Positive outcome on cement biz sale seen soon: JP Asso

Jaiprakash Associates, which has been deliberating sale of its Gujarat cement business for more than five month to pare its debts, may soon announce a positive outcome, Manoj Gaur, Executive Chairman, Jaiprakash Associates told CNBC-TV18 today.

"We are in active discussion and I hope that the distance that we have covered, positive outcome will come soon," Gaur said. Earlier CNBC-TV18 had reported that the company was in talks with Ultratech to sell its Gujarat plant at a valuation of USD 160-170 per tonne.

However, the company was unable to take things forward with Ultratech after the initial talks. Gaur also stressed that the company was on track to reduce its debt substantially after several of its recent debt refinancing initiatives. The company also hopes to cut debt in subsidiary Jaypee Infratech by Rs 2000 crore to Rs 4800 crore by 2013-14 end.

The company had to defer the offer for sale, of Jaypee Infratech due to a sudden fall in its stock price. Gaur said that the company will soon be doing OFS for infrastructure subsidiary. The proceeds from the stake sale will also help JP Associates to further pare its debt.

Below is the verbatim transcript of the interview

Q: The market would be interested to know what is happening with cement stake sale and whether that is still on track and you are in discussions with some of the parties that were being talked about?

A: Many times I have been asked this question, let me again reiterate that as an organisation we stand committed to enhance our shareholder value and debt reduction is one of the important items, which we have planned. It has been in public domain that we have been in active discussion for sale of our cement asset in Gujarat. I will not like to comment on whether there is this difficulty or that difficult but yes we are in active discussion and I hope that the distance that we have covered, positive outcome will come soon.

Q: The other money raising plan that you had was with regards to Jaypee Infratech, you wanted to do an offer for sale (OFS) but then you withdrew because the market conditions were not seen as favourable, what is the update over there, will you still be looking at that OFS plan?

A: As you know it is Jaiprakash Associates's (the holding company of Jaypee Infratech) responsibility to comply with the guidelines of Securities and Exchange Board of India (SEBI) and so JP Associates will be doing the OFS.

Q: Just to get the levels into the right context though at this point, what kind of debt does Jaypee Infratech have on its books specifically?

A: Jaypee Infratech debt stands around Rs 6,800 crore, that was a debt we had taken in 2008-2009 and the entire thing was invested for the construction of expressway. I am happy to share with you that after the expressway got commissioned in August, we tried our level best to get the interest rate reduced on the debt and also to have the debt refinanced by an instrument, which has a longer moratorium and a longer repayment cycle. So as the thing stands today the interest has come down to about 12.5 percent from a high of about 15.5 percent. There is going to be net saving of 3 percent to Jaypee Infratech and entire debt has been refinanced to a 15-year instrument partially 15-year, partially 18-years. Our plan in Jaypee Infratech is to reduce the debt of Rs 6,800 crore to a level of about Rs 4,800 crore by end of FY14.

Q: Which brings on to the bigger question of what is happening with the debt levels at JP Associates, I am sure you have seen the kind of pressure stocks such as yours have been facing because of debt concerns, can you just update us on where total debt level stand at by the end of this financial year and whether any steps have been taken in order to alleviate that kind of debt stress aside from the cement stake sale and the OFS on Jaypee Infratech that we have already talked about?

A: As far as debt reduction is concerned for JP Associates, it is an important key performance indicator (KPI) for all of us in our group and there are many avenues available other than partial sale of cement asset, we have- as I mentioned to you, JP Associates can do some equity dilution in Jaypee Infratech. JP Associates can also raise money through its commercial land and then maybe if market permits some other instrument. So we are on track as far as debt reduction of upto Rs 5,000-6,000 crore is concerned, in this year we will do it.

Q: Would you pick any Oil marketing company (OMC) to trade today?

A: For the day I am keeping a positive stance on three sectors that is banking finance, cement and oil and gas. So with the diesel price hike it is confirmation of the policy initiative having initiated by the government, they are very firm. That will be sending a very positive signal, which will be seen as quite positive for the OMCs as well as upstream. So yes technical positive bias is kept on all three OMCs, but if I need to pick and choose one, probably I will go with Hindustan Petroleum Corporation (HPCL) because that seems to have better potential to offer gains of may be closer to Rs 298-300 that one can expect by expiry in next three days.