JP Power falls 17% on profit booking, JP Morgan cuts target

Moneycontrol Bureau

Jaiprakash Power Ventures is reeling under pressure on Monday as investors are worried about valuation of the deal in which the company decided to sell two hydropower units to Abu Dhabi-based TAQA-led consortium. The stock lost as much as 17.3 percent intraday while it had surged 12 percent on Friday ahead of board meeting that took place on Saturday.

JP Power said it would sell 1400 MW hydro projects (300 MW hydroelectric plant and 1091 MW Karcham Wangtoo hydroelectric plant) to consortium led by TAQA India Power Ventures, INDO-INFRA Inc (Canadian investor), IDFC Alternatives' India Infrastructure Fund-II. According to CNBC-TV18 reports, these companies are going to own 51 percent, 39 percent and 10 percent in the project, respectively.

TAQA India Power Ventures is an indirectly owned and controlled subsidiary of Abu Dhabi National Energy Company PJSC.

These units have an enterprise value of Rs 10,500 crore including Rs 6,500 crore debt and JP Power will get around Rs 4,000 crore cash from deal.

TAQA said the company would spend about USD 616 million on acquiring JP Power plants. "Enterprise value of JP Power plants it’s buying, including debt, is about USD 1.6 billion," TAQA added.

Meanwhile, JP Morgan has downgraded the stock to neutral and reduced price target to Rs 19 apiece from Rs 25 apiece, citing risk-return trade off is no longer attractive.

"Implied deal valuation is 30 percent lower than expectations and 1.5 times of its original invested equity in two projects," JP Morgan report said.

Its holding company Jaiprakash Associates, which holds 60 percent stake in JP Power, already sold two cement unit in Gujarat for Rs 3,800 crore to UltraTech Cement in September 2013 as a part of debt reduction plan.

At 12:23 hours IST, the stock was down 14 percent to Rs 14.25 amid large volumes on the BSE.