The Hindu Business Line : FII interest props up Jaiprakash Ind scrip

THE stock of Jaiprakash Industries has been scaling new intra-day highs in the recent past, on the bourses. While the stock ended the day marginally weak on Wednesday, dealers maintain that it was more in keeping with the market pattern.

"It still was one of the stronger counters despite the volatile trend," a dealer said.

Brokers maintain that FII interest has been increasing at this counter. In particular, GMO Emerging Market Fund and another leading FII have been very actively supporting the counter. A moot point to note is that GMO already has a 7.3 per cent holding as of December 30, 2003.

"A strong order book and bright outlook for the hydel power projects for the EPC (engineering projects consultancy) business along with volumes and cost savings in the cement business should drive earnings growth by 30 per cent plus," Mr Sridhar Iyer, Assistant Vice-President, research, B&K Securities said.

According to Mr Iyer, the company has a healthy order book of Rs 9,500 crore in the EPC business, mainly in the hydel power projects. "The key driver will be GOI's initiative to set up 50,000 MW hydel power plants. The company expects to benefit from the recent tendering of jobs worth Rs 1,200 crore which could materialise favourably in the next 12 months. It has also recently bagged an 8 km tunnel order from railways for Rs 180 crore in J&K," he added.

Jaiprakash Industries is the flagship company of the Jaypee Group. The merger of its 100 per cent subsidiary, Jaypee Cement is expected to go through shortly. Analysts maintain that this would not only result in unlocking the value of the cement business, it would also help restructure the cement debts and reduce the tax liability of Jaiprakash. "The company's cement business is in the northern region where prices are ruling firm," an analyst added.

Jaypee Cement is also to hike its capacity from 4.6 mn tonnes to 7 mn tonnes at a cost of Rs 215 crore. It is expected to become operational by June 2005. Jaiprakash is also expected to benefit significantly via its hydropower projects. "BASPA II - 300 MWs commissioned in July 3 has been working at above PLF and has begun to generate cash, Vishnuprayag in Uttranchal - 400 MWs is under implementation ad expected to go on stream in 2006, Karcham Wangto in HP - 1000 MWs is planned to be commissioned in 2008 etc.

"While the PPA power purchase agreement has been signed for the first two projects, Jaiprakash intends to distribute power directly to the consumers for the third project, which would enhance the return on equity (ROE) to more than 16 per cent. For BASPA, the ROE is expected to be much higher at 20 per cent," Mr Sridhar Iyer said.

Market sources maintain that the stock is significantly undervalued vis-a-vis its peer in the construction business and cement business. "We are looking at a price projection of Rs 250 over a period of 12 months," Mr Iyer added. The stock ended the day at Rs 142.70, with around 10.98 lakh shares traded on the NSE. On the BSE the stock ended at Rs 142.30 with around 6.24 lakh shares traded.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
MFs unlikely to face redemption pressure

Bears prevail

Ratio talk props it up

Cheaper valuation attracts interest in standalone refinery stocks

FII interest props up Jaiprakash Ind scrip

Reliance Energy: Outlook negative, short March futures

Key index stocks drag Sensex down

Four Soft IPO oversubscribed