Stock Review: Jaiprakash Associates

Even if the market has been discounting Jaiprakash Associates, the promoter group has been buying its stock through the fall in the markets. While this speaks volumes about the promoter's faith in the company, the markets look at the cash flows. For the last five years, the company has been weighed down by high capital expenditure across all businesses. According to a report by CLSA, it is set to change, helped by a 90 per cent rise in cement capacity over FY1013 and resilient real estate sales in the parent company and its subsidiary, Jaypee Infratech (JIT). Key projects like Jaypee Infra's Yamuna Expressway toll road and 1,500 Mw of extra power capacity in subsidiary Jaiprakash Power will go on-stream by Q4 of FY12.

A trebling of cement production over FY10-14 may offset lower construction revenue, rising depreciation and interest expenses. CLSA expects consolidated profit to rise sixfold over this period. However, with the 1,000Mw Karcham hydropower project starting from March 2011, capacity of Jaiprakash Power will expand from 700 Mw now to 7,480 Mw by March 2015