One of the baffling episodes in the market this February has been the collapse of the JP Associates stock. It was Rs 510 at the start of the year, corrected to Rs 370 by the end of January but it is the fall since then to Rs 250 which is mysterious.
The second leg of the fall has it’s genesis in a global investor conference organised by an influential investment bank where the company presented and a harmless slide in that presentation gave the listed JP associates only a 55 per cent economic interest of it’s arm JP Infratech, which houses the multi billion dollar Taj Expressway project.
Investors were aghast, after all they had assumed that JP Infratech was always going to be a 100 per cent subsidiary and the entire project upside would be captured by the shareholders of the listed entity. They were now being told that 45 per cent would be held by promoters.
When confronted at the conference the JP associates official confirmed the news; the next morning the stock tanked 10 per cent. Within minutes the vice chairman of the company was on CNBC TV18 clarifying that JP associates would own the entire 100 per cent of JP Infratech, yet the stock failed to recover.
Grapevine has it that calls were made by even Union Ministers to ascertain the facts with Manoj Gaur though one cannot be sure of these things. I also hear that the management’s “ostensible” reason for splitting the shareholding was that they had to share ownership with certain politicians from UP without whose blessings the deal may have been difficult to bag.
But all this is hearsay. So, essentially the management had indeed considered such a move but had to back off or reverse it on investor/political pressure.
This has left a bad taste in the mouth for large investors. It’s a well owned stock, FIIs own large chunks of and mutual fund houses own hundreds of crores worth of stock. This institutional holding is perhaps a hangover now, the reason why the stock refuses to bottom out despite having lost half it’s market cap this year. Trust has been violated, or at least that’s the perception. The Gaurs of JP need to do some damage control and assure investors they won’t attempt such sidey moves.
Else the market will make life difficult for them and the group will require a lot of growth capital. They can’t afford to make such mistakes.
(Udayan Mukherjee is an Executive Editor, CNBC-TV18)