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May 23, 2010, 10.04 AM IST | Source: CNBC-TV18

JP Infra lists below issue price: Should you buy it now?

Jaypee Infratech, a subsidiary of Jaiprakash Associates, listed at Rs 98, below its issue price of Rs 102. In an exclusive interview with CNBC-TV18, Sanju Verma, CEO-Institutional Business, Proactive Universal Group and SP Tulsian, sptulsian.com, speak about the company and give their outlook going forward.

Jaypee Infratech , a subsidiary of Jaiprakash Associates , listed at Rs 98, below its issue price of Rs 102.

In an exclusive interview with CNBC-TV18, Sanju Verma, CEO-Institutional Business, Proactive Universal Group and SP Tulsian, sptulsian.com, speak about the company and give their outlook going forward.

Here is a verbatim transcript of the exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: Would you buy it at Rs 93? If yes, then why?

Tulsian: Yes, I will go for the stock at Rs 94 because this is a combination of an infrastructure pure road construction play and the realty. If you cannot take a call on the realty valuation because they have chunk of about 3,300-3,500 acres of land in NCR region, part of that monetisation or maybe the profit booking have started by the company and we have seen that Rs 650 crore profit coming to the company in last 18 months or so and the best part is that even the profits we derived from this construction activities is also exempted under Section 80 I. The company will definitely be making all the efforts to monetise this land value, land parcel over next four-five years, which can give them profit on present valuation, if I go on valuation of about Rs 10 crore per acre, which has been prevailing based on FAR costs in the NCR region, can give them profit of about Rs 8,000-10,000 crore over the next four-five years time.

The management has indicated a turnover of about Rs 2,500 crore by FY11 and of that nothing will be coming out of the road or toll revenue. The entire amount will be coming in purely from the construction activities. On that, we can expect a profit of about maybe Rs 1,000-1,200 crore in FY11 itself, which will be tax exempted minus the MAT liability which will get attracted under section 80 IA.

So they will be making all the efforts to encash this, make the company debt free. Out of that total cost of Rs 9,500 crore, they have availed debt of about close to Rs 5,000 crore. That if can get repaid from FY12 onwards, when the expressway will be operational, maybe in phase from November 2010, but I am taking that to start full-fledged from 1 April 2011, can start giving them a toll revenue close to Rs 700-750 crore in the first year, which can keep on increasing to about Rs 2,000 crore over the next two-three years time.

So if I take all this into consideration and in the present valuation, the present EV of the company, is close to about Rs 18,500-19000 crore. I am not taking the land, which the company will be owning, of about 2200 acres in Aligarh and Agra, purely focusing only on the NCR region which they will be having to the extent of 300-330 million sq ft. As I said the present valuation has been about Rs 1000 per sq ft, the present valuation comes to about Rs 25,000 crore plus. Because if you are negative on the realty parcel or the land parcel then proably one has to take a negative call on all the realty stocks like DLF , Unitech or maybe the other players, which will be tapping the capital market from that region, then probably all other realty stocks look quite stretched and overvalued.

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