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Some of the highly-leveraged companies such as Jaiprakash Associates, Alok Industries, Bhushan Steel, Suzlon Energy and Jaypee Infratech spurted on the bourses on Tuesday as a result of the RBI’s scheme for sustainable structuring of stressed assets.
Share price of these companies jumped 10-16 per cent in a dull trading session that saw benchmark indices end flat.
According to data provided by Capitaline, these companies’ debt-to-equity ratio ranged between 1.5-9 times as on March 31. Suzlon Energy and Alok Industries have negative networth and debt in the range of ₹10,000-20,000 crore. Operating profit of Jaiprakash Associates and Bhushan Steel have declined, interest cost has exceeded operating profit and thus net loss has widened in the last two consecutive financial years.
Interest cost exceeded Jaypee Infratech’s operating profit in FY16 and the company reported net loss of ₹298 crore compared to a profit of ₹350 crore last year.
Alok Industries reported an operating loss in FY16. Only Suzlon Energy has been able to turn around in FY16 with interest cost down a sharp 41 per cent leading to net profit of ₹483 crore compared to net loss of ₹9,158 crore in FY15.
Market experts feel that the macro environment is too challenging to turnaround businesses. Hence, Tuesday’s move was just a knee jerk reaction and RBI’s scheme would be more positive for banks.
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