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IndiaNivesh ResearchIndiaNivesh Securities Private Limited601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800

Company UpdateFebruary 7, 2013 Jaiprakash Associates Ltd.

IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.

CMP : Rs.74

Rating : BUY

Target : Rs.163

Rating : BUY

Target : Rs.163

Current Previous

Daljeet S. Kohli

Head of Research

Mobile: +91 77383 93371, 99205 94087Tel: +91 22 66188826daljeet.kohli@indianivesh.in

Y. Santosh

Research Analyst

Mobile: +91 77383 93416Tel: +91 22 66188840s.yellapu@indianivesh.in

Jaiprakash Associates Ltd (JPA) stock has been under pressure for last few days and

has corrected by 42.6% from its recent peak (touched a high of Rs 107 on Dec-12,2012). We tried to understand the rationale for such steep price correction.

Concerns over JPAs inability to conclude the deal of their 5.0 mtpa Gujarat

based cement plant (as per media reports ABG Cements ~6.7 mtpa plant is

on block).

Withdrawal of Offer-For-Sale (OFS) of 27.8 mn equity shares of Jaypee

Infratech Ltd.

Admitting to Himachal Pradesh High Court about its inability to pay 2nd

installment (Rs 250 mn) of total Rs 1.0 bn of fine (imposed on environmental

clearance related case).

Recently JPA raised Rs 5.3 bn through Qualified Institutional Placement (QIP)route, in order to fund its working capital requirements.

We are of view that JPA stock has sharply reacted to these developments,

given that the fundamentals of the company have not worsened and these

concerns are temporary in nature. Our view is on a/c of the following

developments and rationale.

JPA has confirmed that Gujarat cement plant is not off the block & mismatch

in valuation expectations has lead to delay in the deal taking place. JPA has

already restructured Gujarat cement plants by creating separate subsidiary

namely, JP Cement Corporation Ltd (to facilitating transaction smoothly). The

only stumbling block, here is valuation expectations, as JPA is expecting EV/

tonne of $ 150-160, with potential buyers willing to offer EV/tonne of $135-

140. On the other hand, some of the smaller players have put their cements

business on block with valuation expectations of ~$140/tonne.

Given that JPAs plants when compared to these smaller plants are running

on higher operational efficiencies and have lower plant age, we sense that

JPA asking 7-14% premium to smaller players expectations is justified.

JPA raised ~Rs 8.4 bn ($ 150 mn) of the total planned ~Rs 28 bn ($ 500 mn)

through Foreign Currency Convertible Bond (FCCBs) route in Aug-12. JPA has

received approval from RBI to raise $ 250 mn (Rs 14 bn), implying its eligibility

to raise another ~ Rs 5.6 bn, as per capital requirements (for FY13E-14E).

Further to this, the company does not have any FCCBs for retirement, exceptRs 14.4 mn in Mar-13. With FY13E operating cash flows of ~Rs 8.0 bn, when

coupled with expected cash balance of ~Rs 4.0 bn at FY13-end, does not

concerns about the overall funding requirements of the company. We sense

that the company is exploring cheaper sources of funding and in the due course

has raised money through QIP route to fund its working capital requirements.

We dont read much in to the point that JPA does not has money to pay the

second installment of fine, as this may be companys tactics of efficiently

managing the monetary resources.

With all these developments leading to correction in the stock price, we see this as

an opportunity for long-term investors to enter the stock at current levels. At CMP

of Rs 74, the stock is trading at FY13E and FY14E, EV/EBITDA of 8.5x and 6.9x,respectively.

Recent correction in stock price, gives a good entry point | Re-iterate BUY

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IndiaNivesh Research Jaiprakash Associates Ltd|Company Update

Company Update (contd...)

February 7, 2013 | 2

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IndiaNivesh Securities Private Limited

601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007.

Tel: (022) 66188800 / Fax: (022) 66188899

e-mail: research@indianivesh.in | Website: www.indianivesh.in

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SoTP Valuation

Rs in mn Ins. Cap. (mtpa) Valuation metric Unit Multiple EVCement business 35 EV/tonne $120 231,000

Construction business EV/EBITDA 5.0x 118,932

Real Estate NAV 20% discount 64,800

Hotels EV/EBITDA 5.0x 1,379

Total EV 416,110

Standalone Net Debt BV 1.0x 158,488

Contribution from listed subsidiaries

a) Jaypee Infratech Ltd (JIL) M-Cap 20% discount 44,260

b) Jaiprakash Power Ventures Ltd (JPVL) M-Cap 20% discount 45,645

Jaiprakash Associates' M-Cap 347,527

Shares outstanding 2,126

Value/share 163

Note:CMP

of

JIL

and

JPVL

as

on

Feb

7,

2013;

1

USD

=

Rs

55.0

Source:IndiaNiveshResearch

With elections scheduled in FY14E and a lot of reform announcement expected

from the upcoming budget we sense that good times are ahead of the company.

We maintain our BUY rating on the stock with FY14E based price target of Rs 163.