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Media reports indicate that the UP government is seeking MoEF nod for
Jaiprakash Associate’s (JPA) Ganga Expressway project. We believe this
news is a directional positive as it will allay concerns of political
uncertainty post regime change in UP. While we have ‘HOLD’ on JPA due
to leverage concerns, we have ‘BUY’ on JPIN on strong real estate
performance and visibility on commencement of Yamuna Expressway.
Event: Media reports indicate that the Samajwadi Party government has decided to go
ahead with the 1,047 km, eight lane Ganga Expressway project proposed by the earlier
BSP government. Further, the Uttar Pradesh Expressways Industrial Development
Authority (UPEIDA) will send the proposal to the Ministry of Environment and Forests
(MoEF) for necessary clearances, instead of the project developer.
Background: In March 2008, JPA had won the bid to develop the Ganga Expressway, for
which the cumulative cost was then estimated at INR400bn. Modeled on the lines of
the 165 km Yamuna Expressway, this project entailed development rights on 30,000
acres (3.3 bn sq ft built up area) along the expressway. However, in the absence of
approval from the MoEF, JPA had withdrawn the INR10bn bank guarantee recently with
a commitment that it would be furnished whenever asked by the government.
Analysis: Whilst renewed momentum in a dormant project is a directional positive for
the company (and for its 83.1% subsidiary JPIN), we believe given JPA’s leverage, the
project will be a burden in the near term, as funding / bank guarantees may have to be
tied up amid uncertainty of a massive land acquisition exercise, which could be as high
as ~60,000 acres of fertile land along the densely populated Indo‐Gangetic basin.
Impact: We do not foresee any immediate direct impact on JPA given the nascent stage
that the project is in. However, sentimentally, it will be a positive for stocks of the
Jaypee Group (JPA, JPIN, JPVL [Unrated]) as it allays political concerns dogging the
Jaypee Group. We have a ‘HOLD’ recommendation on JPA given the balance sheet
concerns, where we believe that deleveraging will be key to stock performance. More
importantly, this enhances visibility for commencement of the YEP (held in JPIN – our
top pick in real estate space), which is scheduled to open later this month.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Media reports indicate that the UP government is seeking MoEF nod for
Jaiprakash Associate’s (JPA) Ganga Expressway project. We believe this
news is a directional positive as it will allay concerns of political
uncertainty post regime change in UP. While we have ‘HOLD’ on JPA due
to leverage concerns, we have ‘BUY’ on JPIN on strong real estate
performance and visibility on commencement of Yamuna Expressway.
Event: Media reports indicate that the Samajwadi Party government has decided to go
ahead with the 1,047 km, eight lane Ganga Expressway project proposed by the earlier
BSP government. Further, the Uttar Pradesh Expressways Industrial Development
Authority (UPEIDA) will send the proposal to the Ministry of Environment and Forests
(MoEF) for necessary clearances, instead of the project developer.
Background: In March 2008, JPA had won the bid to develop the Ganga Expressway, for
which the cumulative cost was then estimated at INR400bn. Modeled on the lines of
the 165 km Yamuna Expressway, this project entailed development rights on 30,000
acres (3.3 bn sq ft built up area) along the expressway. However, in the absence of
approval from the MoEF, JPA had withdrawn the INR10bn bank guarantee recently with
a commitment that it would be furnished whenever asked by the government.
Analysis: Whilst renewed momentum in a dormant project is a directional positive for
the company (and for its 83.1% subsidiary JPIN), we believe given JPA’s leverage, the
project will be a burden in the near term, as funding / bank guarantees may have to be
tied up amid uncertainty of a massive land acquisition exercise, which could be as high
as ~60,000 acres of fertile land along the densely populated Indo‐Gangetic basin.
Impact: We do not foresee any immediate direct impact on JPA given the nascent stage
that the project is in. However, sentimentally, it will be a positive for stocks of the
Jaypee Group (JPA, JPIN, JPVL [Unrated]) as it allays political concerns dogging the
Jaypee Group. We have a ‘HOLD’ recommendation on JPA given the balance sheet
concerns, where we believe that deleveraging will be key to stock performance. More
importantly, this enhances visibility for commencement of the YEP (held in JPIN – our
top pick in real estate space), which is scheduled to open later this month.
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