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Feb 19, 2013, 05.36 PM IST | Source: CNBC-TV18

Jayaswal Neco's premium price based on intrinsic value: CFO

PK Bharadwaj, CFO, Jayaswal Neco justifies the premium price of allotment to the intrinsic value of the company. He further adds the intrinsic value lies in the coal and iron ore reserves.

The company has a huge reserve of iron ore mines though they have not become operational as on today. Once these iron ore mines become operational the game is going to be very different for us.

PK Bharadwaj

CFO

Jayaswal Neco

Jayaswal Neco has decided to issue shares on a preferential basis at a huge premium of Rs 30 per share. The current market price is at Rs 12, while the stock price of Jayaswal Neco for the past two years has been low. It headed from levels of Rs 40 to the current levels of Rs 12.

The company will issue 6.75 crore equity shares.

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PK Bharadwaj, CFO, Jayaswal Neco justifies the premium price of allotment to the intrinsic value of the company. He further adds the intrinsic value lies in the coal and iron ore reserves.

The company is raising funds for expansion plans which they are undertaking in steel,mining and power.

Below is the verbatim transcript of his interview on CNBC-TV18

Q: Can you update on the high premium at which this allotment will be done of Rs 30 per share, the reason behind that and whether you guys are looking to raise any more funds in due course?

A: There is no doubt that the current price which is around Rs 12 and we have issued the shares at a premium of Rs 30 but we have issued the shares on intrinsic value of the company and if we see the history even the current book value of the company is around Rs 35. Earlier also we had issued shares to mutual funds like Reliance at the rate of Rs 34 per share.

The equity structure of the company as on today is that 69 percent equity is held by the promoters and 31 percent by public. Promoters have put trust on the company. The intrinsic value lies in the coal and iron ore reserves and that development work is going on. Investors see the future in the next two-three years. On that basis the justification of the premium comes.

Q: Is there any more fund raising on the cards and what will the funds that you have raised what will it be used for this Rs 270 crore?

A: As on today, the objective of this issue is to partly fund the projects which we are undertaking in steel, mining and power. We have half a million integrated steel plant at Raipur. We have infrastructure available with 2000 acre land there and we are expanding our capacity. This is one area of project, which is going on. Second, we are putting up the sponge iron plants with power plants near to our pit head of coal washery at Bilaspur.

We have been awarded two coal blocks which has a total capacity of 2.2 million which is going to become operational in the next financial year. So, the entire funds are going to be part funding for the projects which are going on and most of these projects are going to be over in 2014 and 2015.

Q: Will none of these funds be used to pare-off your debt because you are sitting on a huge debt of about Rs 1,450 crore and the market cap of your company is less than Rs 500 crore? How do you plan to bring down your debt?

A: Most of the debt which has been taken during the last two years is for the new projects which are going on. We are investing around Rs 4000 crore in setting up washery, in setting up sponge iron plants, power plants which will be completed in next two years.

More than 50 percent of the old debt, we have already paid and the debt which is outstanding is for new projects.                                           

Q: Any more fund raising that you have on the cards? We would also like to know why the non-promoter group has been allocated shares or why they have agreed to pay such a huge premium? We haven’t seen this Rs 30 price in the last one and half years on the stock. What is the future objective with respect to the non-promoter entities?

A: Today, raising fund from market through IPO and other sources with the environment we have and especially towards the steel sector is much more difficult. The company has a huge reserve of iron ore mines though they have not become operational as on today. Once these iron ore mines become operational the game is going to be very different for us.

Jayaswal Neco stock price

On October 23, 2014, Jayaswal Neco Industries closed at Rs 10.14, up Rs 0.22, or 2.22 percent. The 52-week high of the share was Rs 20.20 and the 52-week low was Rs 6.95.


The company's trailing 12-month (TTM) EPS was at Rs 1.27 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 7.98. The latest book value of the company is Rs 33.88 per share. At current value, the price-to-book value of the company is 0.30.

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