Event Update | Construction

September 12, 2013

Jaiprakash Associates
Agreement to sell Gujarat cement unit to Ultratech
Event: The Jaypee group has reached an agreement to sell its 4.8mn tonne Gujarat cement plant (a unit of Jaypee Cement Corporation [JCCCL] which is a wholly owned subsidiary of Jaiprakash Associates) to UltraTech Cement. The Gujarat plant consists of an integrated cement plant at Sewagram and a 2.4mn tonne cement grinding unit at Wanakbori. The plant also has a 2500DWT jetty at Kutch which is used for clinker and coal movement in addition to a 57.5MW coal based captive power plant. The enterprise value of the transaction is to be `3,800cr excluding actual net working capital. As per the agreement, UltraTech Cement will take over the debt of `3,650cr of Jaypee's Gujarat unit and will issue equity shares worth `150cr (with the fresh issue resulting in dilution of no more than 0.32 percent of its capital) once the transaction is complete. As per the Management, the transaction is expected to be completed within 7-9 months subject to approval of shareholders and creditors, sanction of the Scheme of Arrangement by the High Courts, and approval of the Competition Commission of India besides other statutory approvals. Impact: The deal brings in a much needed relief to Jaiprakash Associates as it would help in reducing its huge debt. The valuation of the deal translates into US$124/tonne (assuming a USD rate of `64), which we believe is reasonable considering the current valuation of Ambuja Cements (US$132/tonne) and its large cap peers (at an average of US$138/tonne) on a trailing basis. On the completion of the transaction, the deal would help the company reduce its net debt by 6% on a consolidated basis; thus resulting in a boost in its profitability. Outlook & Valuation: We believe the deal is the first step in the right direction and brings in a much needed relief to the company as it would help reduce its debt. The Management has guided to reduce its consolidated debt by ~`15,000cr in FY2014 through monetization of its land parcel, cement business, and thermal & hydro assets. Going forward, we believe deleveraging the balance sheet through monetization of assets would help reduce the huge debt which continues to remain an overhang on the stock. Hence closure of such a deal would be positive for the company. However, due to recent increase in the stock price we recommend a Neutral rating on the stock.

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others Abs. (%) Sensex JPA 3m 4.5 (29.2) 1yr 12.0 (36.3) 45.1 12.0 24.3 18.6 3yr 6.4 (63.7) Infrastructure 9,631 23,000 1.7 107/28 3,052,771 2 19,997 5,913 JAIA.BO JPA@IN

`43 -

Key Financials (Standalone)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2012 12,916 (1.8) 1,089 52.7 4.9 27.1 8.5 10.0 8.7 0.8 2.3 8.5

FY2013 13,415 3.9 548 (49.7) 2.5 25.2 17.6 4.3 7.2 0.7 2.4 9.7

FY2014E 12,946 (3.5) 272 (50.3) 1.2 24.7 35.3 2.0 6.0 0.7 2.6 10.6

FY2015E 14,897 15.1 594 118.1 2.7 25.5 16.2 4.3 7.1 0.7 2.4 9.3

Viral Shah
022-39357800 Ext: 6842

viralk.shah@angelbroking.com 1

Please refer to important disclosures at the end of this report

Jaiprakash Associates | Event Update

Exhibit 1: Valuation of cement companies

Company ACC Ambuja Cements India Cements JK Lakshmi Cement Madras Cements Shree Cement UltraTech
,Assuming USD rate of `64

EV/tonne (USD/tone)

80 132 42 22 60 92 145

Source: Company, Angel Research ;Note: *adjusted for CPP; CMP as of September 11, 2013

Exhibit 2: JCCL Company structure

Jaiprakash Associates (JAL)

Jaypee Cement Corporation (JCCL)

AP cement plant

Gujarat cement plant

Sold to Ultratech Cement

Source: Company, Angel Research

September 12, 2013

Jaiprakash Associates | Event Update

Research Team Tel: 022 - 39357800

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Jaiprakash Associates No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

September 12, 2013

Jaiprakash Associates | Event Update

6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai- 400 093. Tel: (022) 39357800

Research Team Fundamental: Sarabjit Kour Nangra Vaibhav Agrawal Bhavesh Chauhan Viral Shah V Srinivasan Yaresh Kothari Ankita Somani Sourabh Taparia Bhupali Gursale Vinay Rachh Amit Patil Twinkle Gosar Tejashwini Kumari Akshay Narang Harshal Patkar Nishant Sharma Technicals: Shardul Kulkarni Sameet Chavan Sacchitanand Uttekar Derivatives: Siddarth Bhamre Institutional Sales Team: Mayuresh Joshi Meenakshi Chavan Gaurang Tisani Production Team: Tejas Vahalia Dilip Patel Research Editor Production Incharge tejas.vahalia@angelbroking.com dilipm.patel@angelbroking.com VP - Institutional Sales Dealer Dealer mayuresh.joshi@angelbroking.com meenakshis.chavan@angelbroking.com gaurangp.tisani@angelbroking.com Head - Derivatives siddarth.bhamre@angelbroking.com Sr. Technical Analyst Technical Analyst Technical Analyst shardul.kulkarni@angelbroking.com sameet.chavan@angelbroking.com sacchitanand.uttekar@angelbroking.com VP-Research, Pharmaceutical VP-Research, Banking Sr. Analyst (Metals & Mining) Sr. Analyst (Infrastructure) Analyst (Cement, FMCG) Analyst (Automobile) Analyst (IT, Telecom) Analyst (Banking) Economist Research Associate Research Associate Research Associate Research Associate Research Associate Research Associate Research Associate sarabjit@angelbroking.com vaibhav.agrawal@angelbroking.com bhaveshu.chauhan@angelbroking.com viralk.shah@angelbroking.com v.srinivasan@angelbroking.com yareshb.kothari@angelbroking.com ankita.somani@angelbroking.com sourabh.taparia@angelbroking.com bhupali.gursale@angelbroking.com vinay.rachh@angelbroking.com amit.patil@angelbroking.com gosar.twinkle@angelbroking.com tejashwini.kumari@angelbroking.com akshay.narang@angelbroking.com harshal.patkar@angelbroking.com nishantj.sharma@angelbroking.com

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September 12, 2013