Update

SECTOR: INFRASTRUCTURE

Jaiprakash Associates
BSE SENSEX S&P CNX
19,208 5,760 Rs122 Buy

Growth across verticals

Cement to drive near term earnings; cash flows impacted due to land payments
Bloomberg JPA IN
Reuters JAIA.BO  Cement capacity target of 50mtpa: In the next round of capacity additions,
Equity Shares (m) 2,127.7
Jaypee Cement is targeting production of 50mt. The business has already
52-Week Range 180/108
witnessed significant ramp-up in capacity from 7mt in FY08 to 22.8mt in March
1,6,12 Rel. Perf. (%) -4/-28/-38
M.Cap. (Rs b) 260.0 2010 and targeted 34mt by FY12; and has been the fastest rollout of greenfield
M.Cap. (US$ b) 5.6 capacity addition in the sector. We understand that a large part of the planned
cement capacity addition from 34mt to 50mt will be brown field, entailing competitive
Y/E MARCH 2010 2011E 2012E
capital cost.
N.Sales (Rs b) 100.9 124.3 157.5
EBITDA (Rs b) 23.1 30.4 38.3  EPC performance expected to be muted; improved intake seen from RE
NP (Rs b) 8.9 9.4 14.8 development, power: The EPC division's order book as at March 2010 was
EPS (Rs) 4.2 4.4 7.0
Rs377b, of which in-house projects contributed Rs348b (92% of the order book).
EPS Gr. (%) -0.4 4.6 58.2
Excluding the Ganga Expressway Project, the order book position is Rs76.5b v/s
BV/Share(Rs) 40.0 45.3 50.7
FY10 revenue of Rs56b, a book-to-bill ratio of 1.4x (the lowest in the past several
P/E (x) 29.1 27.8 17.6
years). Given the current poor BTB ratio and the gestation period in terms for new
P/BV (x) 3.1 2.7 2.4
project contributions, we expect revenues to be stagnant until FY12 (1.3% CAGR).
EV/ EBITDA (x) 17.3 13.2 10.6
EV/ Sales (x) 4.0 3.2 2.6
 RE cumulative bookings in NCR at Rs126b, expect revenue booking traction
RoE (%) 11.8 10.3 14.5
in FY11: Jaypee group, comprising Jaiprakash Associates, Jaypee Infratech and
RoCE (%) 14.4 11.7 12.2
JPSK Sports has crossed cumulative real estate (RE) bookings (pre-sales) of
Rs126b as at June 2010 (35.8msf). This is commendable since a large part of the
SHAREHOLDING PATTERN % (JUN-10)
sales took place over the past two years, and it makes Jaypee group by far the
Others,
Promoter largest RE developer in the fast growing NCR market. Cumulative advances received
18.9
46.0 were Rs52.5b (42% of bookings) which is commendable. We expect a meaningful
ramp up in revenue recognition from FY11, as sales in Noida project cross the
30% revenue recognition stage.

 Muted FY11 earnings; cement, RE to drive FY12 growth: We expect JPA to

Foreign, post earnings CAGR of 29% over FY10-12, driven by 32% EBIT CAGR in the
24.8 cement division, 33% EBIT CAGR in real estate and stagnant EPC profit. Reported
Domestic
net profit is expected at Rs9.4b in FY11 (up 5% YoY) and Rs15.5b in FY12 (up
Inst, 10.3
58% YoY). Key risks to estimates are: volumes and pricing pressure on cement,
STOCK PERFORMANCE (1 YEAR)
and E&C margins (we model residual EBIT margins of 26% for 9MFY11 v/s 7% in
Jaiprakash Associates
1QFY11 and 21% in FY10). Maintain Buy with a target price of Rs136 per share.
Sensex - Rebased
200
 Highlights from FY10 annual report: (1) Equity investment in project SPVs up
175
Rs10.9b, (2) debt raising of Rs45b in FY10 (standalone net DER at 1.7x) despite
150
sale of treasury stock of Rs17b, (3) working capital as a percentage of sales was
125
72% for FY09 and FY10 v/s 56% in FY08, given increased debtors and land
100
purchases from subsidiaries, (4) land payments of Rs20b (consolidated) in FY10
Dec-09

Mar-10

Jun-10
Sep-09

Sep-10

impacted reported operational cash flows, and (5) cash flow support of Rs17.1b to
Jaypee Infratech.

Satyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410 / Nalin Bhatt (NalinBhatt@MotilalOswal.com); Tel: +91 22 39825429
 Jaiprakash Associates

Cement capacity target of 50mtpa, near term earnings

under pressure

FY10 annual report states that in the next round of capacity additions, Jaypee Cement
aims to produce 50mt of cement. The business has witnessed significant ramp-up in capacity
addition from 7mt in FY08 to 22.8mt in March 2010 and it aims at 34mt by FY12. This is
the fastest rollout of greenfield capacity addition in the sector. We understand a large part
of the planned cement capacity addition from 33mt to 50mt is through the setting up of
grinding units, entailing competitive capital cost.

The management expects cement production to rise from 10.7mtpa in FY10 to 28.7mtpa
in FY12, a CAGR of 64%. We have modelled cement volumes of 18mtpa in FY11 (up
77% YoY) and 25mtpa in FY12 (up 22% YoY) and have not assumed capacity addition
beyond earlier stated guidance of 33mt. We await clarity on projects identified by the
company and the timelines in achieving the target. About 10mt of the new capacity is
entitled to fiscal benefits including a 10-year exemption on sales tax and royalty for a 3mt
UP cement unit and a 10-year exemption on excise duty for a 7mt HP plant.

Given continued pricing pressure and increased fixed costs including interest and
depreciation on expanded capacity, we expect the cement business to post EBIT growth
of 13% in FY11 on volume growth of 77%. In FY12, we expect performance to improve
with EBIT growth of 55% on volume growth of 39%. A correction in cement prices is the
key risk to our estimates.
FY11-12 TO WITNESS A MEANINGFUL RAMP-UP IN MARKET SHARES GIVE INCREASED UTILIZATION

Market Share (%) Incremental market share (%) 10.0

32.3

Jaypee Cement aims at 8.0

production capacity of 50mt. 26.3
We expect production of 5.1
4.0 4.0 4.2 4.3 4.0 4.2
3.7
25mt in FY12 (CAGR of 57%
over FY10-12) 8.1
5.7 5.3 6.1 13.7
0.9

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E

PLANS TO RAMP-UP CEMENT CAPACITY TO 50MT BY 2013 (M TON)

Capacity* Production* 50.0

Based on forecast sales
volumes of 25mtpa (v/s 37.6
33.6
29mtpa as expected by the
28.7
management) by FY12, JPA 22.8
20.2
would have 10% market
13.5
share and account for ~30% 9.0 10.7
6.8 7.6
of incremental market share

FY08 FY09 FY10 FY11E FY12E 2013

* As per managements estimates Source: Company/MOSL

13 September 2010 2
 Jaiprakash Associates

JAYPEE CEMENT TARGETING INITIAL PRESENCE IN EAST, SOUTH INDIA (MT, % OF TOTAL)

FY10 FY12
West,
West, 4.8, 14%
2.4, 11% North,
Central, 6.2, 18%
JPA's dependence on the
14.2,
central region will decline to 67%
52% from 67% as 33.7mt
capacity is commissioned by Central,
Eastern,
16.95,
FY12 North, 2.1, 6%
52%
4.7, 22% South,
3.5, 10%

Source: Company/MOSL

CEMENT DIVISION PERFORMANCE (RS M): FY11 VOLUME GROWTH OF 77%, EBIT GROWTH OF 13% YOY

FY08 FY09 FY10 FY11E FY12E CAGR (%)*

Sales Volume (m tons) 6.8 7.6 10.2 18.0 25.0 56.7

Growth (% YoY) 12.5 33.9 76.8 38.9
Net Revenues 19,504 22,360 36,227 61,209 87,120 55.1
Growth (% YoY) 14.6 62.0 69.0 42.3
Pricing pressure EBITDA 7,936 8,308 13,637 17,119 23,441
and higher interest/ Growth (% YoY) 4.7 64.1 25.5 36.9
depreciation will impact the EBIT 6,920 6,850 10,579 11,981 18,507 32.3
Growth (% YoY) -1.0 54.4 13.3 54.5
cement division's profit
Per ton summary
Net Realization 2,884 2,940 3,558 3,401 3,485 -1.0
EBITDA 1,173 1,092 1,339 951 938 -16.3
EBIT 1,023 901 1,039 666 740 -15.6
Capital Employed 57,656 80,785 121,209 132,209 138,209 4.4
Source: Company/MOSL

