JP Associates slides 10% on FCCB issue; Goldman turns bearish

NEW DELHI: Jaiprakash Associates Ltd plunged over 10 per cent in afternoon trade on Wednesday after the company informed the exchanges that it has launched a foreign currency convertible bond (FCCB) issue of $150 million for repayment of the exiting FCCBs.

“The issue has coupon rate of 5.75% per annum, payable semi-annually and maturity date is set at September 8, 2017. The conversion premium is set at 10 per cent over the reference share price and has set a conversion price of Rs 77.50 per share,” JP Associates said in a filing.

At 02:50 pm, JP Associates was trading 9 per cent lower at Rs 64.05. It has hit a low of Rs 63.30 and a high of Rs 69.50 today.

The proceeds of this FCCB issue will be utilized to part finance the repayment of the exiting FCCBs of the company maturing on September 12, 2012, it added.

Barclays Bank PLC and Standard Chartered Bank are the joint lead managers for the offer.

Goldman Sachs in its annual report has raised concerns over the company’s increasing debt levels and maintains a ‘sell’ rating on the stock with a target price of Rs 57.00.

According to the brokerage firm, consolidated net debt increased to Rs 50,300 crore from Rs 37,500 crore as of FY11-end, nearly 34 per cent increase YoY.

“High debt levels would result in interest coverage remaining close to 1.5X over FY12-15E despite EBIT doubling over the same period,” the report said, adding that “in our view, monetization of assets would be the key in meeting funding requirements of the business. We cut our 12-month SOTP based target price to Rs 57 from Rs 60 earlier, as we build in higher leverage and retain ‘sell’ rating.”