Stock gains 40% in a month, till a month ago investors in Jaypee Infratech shared the blues with other investors in the realty/construction sector, the company having lost half its value in the preceding year.
But with the F1 track in Greater Noida all set to host India’s first Grand Prix, investors have warmed up to the idea that firm may undertake the ribbon development on 6175 acres in five locations along the Yamuna Expressway. The company’s stock has zoomed by over 40 per cent from Rs 44.50 exactly a month ago to Rs 63.05 on the BSE, outpacing peers. This has happened even though Jaypee Infratech had liabilities of over Rs 6,000 crore at the end of last fiscal.
Along with the market value, the brand value has increased manifold for Jaypee Group, created by former civil contractor Jaiprakash Gaur. While brand experts remain tight-lipped about the group’s possible monetary gain from F1, Jaypee is now a widely known name in India.
The world over F1 is associated with economic activity running into millions of dollars. For example, F1 races generate over a billion dollar spin-off businesses in Australia, Canada and the UK. In Malaysia and Bahrain the first F1 races saw the generation of $300 million of economic activity, claimed F1 officials in August. This can happen in India also, specially Jaypee which has businesses ranging from infrastructure, hospitality and real estate. Jaypee Infratech is an 83 per cent subsidiary of Sensex firm Jaiprakash Associates. Jaypee Sports International (earlier named JPSK Sports), another subsidiary, has completed the construction of the Buddh International Race Circuit that will host India’s first F1 Grand Prix this weekend. According to estimates, the race circuit was built at a cost of Rs 1,000 crore.
This has also boosted the stock of Jaiprakash Associates by 5.4 per cent from Rs 69.10 to Rs 72.80. This has made, the promoters of both the companies richer by over Rs 3,000 crore in one month.
Other investors too have gained. It hasn’t rubbed off on large-cap stock Jaiprakash Power Ventures, another group company, which has lost over 14 per cent.
According to Shirish Rane and Salil Desai of IDFC Securities, parcel 3 (along the Yamuna Expressway) is close to the F1 circuit and will benefit from the expected spike in economic activity around. “Jaypee Infratech is expected to be a key beneficiary of higher realisations for its land parcels, as the proposed new Land Acquisition Act and ongoing disputes over other land parcels in Noida Extension make the cost of new development higher,” the analysts said.
Plus, the recent Allahabad high court order hasn’t negatively impacted either Jaypee Infratech or Jaiprakash Associates.
Say Eelweiss Securities analysts Aashiesh Agarwal and Adhidev Chattopadhyay said “We view the judgment as directionally positive as it eases the regulatory overhang on the Noida realty market. Developers likely to benefit are largely from the unlisted space while we see no material impact on Jaiprakash Associates and Jaypee Infratech.