MUCH OF THE CAPEX ON CEMENT CAPACITY EXPANSION HAS BEEN INCURRED (RS B)

Cement capacity (m ton) Cement CE (Rs b) 132.2 132.2

121.2
29.3
Capital employed for the 27.5
cement division in FY10 was
20.6
Rs120b and thus a large 80.8
part of the capex on planned
57.7 13.5
capacity addition of 33mtpa
34.9 9.0
(Rs132b) has been made 7.0
7.0 7.0
4.4 4.4
19.9
8.7 10.9 13.5

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10A FY11E FY12E

Source: Company/MOSL

13 September 2010 3
 Jaiprakash Associates

CEMENT SECTOR ACCOUNTED FOR A LARGE PART OF CAPEX OVER FY06-10 (RS B)

Cement Others
3.0
In FY10 JPA spent Rs25b 6.2
8.0
on the cement business v/s
Rs30b in FY09. As
4.6
significant part of capex is
already made, capex
intensity would fall 1.8
6.5 3.3 0.5
6.6 15.1 22.7 30.2 24.6
1.2 3.0 2.6
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Source: Company

Production from Mandla coal block: JAL has been allotted a coal block in Mandla in
Madhya Pradesh with estimated reserves of 180mt. The mine will start operations in
2011/2012 and be used to meet coal requirement for a 7mt cement plant in Rewa, Madhya
Pradesh and a 5mt plant in Baga, Himachal Pradesh and other captive plants. The
management estimates the captive mine will lead to savings of Rs1,000-1,200/ton, as the
cost of coal (from captive mines) is estimated to be Rs1,600/ton and coal procurement
costs are Rs2,800/ton.

13 September 2010 4

We have modelled in EBIT
margins of 20% in FY11,
entailing residual margins of
26% in 9MFY11, and
disappointments will lead to
earnings downgrades.
JPA has pre-qualified to bid
for large projects, several
on an EPC basis
Given the poor BTB ratio
and gestation period of new
projects, we expect revenue
to be stagnant until FY12
(CAGR of 1.3%)
13 September 2010
Jaiprakash Associates
EPC performance to be muted; expect higher intake from
RE, power
As at March 2010, the EPC division order book was Rs377b, of which in-house projects
contributed Rs348b (92% of the order book). The current order book includes the Ganga
Expressway Project (Rs300b), Yamuna Expressway Project (Rs30-35b) and the Karcham
Wangtoo Project (Rs10-15b). Excluding the Ganga Expressway Project, the order book
position is Rs76.5b v/s FY10 revenue of Rs56b, a book-to-bill ratio of 1.4x (the lowest in
the past several years). Given the current poor BTB ratio and gestation period for new
project contributions, we expect revenue to be stagnant until FY12 (CAGR of 1.3%).
Going forward, we expect accelerated order book accretion from in-house projects
including RE development and thermal/hydro power projects. These include civil
construction for 1.5GW lower Siang hydro power project (expected completion by FY16),
5GW Thermo project, 15-20msf p.a. of RE development possibilities, etc. The management
highlighted participation in bidding for certain large BOT road projects and hydro projects
on an EPC basis, which should also add to the order book in FY11 and FY12.
EBIT margins in 1QFY11 fell substantially to 7.3% from 17% in 1QFY10 and 21% in
FY10. Margins were impacted by: 1) higher contribution from low margin in-house
construction work (Yamuna Expressway Project contributed 40-45% of 1QFY11 revenue),
and 2) force majeure at Srisailam irrigation project due to flooding in one of the two
tunnels in mid-FY10, leading to tunnel boring machine (TBM) being submerged. Thus,
continued site establishment expenses impacted margins, since there was no revenue
recognition from the second tunnel. We have modelled in EBIT margins of 20% in FY11,
entailing margins of 26% in 9MFY11, and disappointments will lead to earnings downgrades.
EPC DIVISION BIDS FOR PROJECTS, QUALIFIES FOR EXPRESSWAY, POWER PROJECT
PROJECT STATE TYPE
Eastern Peripheral Expressway Haryana / Toll road
Uttar Pradesh
8-lane access controlled expressway Uttar Pradesh Toll road
Civil & Hydro mechanical work Uttarakhand EPC contract
for Vishnugad pipalkoti HEP
HRT and Powerhouse for Arunachal Pradesh EPC contract
3GW Dibang project
Source: Company
BOOK-TO-BILL (EXCLUDING GANGA EXPRESSWAY) RATIO 1.4X, LOWEST IN SEVERAL YEARS (RS B)
Revenues Book to bill ratio
7.5
7.5 55.9
5.1
4.2
29.4
20.0 17.9 1.4
16.6
FY06 FY07 FY08 FY09 FY10
Source: Company
5
 Jaiprakash Associates

