Group's Rs`60,000Cr Debt Is Nearly 0.5% Of All Bank Loans
Jaiprakash Associates, the flagship company of the JP Group, has been downgraded to default status by rating agency Care following its failure to meet its payment obligations.The downgrade resulted in the company losing 10% of its market value. ICICI Bank, one of the large lenders to the group, also saw its share price tank by nearly 4% to Rs 300.
“On account of deterioration of the company's financial performance and delay in receipt of funds through monetization of assets as well as debt management exercise, the liquidity position of the company has been impacted leading to delays in debt servicing by the company ,“ Care said in a statement. The downgrade has huge implications for the banking system. JP Associates has a debt exposure of Rs 40,000 crore while the entire group has debt of Rs 60,000 crore. The group's loans amount to almost half a percentage point of bank lending in the country .
The rating agency has downgraded total bank facilities of Rs 25,280 crore and long-term non-convertible debentures of Rs 4,023 crore to `D' grade, indicating their failure to meet debt liabilities. However, banks are yet to term these loans as non-performing assets (NPAs). According to RBI norms, a loan need not be classified as an NPA unless payments are overdue for a period of more than 90 days.
The group, led by executive chairman Manoj Gaur, has been behind some of the biggest projects in the country, including the Sardar Sarovar Dam and the Tehri Dam. The group was also behind most of the development in Noida and had brought F1 racing to India following construction of the Buddh International Circuit in Greater Noida.
Gaur has been selling group assets in a bid to bring down debt. However, the exposure continues to be very high. For FY15, the company reported a net loss of Rs 1,110 crore on a total operating income of Rs 10,854 crore on a standalone basis, as compared with a PAT of Rs 414 crore on a total operating income of Rs 13,328 crore in FY14.
On a consolidated basis, the company reported a net loss of Rs 1,543 crore on an operating income of Rs 19,650 crore in FY15 as against net loss of Rs 703 crore on a total operating income of Rs 20,007 crore in the year-ago period.
JP Associates had run up significant debt following its expansion in various sectors such as real estate, power, cement, engineering, and roads and power. The timing of its expansion coincided with the slowdown in the economy which impacted the group's cash flows.
