set itself a target of Rs35,000 crore by selling 3G spectrum and broadband and wireless access (BWA) services.
While ‘Metro’ and ‘Circle A’ areas continue to attract higher bidding for 3G spectrum, circles in the ‘C’ category failed to match the pace. In fact, for circles like Orissa, Assam and Jammu & Kashmir there is not a single bid yet. The main reason for this trend is lower average revenue per user (ARPU) as well as lower minutes of usage (MoU) in these circles.
In ‘Circle C’, there are six regions—Himachal Pradesh, Bihar, Orissa, Assam, the North-East and Jammu & Kashmir. Out of these, there are two bids each for Himachal Pradesh and the North-East region, while there is a single bid for Bihar at the end of the 64th round on the 11th day of the e-auction.
“Typically, uptake and graduation to 3G services requires enabling infrastructure in terms of 3G-enabled handsets. The market size in terms of graduating to 3G handsets is not very robust in ‘C’ and certain ‘B’ circles, and hence the players are not very positive on these circles and so the low interest,” said Ms Tripathi.
The 3G spectrum will help operators to provide high-speed Internet and data services on their networks to high-value post paid or corporate subscribers, which could translate into higher ARPUs for the operators. "3G spectrum will also increase the bandwidth significantly, which will help operators to overcome the spectrum crunch they are witnessing in high-density urban areas. In this context, it becomes critical for incumbents to win 3G spectrum in ‘Metro’ and ‘Circle A’ areas,” said Ambit Capital Pvt Ltd in a research note.
According to the pre-qualified bidders’ list, six leading operators are bidding at a pan-India level whereas three new entrants are participating in the bidding only in select circles. As a result, there are more than six operators competing for three 3G slots in most of the circles.
This is apart from State-run telecom services providers, Mahanagar Telephone Nigam Ltd (MTNL) and Bharat Sanchar Nigam Ltd (BSNL). However, both MTNL and BSNL will have to pay the licence price equal to the winning bid. In any circle, if the winner has to pay Rs1,000 crore for 3G spectrum, then BSNL or MTNL would also have to pay the same amount for that particular circle, depending on their areas of service.
Mobile operators have already secured term loan facilities from banks and financial institutions for 3G funding. “However, in the short term, depending on the bid price, the winning operator may feel some pressure on its earnings,” said Ms Tripathi from Sharekhan.
Coming back to the action on the 11th day, two ‘Metro’ circles, Delhi and Mumbai, continue to receive the highest bids. While five bidders quoted a price of Rs850.42 crore for Delhi circle, the same for Mumbai was Rs752.38 crore. Tamil Nadu from ‘Circle A’ received the third-highest bid at Rs710.62 crore. All these circles have three slots each and a reserve bid price of Rs320 crore.
Two neighbouring circles, Maharashtra and Gujarat, received bids from five and two bidders, respectively, who quoted Rs696.96 crore and Rs589.16 crore for these circles.