Changing Fate of Jaypee Group

With Adani Group losing the deal to Reliance Power, it seems Reliance Power is going to be the nation’s largest Power producer. Reliance also pipped JSW Group for signing India’s biggest deal in infrastructure sector other than Telecom sector with Japyee Group.
Anil Ambani owned Reliance Power signed the MoU with Jaiprakash Group for taking control of country’s biggest private portfolio of hydro projects, 1800MW, for a INR15,000 crore deal. This deal happened onElectricity Powerly after Abu Dhabi National Energy or TAQA backed out of a $1.6 Billion dollar deal with debt ridden Jaypee Group. Jaypee had to put its hydro projects at stake to emerge out of their debt crisis. The deal happened between Reliance Power and Jaiprakash Power Ventures Ltd, which is a subsidiary of Jaiprakash Associates Ltd. It will be further executed by Reliance Power to its 100% subsidiary Reliance CleanGen. SBI Capital Markets was the advisor of this transaction.

The deal consists of 3 hydroelectric plants that are in full operation and have an average asset life of 50 years. Each plant uses run-of-the-river technology and produce electricity without the need of a large reservoir which compromise the ecology of those regions. The deal by Abu Dhabi National Energy Company said that IDFC and a Canadian pension fund were set to purchase the Karcham and Baspa hydro power projects of Jaypee for over INR 10,000 crore. The 1,000 MW Karcham-Wangtoo project is the country’s largest private sector hydropower entity.

The share prices of Reliance Power on 28th July went up by 4%. Reliance Power’s scrip ended the day at INR 94, up 3.47 percent on the BSE. During the day, it rose by 4.18 percent to INR 94.65. At the NSE, it went up by 4.13 percent to close the day at INR 94.50. Similar trend was seen at Jaiprakash Associates and Jaiprakash Power Ventures share prices that gained 2.95 percent and 3.17 percent, respectively. The deal came as a surprise as initial bidders, Adani and Jindal Steel were in the race and later Reliace clinching the deal gave a blow to investors and brokers unexpectedly. Reason behind this deal is that both the giants, Adani Group & JSW Group were making the deal partly in cash and share swap with Jaypee. But Jaypee, being short on cash to get over its debt had to accept the surprise bid by Anil Ambani’s Reliance Power.


Presently, the group is under crores of debt pile and that is one of the highest among Indian corporates. It seems that Japyee is achieving highs, whether it’s this deal or the hefty debt. The debt is the result of expansions in the field of real estate, infrastructure, cement and power sector over the past years. The group is trying to get over the debt crisis as it sold its cement manufacturing unit in Gujarat to Ultratech Cement by struggling to reduce its debt by INR 3,800. The debt as estimated by some of the brokerage firms is approximately INR 60,000 crore. It is yet to be seen what Jaiprakash Associates Ltd will do to make themselves stand again in the market after losing so much in the power sector in which they had dominance.



Published for The Management Edge 1st Edition, University of Delhi.
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