Jaiprakash Associates downgraded, India

Jaiprakash Associates downgraded, India
Published: 31 July 2013


Two brokerages have downgraded Jaiprakash Associates Ltd, days after Deutsche Bank also cut its ratings and earnings estimates for the India-based cement producer.

Morgan Stanley has downgraded Jaiprakash to "equal-weight" from "overweight", citing worsening headwinds for cement profitability, a reduced likelihood of the Reserve Bank of India (RBI) cutting interest rates and a lack of asset sales so far to meaningfully reduce debt levels.

Citigroup, meanwhile, has cuts the company to "neutral" and high-risk from "buy", citing "an overleveraged balance sheet, perplexing diversification and recent move by RBI to tighten liquidity."

Last week Deutsche Bank downgraded Jaiprakash Associates Ltd to "sell" from "hold". The bank says the company's consolidated debt of INR612bn (US$10.24bn) came in at INR10bn above its estimates. It has also cut its FY14 earnings estimates for the India-based cement producer  by 14 per cent and that of FY15 by nine per cent, citing a "high degree of operating leverage" in a "weak cement demand environment."

On Monday, Jaiprakash reported that its first quarter net profit more than doubled, though that was helped mainly by one-time gain from the sale of shares in a subsidiary.