Jaypee Group to sell assets worth $2.5 billion to offset debt

Jai Prakash Gour, Chairman of Jaypee Group

Jaypee Group, one of India’s largest cement manufacturers has planned to sell some of its plants and real estate to offset their already escalating debt.

The group is reported to have total debt of $10 billion and the present move is expected to offset at-least $2.5 billion (150 billion rupees), which is approximately 25% of the total debt.

Cement plants in the West and South of the country, and some of their power generation plants along with real estate will be first on the list of assets to be sold this year, revealed Suren Jain who is the Managing Director at Jaiprakash Power Ventures Ltd.

“The cash flows from operations won’t be sufficient in the next one to two years to bring down the debt,” said Anubhav Gupta, an analyst at Kim Eng Securities Pvt. in Mumbai. If the company had sold a cement plant “12 months back the troubles might not have been what they are today.”

Problems seemed to have originated about five years ago when the Chaiman Manoj Gaur, had taken up projects to expand Jaypee’s sports and construction business despite the expectation of an increase in debt.

The company is now looking to sell about 30 percent of its cement capacity, which at present is 35 million metric tons to reduce the burden, revealed Mr. Jain.

While Mr. Jain has been non-committal on the exact assets that that will be sold, he has said that the company will start a power generation project that may help with the present crisis. “The company plans to start generating power from a 1,320 megawatt thermal power plant this year and refinance loans for the unit, which will be cheaper as the projects would have started operations,” Jain said, as reported by Blomberg.

Jai Prakash Gour, who is the founder of the company, had started out in the construction business before diversifying into the various other divisions of the company. The company’s interest in sports involves the running of a hockey team, and they also have developed the 5.13 km Formula One track at the Buddh International Circuit, on the outskirts of Delhi.

They have also associated themselves with cricket by sponsoring some ODI series in the country, amongst other sporting ventures.