FY10 EPC REVENUE GROWTH ATTRIBUTABLE TO HIGHER EXECUTION FROM YAMUNA EXPRESSWAY, KARCHAM

WANGTOO (RS B)

Revenues EBIT EBIT margin (%)

CAGR of 1%
27.1 27.4
Karcham Wangtoo 25.9

57.4
55.9

53.7
and Yamuna Expressway 23.8 CAGR of 50%

projects contributed 72% of 21.0

21.2
20.0
FY10 revenue 20.0 20.0

29.4

11.7

10.7

11.5
7.6
20.0
18.5

5.1
4.5

4.8

17.9
16.8

3.5

3.6
16.6
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E

QUARTERLY MARGINS VOLATILE (%)

31.2 30.0
26.4 25.0
21.0 20.0 20.0
We have modelled in EBIT 17.2
margins of 20% in FY11 12.2
entailing residual margins of 7.3
26% in 9MFY11 and
disappointments will lead to
4QFY08

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11
earnings downgrades

BUILD UP OF RECEIVABLES FROM IN-HOUSE PROJECT EXECUTION (RS B)

EPC revenues (Rs b) % of in-house debtors Debtor days

Increased execution from in-
% from in-house projects 83
house projects has led to 72.0
76.2
higher proportion of 65
54
in-house debtors for
Jaiprakash at 46% in FY10 36.1 45.8
41.1
(v/s 10% in FY08) and
higher debtor days at 83
17.9 29.4 55.9 9.6
(v/s 54 in FY08)
FY08 FY09 FY10 FY08 FY09 FY10

Source: Company/MOSL

13 September 2010 6
 Jaiprakash Associates

RE cumulative bookings in NCR at Rs126b, revenue

traction in FY11 expected

With a land bank of 1.2bsf
(excluding 3.3bsf from the
Ganga Expressway Project),
the group has the largest
land bank in the NCR
The Jaypee group, including Jaiprakash Associates, Jaypee Infratech and JPSK Sports,
crossed cumulative real estate (RE) bookings (pre-sales) of Rs126b as at June 2010
(35.8msf). This is commendable given that a large part of the sales took place over the
past two years, and makes the Jaypee group by far the largest RE developer in the NCR.
Cumulative advances received were Rs52.5b (42% of bookings). With a land bank of
1.2bsf (excluding 3.3bsf from the Ganga Expressway Project), the group has the largest
land bank in the NCR.

Real estate consolidated revenue (net off inter-group transactions) was Rs6.8b in FY10
(v/s Rs8b in FY09). The decline in FY10 is given the elimination of Rs6.2b of inter-
company transactions (largely towards land purchases for a commercial office by JPA
from Jaypee Infratech). We expect a meaningful ramp up in revenue recognition from
FY11. Sales in the Noida project crossed the 30% revenue recognition stage (including
land cost) for JPA in 1QFY11. For Jaypee Infratech it is expected to cross the 30% mark
by the end of FY11. In 1QFY11 JPA posted an increase in real estate revenue bookings of
Rs3.7b v/s Rs952m a year earlier and Rs6.5b in FY10.

