Jai Corp, a company owned by Anand Jain, has a crucial role to play in a slew of Mukesh Ambani’s mega-projects.
In January 2007, Business Today ran a story on Jai Corp, a company owned by Anand Jain and family, and its role in the implementation of Mukesh Ambani’s special economic zones (SEZs). Since then the Jai Corp stock has surged nearly 650 per cent, to Rs 1,076.85 on 15 October 2007 from Rs 145.34 on 2 January 2007.
The story has since moved ahead, along with the stock, with Jai Corp playing a crucial role in the SEZS and other infrastructure-related projects (see With a Little Help...)
Jai Corp along with the Reliance group intends to build two multi-project SEZs on 17,500 acres of land in Navi-Mumbai and Mumbai (land acquisition for a Mumbai SEZ is in progress, while 5,250 acres for the Navi-Mumbai SEZ have been purchased).
The Ambani-Jain duo—Jain will hold a 10 per cent stake in these projects— will also develop a port at Rewas (on the outskirts of Mumbai), and will bid for projects such as a proposed international airport, a metro rail and a transharbour sea link. Jain will be involved in putting up a power plant and a dam for the two SEZs, too. The total outlay for all these ventures is estimated at Rs 33,700 crore, of which Jain’s share will be Rs 2,630 crore.
It’s the sheer potential for growth via these ventures that’s pole-vaulted Jai Corp amongst the top 25 performing stocks on the BSE. Jai Corp’s involvement in these projects has resulted in Enam Financial Consultants projecting a valuation of Rs 10,700-13,500 crore for the company.
According to the domestic brokerage, a 10 per cent stake each in the two SEZs has been collectively valued in the Rs 9,000 crore-11,600 crore range. The market, for its part, sees even more value in the company, with the market cap at the time of writing standing at Rs 18,590 crore.
BT made repeated attempts to contact Jain, but he remained unavailable. Currently, he’s busy working out his share of the funding modalities in the Reliance projects.
As on June 30, Jain and family own nearly 88 per cent of Jai Corp. The promoters have begun to dilute their stake by offloading stock in the open market (on October 15 they sold 2.19 crore shares to FIIs). The company has already issued bonus shares in the ratio of 1:1 as well as split the stock to a face value of Re 1 from Rs 10 per share. It has also raised the FII investment limit to 49 per cent.
According to Enam, the company plans to raise Rs 1,400 crore through infusion of fresh equity; this will dilute the promoters’ holding by 13 per cent stake. Jai Corp will also raise debt of Rs 800 crore and fund Rs 480 crore from internal accruals. The internal accruals will be the fees garnered from two infrastructure funds. In early 2006, Jai Corp had incorporated two wholly-owned subsidiaries, Urban Infrastructure Trustees and Urban Infrastructure Ventures. Analysts expect cash flows over the next eight years through the funds to be Rs 2,000 crore.
If you’re wondering what Jai Corp has been up to for so long, it’s in the businesses of steel, plastics and textiles. The company plans to hive off its steel division on account of thinner margins, and plans to expand the plastic processing business. Currently the stock of Jai Corp is trading at a P/E ratio of 177 times. For the first quarter ended June 30 2007, Jai Corp reported a profit of Rs 34.04 crore, on revenues of Rs 51.2 crore. Clearly, Jain has got a lot of work ahead of him.