The Hindu Business Line : Shot in the arm for Jaiprakash Ind

The counter, however, came off its high to end the day at Rs 140.45, up 4.89 per cent, on the NSE; and at Rs 140, up 4.63 per cent on the BSE. Substantial volumes of over 60 lakh shares on the NSE and 40 lakhs on the BSE were traded on Monday.

Brokers said rumours of a placement at Rs 180-odd levels has been dodging the counter. FIIs have also been active at the counter, with GMO Emerging Market Fund being touted as having been the most active in the recent past. A strong order book also added to the interest in the counter.

The stock also received a shot in the arm following the interim sops announced last Thursday. Jaiprakash Industries stands to benefit from the reduction in custom duties on coal from 25 per cent to 10 per cent, the reduction in peak custom duties on non-agricultural goods from 25 per cent to 15 per cent and a 15 per cent cut in custom duty on power transmission and distribution projects to 10 per cent.

Taking an optimistic stand, analysts maintain Jaiprakash Industries to be a good growth story. "It has a firm foothold in the domestic cement and construction industry. There is expectation of the Government stepping up infrastructure spend in the long term which will also benefit the company," an analyst said.

Jaiprakash Industries is the flagship company of the Jaypee Group. There is a proposal to merge Jaypee Cement, a subsidiary of Jaiprakash, with the company. Jaypee Cement has a total capacity of 4.6 million tonnes. "The company, which will soon become a division of Jaiprakash Industries, is looking to expand its capacity to 6 million tonnes primarily through de-bottlenecking. The capacity should be operational by June 2004," an analyst said.

Firming up of cement prices in Uttar Pradesh, where the company reportedly commands a 20 per cent market share, is another reason for the optimistic outlook on the company. The company is also expected to witness significant gains via its three subsidiaries -- Jaiprakash Hydro Power, Jaiprakash Power Ventures and Jaypee Karcham Hydro Corporation -- that are in the process of implementing key projects in the power sector.

"Gains will be significant particularly from its Hydel plant given that the tariff will be frontloaded. This would mean that return on equity would be higher subsequently," an analyst said.

Good fundamentals and a strong order book apart, brokers, however, maintain that one should exercise caution at entering at these levels as the price run up has been too much.