Shares in infra major Jaiprakash Associates fell sharply Wednesday amid concerns of rising debt in the company. Global investment bank Goldman Sachs has said high debt levels would result in interest coverage remaining close to 1.5-times over FY12-15E despite EBIT doubling over the same period.
Jaiprakash Associates' consolidated net debt rose to Rs 50,300 crore at the end of 2011-12, 34 per cent year-on-year rise from Rs 37,500 crore in 2010-11. The net debt to equity stands at 4.4-times and current maturities of long term debt stands at Rs 7,800 crore (including FCCB of $534 million due in September 2012). (See: FCCB push for JP Associates)
The company is seeking to raise another $200 million (over Rs 1,100 crore at 55.67 to the dollar) through FCCBs. FCCBs are foreign currency denominated convertible bonds. The proceeds will be used to pay back current FCCB. Jaiprakash Associates has a repayment of $350 million coming up in September 2012.
External construction order book is close to Rs 5,000 crore – hence, engineering and construction revenue for the year will be largely driven by internal/real-estate orders, Goldman Sachs added.
"Though, we expect operating cash flow after interest and taxes to improve over FY13E-15E, but committed capex would entail further debt increase at the consolidated entity," the investment bank said.