CUMULATIVE RE PRE-BOOKINGS AT RS126B (RS B)

NOIDA* Gr. NOIDA # Sales (msf) 126.0

Jaypee Group RE sales in NCR region has crossed

Cumulative RE bookings by 95.9
Rs126b in June-10, up from Rs18b in Mar-08
Jaypee group in the NCR is
Rs126b, including Rs48b in
JPA's standalone books 31.4
18.1

4 8 29 36

Mar-08 Mar-09 Mar-10 Jun-10

*Includes sales by Jaypee Infratech, Jaiprakash Associates, etc, # Includes sales by Jaiprakash Associates,
JPSK, etc Source: Company/MOSL

NOIDA CUMULATIVE RE SALES RS105B, 30MSF

Sales (msf) Pre Sales (Rs b)

105
89

Incremental Sales (msf) Advances Received (Rs b)

Cumulative advances 40 Realizations (Rs/sf) - RHS 8,000

received in Noida RE project 6,000

60

30
49

Launch o f "Jaypee
were Rs39b (37% of sales). 4,000
41
38

39

A man" pro ject at

20
27

27

Over the past year, there has Rs2,200/sf resulted

25
24
23
23

2,000
18
16

in lo wer average
16

13
13
10

been a significant pick up in 10 realizatio n 0

8
8
6
4
2

transactions with RE
0 -2,000
Mar-08
June-08

Dec-08
Mar-09
Jun-09

Dec-09
Mar-10
Jun-10
Sept-08

Sep-09
Mar-08
June-08

Dec-08
Mar-09
Jun-09

Dec-09
Mar-10
June-10

Aug-08

Aug-09

bookings of 20msf
Sept-08

Sep-09
Aug-08

Aug-09

Source: Company/MOSL

13 September 2010 7
 Jaiprakash Associates

JPA STANDALONE: RE REVENUE BOOKINGS, EBIT (RS M)

Revenues EBIT

3,661
3,456
We understand that a spurt

2,743
2,558

1,555

1,558
1,470
in 1QFY11 was because the
Noida project crossed the

810

1,245
447

378
revenue recognition

292
273

266

272

952

884
100
748

664
threshold of 30%
4QFY08

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11
Source: Company/MOSL

LAND BANK SUMMARY (JPA GROUP)

Besides 8msf at Greater
PROJECTS LOCATION MSF
Noida, JPA has 80 acres of
Jaypee Greens (JPA) Greater Noida 8.0
land in Noida and Jaypee Greens (Infratech) Noida - Agra 530.0
marketing rights on an Jaypee Greens (JPA) Noida * 24.5
additional 179 acres owned JPSK Sports (JPSI) Noida 133.0
Ganga Expressway - 3,300
by promoter group
Total 3,881
companies * 7.8msf in books of JPA Source: Company/MOSL

13 September 2010 8
 Jaiprakash Associates

Muted earnings seen in FY11, cement, RE to drive FY12

growth

We expect JPA to post earnings of 29% CAGR over FY10-12, driven by EBIT in the
cement division of 32% CAGR, 33% CAGR in real estate EBIT and stagnant EPC
profitability. Reported net profit is expected at Rs9.4b in FY11 (up 5% YoY) and Rs15.5b
in FY12 (up 58% YoY).

Risks to FY11 estimates

 Cement business - pricing pressure: Given continued pricing pressure and
increased fixed costs, including interest and depreciation on expanded capacity, we
expect the cement business to post EBIT growth of just 13% in FY11 on volume
growth of 77%. In FY12, we expect the performance to improve with 55% EBIT
growth on 39% volume growth. A price correction is the key risk to our estimates.
 EPC business - EBIT margins: EBIT margins in 1QFY11 declined substantially to
7.3% from 17% in 1QFY10 and 21% in FY10. The margins were impacted by: 1)
higher contribution from low margin in-house construction work (Yamuna Expressway
Project contributed 40-45% of 1QFY11 revenue), and 2) force majeure at Srisailam
Irrigation Project due to flooding in one of the two tunnels in mid-FY10, which led to
a tunnel boring machine (TBM) being submerged. Thus, continued site establishment
expenses affected margins, since there was no revenue recognition from the second
tunnel. We have modelled in EBIT margins of 20% in FY11 entailing residual margins
of 26% in 9MFY11, and disappointments will lead to earnings downgrade.
CEMENT BUSINESS DRIVING EBIT (RS M)

48,000 Construction Cement

In FY12, we expect the Hospitality Dividend from BOT subsidiaries
36,000 Real Estate Others
cement division to improve
performance with EBIT 24,000
growth of 55% on volume
growth of 39% leading to 12,000

robust standalone earnings 0

growth of 58% YoY
-12,000
FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E

