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New Delhi-based infrastructure company Jaiprakash Associates on Thursday saw one of its biggest drops in share prices, following panic among investors after one of its promoters reduced stake in it.
Promoter group firm Jaypee Infra Ventures, which owned nearly 30 per cent stake in JP Associates, pared its holding by 1.45 per cent in a few trading sessions between Monday and Wednesday. And, the shares of JP Associates, after dropping as much as 20 per cent, ended 17.6 per cent lower on Thursday to Rs 37.7. This was the worst fall since January 2009, when it had declined around 30 per cent.
To assuage investor concerns, the company issued a statement that “rumours are being planted in the market by persons with vested interests, suggesting that the promoters are selling their shareholding...leading to inflow of queries from investors”.
JP Associates’ market capitalisation was a little over Rs 9,000 crore after the correction. It has a large number of institutional shareholders. Among the large domestic ones are state-owned Life Insurance Corporation and asset management companies HDFC MF, Sundaram Asset and Prudential ICICI AMC. Some large foreign investors also have holdings, such as HSBC, T Rowe Price, Vanguard and Credit Suisse.
Incidentally, the company had raised about $250 million (Rs 1,500 crore) in July from several institutional investors by way of a qualified institutional placement (QIP). It saw a good response and took place at Rs 70.3 a share, 86 per cent higher than the current market price. The share sale was managed by CLSA and Standard Chartered. Following the QIP, the scrip had climbed to around Rs 88 a share. So far this calendar, shares of JP Associates are down around 30 per cent, as against a 30 per cent gain in the benchmark indices.
“It is clarified and confirmed for information of all stakeholders that the promoters of Jaiprakash Associates continue to have full faith in the company and hope that the investors/ stakeholders would continue to have confidence in the company and its management, as hitherto," the company said.
JP Associates said the promoter entity had reduced its holding from 29.75 per cent to 28.3 per cent “to meet its requirement of funds, including for social causes”.
Shares of other JP group companies also took a beating on Thursday. Jaiprakash Power Ventures fell nearly six per cent to Rs 13.55 and while Jaypee Infratech dropped 11 per cent to Rs 29.
Currently, the 12-month price target on JP Associates by consensus Bloomberg estimates is Rs 69 a share.
