Manoj Gaur: The Superman of the Indian conglomerate Jaypee Group [No Dream Too Big] - Mr. Nobody's perspective

THE ALL-SEEING EYE OF ETHMOS

Hello there....good to see you all after such a long break.  We are sorry for the delayed frequency of our articles but the fact of the matter is that we were actually a little busy with our other small priorities like growing our Ethmos.  So, after putting our hands and legs into some serious public problems (as well as solutions), now we are going into exploring the corporate world of our country by giving a short analysis of premiere companies that have helped in creation of our Brand Bharat for the world.  Now most of you will be knowing about the Tatas, Birlas, and the Ambanis; but, today we will be giving you a short glimpse of a company that many have written off as a failure right now but we at Ethmos are able to see the true strength of a company in its ethos and values.  So, here goes nothing about the Jaypee Group!

Manoj Gaur is the poster boy of the Jaypee Group and he is actually living the tag line “No Dream Too Big “. The debt ridden group is actually standing on vast debt of Rs 61,285 Cr. However, irrespective of the debt position, we at Ethmos believe that Manoj Gaur will be able take the group from the clutches of debt. Group has already divested one-fifth of group assets, but troubled economic scenario, especially in the infra sector, is making matters worse. The issue for the group is that it is a conglomerate with wide range from infrastructure to hospitality, from sports to Information Technology, and from healthcare to sports.

Usually infrastructure projects are financed under project finance where the SPV (special purpose vehicle) will be created and the project will be financed by a consortium of the banks. The equity will be brought in by the interested parties. Usually debt equity ratio of the project related to infrastructure finance is to the tune of 70:30. The future repayment of the debt portion will be subject to  the revenue generation capacity of the project. The equity holder’s other project will not be liable for the SPV in case the SPV is not working up to the mark from the COD [commercial operations date].

In an interview Shri Manoj Gaur has mentioned that between 2006 and 2012, the group invested Rs.60, 000 crore in real estate, power and cement. “But in the last three years, analysts and people feel that there is too much leveraging and too much investment,” The sub 5% GDP has taken toll on the Group in their heyday. However, Manoj Gaur has reiterated that CDR [Corporate Debt Restructuring] mechanism is not a solution. But by going for CDR, the group will be able to get some time which can be utilized in much efficient way rather than going for a brisk asset divestiture.

Jaypee Group – Asset Quality

As far as the asset quality of the group is concerned, we are literally talking about plant and machinery rather asset quality as per balance sheet. Group has not bought a single screw from China; they usually go for the countries like Germany and Japan for the heavy equipment machinery. The asset quality of the group is world class that is the reason that not only the foreign players such TAQA, but also Indian giants Reliance and JSW are interested to get the pie.

What went wrong?

Jaypee group entered into the fertilizers by buying Duncan’s Kanpur plant. The transaction resulted in the Jaypee Group investing nearly Rs. 700 crore to enter the fertilizer business.

Similarly in 2013 the group entered in the business of chip making in venture with IBM [International Business Machine Corp.]. The Group is entering this business when the chip tycoons in the countries like China and Taiwan have already made billions. It is not expected from the group to enter in such segments when economic outlook is not good. The green filed investment should be avoided when the debt position is not good.

Abu Dhabi National Energy Company PJSC (TAQA) was initially interested in buying the hydro power plants; however, due to undisclosed reasons the deal did not materialize. At the same time, Reliance Industries also showed their keenness to buy the same. The power plants were eventually bought by the JSW Energy Ltd for Rs. 9700 Cr. The Group has also sold a piece of land near Delhi and a cement plant which generated the whooping amount of sum Rs. 6,900 Cr. The brisk sale of assets might improve the cash position, but will it be beneficial in the long run?  The group has already slipped from the third largest to fifth largest producers in terms of cement production.

Action Plan by the Nobodys of Ethmos:-

Go for the CDR mechanism since it will get some time for introspection.

Introspect group’s assets; don’t sacrifice the assets for short term gains.

Do not go for any greenfield projects as the debt position is already high.

Rather than sacrificing the assets, go for the equity sale, which will generate cash and will have presence in the projects as well.

Brand building: Create a new brand image.

Retain the greatest assets, aka, employees.

Try to find amicable solutions for the stuck up infrastructure projects where group is a supplier.

We believe the actual asset is an off balance sheet item, which is the leadership of the Gaur brothers and integrity of the Jaypee Group employees. Tough times never last but tough people do. Under the leadership of Shri Manoj Gaur, we hope that the group will see the resurgence like phoenix.