MOST OF THE INCREMENTAL CAPITAL EMPLOYED IS TOWARDS CEMENT (RS B)

320 Construction Cement

JPA has spent a significant Investment Unallocated
Real Estate Hospitality
part of its capex on cement Hydro and Wind pow er
240
capacity expansion up to
33.7mtpa. Over FY03-10, the
160
cement division accounted
for half the incremental
80
capital employed, and
investments accounted
0
for 25%
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Source: Company

13 September 2010 9
 Jaiprakash Associates

DEBT (RS B), NET DER

STANDALONE CONSOLIDATED

Standalone borrowings
increased by Rs48b in FY10,
despite sale of treasury stock
(Rs17b), to meet higher
working capital
requirements and advances/
investment to subsidiaries

Source: Company

13 September 2010 10
 Jaiprakash Associates

Valuation and view

Based on the SOTP methodology, we arrive at a price target of Rs136, comprising the
core business at Rs48/share, investment in hydro and thermal power projects at Rs42/
share, Jaypee Infratech at Rs32/share, Jaypee Greens at Rs5/share, land bank at Noida at
Rs2/share and other investment at Rs5/share. We have not factored in possible value
creation from 10mt+ capacity cement unit scheduled for commissioning after FY12, the
Ganga Expressway Project and a Formula-1 project with an integrated sports complex.
At the CMP of Rs122, JPA trades at PER of 28x FY11E and 18x FY12E. Maintain Buy.

JAIPRAKASH ASSOCIATES: SUM OF PARTS VALUATION

STANDALONE BUSINESS BUSINESS METHOD VALUATION VALUE VALUE RATIONALE

SEGMENT MULTIPLE (RS M) (RS/SH)

E&C Business Construction FY11 EV/EBIT 10.0 107,366 51 At par with Industry Average
Cement Business Cement FY11 EV/ton 95 132,307 62 At discount to Industry average
Coal Mining Mining Book Value 9,000 4
Cash Book Value 42,885 20 Book value FY10
Firm Value 291,557 137
Debt Book Value 189,364 89
Equity Value (A) 102,193 48
Subsidiary Companies
Jaiprakash Power Hydro Power NPV of project 77,797 37 At NPV of project development
Ventures Ltd. development
Jaypee Karcham Hydro Power P/BV 12,274 6 At NPV of project development
Hydro Corp Ltd.
Jaypee Ganga Infra Road Project/ Book Value 4,219 2 Advances towards equity and
Real Estate equity investment
Total (B) 101,449 48
Real Estate / BOT
Jaypee Greens Real Estate NPV of project 10,937 5 At project NAV
development
Jaypee Infratech Road Deve/ 25% Discount 68,776 32 83.1% stake valued at 25% discount
Real Estate to CMP to market cap.
Land bank at NOIDA Real Estate NPV/acre 4,800 2 Rs60m/acre based on project NPV for
Yamuna Expressway
Total (C) 84,513 40
Total ( A + B + C ) 288,155 136
Source: MOSL

FULLY DILUTED EQUITY CAPITAL (M SHARES)

Current O/s FCCB Treasury Stock

2,404
189

90

2,125

Source: Company

13 September 2010 11
 Jaiprakash Associates

Takeaways from the FY10 annual report

Increased working capital given land purchases for commercial office,

increased debt from subsidiaries
 In FY10, working capital as a percentage of sales for JPA was 72% for FY09 and
FY10 against 56% in FY08. The increase is due to two key reasons: (1) increase in
RE projects under construction by ~Rs6b, and (2) higher share of in-house EPC
revenue.
 Projects under construction reflect the progress on real estate projects for JPA. In
FY10, JPA acquired land from Jaypee Infratech to develop commercial space and
made payment towards the same, which increased projects under construction and
thus lowered cash flow from operating activities. Land bought for commercial
development for its own use is classified as inventory (and not fixed assets).
 The working capital is impacted by higher in-house EPC revenue at 72% in FY10
against 76% in FY09 and 36% in FY08. Debtor days increased from 54 in FY08 to 83
in FY10 and debtors' outstandings from Jaypee Infratech increased to Rs5.8b in FY10
from Rs1.5b in FY09.

