JPP and JPA's lights out!

Jaiprakash Power Ventures (JPV) had been up in the green on Friday in the anticipation of the asset sale deal being announced. Today, the expected news came in and the stock has slipped over 13% on profit taking. Though it has recovered from the fall, it remains down almost 12% at Rs.14.65. Volumes are up over two times. Jaiprakash Associates (JPA) is also down over 4% at Rs.40.20.

JPP has signed the dotted line to sell two hydroelectric power plants to a consortium led by Abu Dhabi National Energy Co, Taqa for Rs 11,500-12,500 crore. This asset sale is a part of the group’s plan to trim its consolidated debt of Rs.60,000 crore. Taqa is also taking over the Rs.6000 crore debt of JPP and it will also gain Rs.6300 crore which it will use to complete some of its projects. Through JPP, the debt of JPA is also expected to drop 20% and in the long run this is expected to benefit JPA, whose interest cost is expected to come down and thus help shore up margins.