PROJECTS UNDER DEVELOPMENT (RS M)

PARTICULARS STANDALONE

FY10 FY09

Opening Balance 7,261 3,262

Expenditure During Year
Land Payments 5,132 1,939
Construction 3,626 2,694
IDC 755 -
Staff Cost 411 157
Others 249 1,200
Total 17,433 9,253
Less: Allocated to Projects Developed 3,873 1,992
Total Projects Under Development 13,561 7,261
Source: Company

Increased debt to meet working capital/investment requirements, Rs11b

infused into project SPVs
 JPA borrowed additional debt of Rs45b in FY10, and sold treasury stock (Rs15b) to
meet higher working capital requirements, advances/investment to projects subsidiaries.
Standalone DER was 1.7x as at FY10 v/s 1.5x as at FY09.
 Incremental equity contribution was towards the Yamuna Expressway Project (Rs2.6b),
JPSK Sports (Rs4.9b), Cement JVs (Rs1.9b) and Ganga Expressway Project (Rs1.5b).
Besides, JPA paid Rs5.2b to Jaypee Infratech for land purchases, Rs4.3b for increase
in debtors and Rs5b as corporate guarantee for NCDs raised. Thus, in FY10, JPA
provided cash flow of Rs17.1b to Jaypee Infratech.

13 September 2010 12
 Jaiprakash Associates

DETAILS OF INVESTMENTS BY JPA INTO PROJECT SPVS

FY08 FY09 FY10

Power Projects
Karcham Wangtoo 7,500 9,250 9,250
Jaiprakash Power Ventures 8,428 8,428 8,428
Cement JVs 1,192 2,189 4,094
Yamuna Expressway 9,550 9,550 12,150
Ganga Expressway 920 2,734 4,219
Treasury Stock - 9,684 6,040
JPSK Sports (JPSI) 16 121 4,999
MFs/ Liquid funds - - 4,094
Others 4,644 196 2,490
Total 32,250 42,151 55,763
Source: Company

Consolidated DER 3.1x, adjusted operating cash flow positive (v/s reported
negative cash flow)
 For JPA, the increase in consolidated DER from 2.3x in FY09 to 3.1x was largely due
to securitization of debt raised in Baspa and Vishnuprayag hydro power project (Rs11b),
an FCCB issue (Rs9b) in Jaypee Power Ventures and SPV debt increase in Jaypee
Infratech (~Rs4b).
 In FY10, operating cash flows for JPA on a consolidated basis was negative at Rs10.2b
v/s positive cash flow of Rs7.6b. A decline in cash flow was largely due to land
payments (part of projects under construction) to the extent of ~Rs20b by Jaypee
Infratech to acquire the Yamua Expressway Project land and JPSK Sports for the
acquisition of 1,000 hectares for a Formula-1 track project. Adjusted for this, the
operating cash flow would be a positive Rs10.4b, v/s Rs8.7b in FY09.

OPERATING CASH FLOW POSITIVE, ADJUSTED FOR ONE-TIME LAND PAYMENT (RS M)

PARTICULARS CONSOLIDATED REMARKS

FY10 FY09

Operating profit 25,817 19,444 Growth in consolidated operating profit negated on

before WC change account of higher in-house EPC and RE sales
Working Capital Change
- Inventory (3,438) (2,679)
- Projects under (26,527) (5,084) Payment of land by JPSK sport (JPSI) and
development Jaypee Infratech classified as inventories
available for RE development in consolidated
- Debtors (6,888) 169 Higher in-house debtors, increase in WC cycle
- Loans and Advances (11,686) (10,329) EPC advances to third party contractors in
consolidated account for execution of RE for NOIDA
- Liabilities 16,139 9,851 Receipt of advances from group companies
towards execution
Cash generated
from operations (6,582) 11,372
Less: Taxes (3,569) (3,771)
Operating Cashflow (10,151) 7,601
Adjusted Operating
Cashflow 10,350 8,686
Source: Company

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 Jaiprakash Associates

Financials and Valuations

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 Jaiprakash Associates

N O T E S

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 Jaiprakash Associates

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Disclosure of Interest Statement Jaiprakash Associates

1. Analyst ownership of the stock No
2. Group/Directors ownership of the stock No
3. Broking relationship with company covered No
4. Investment Banking relationship with company covered No

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