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Citi doawngrades Jaiprakash Associates

April 1, 2008

Citigroup research has cut the target price estimate for Jaiprakash Associates. After a 50%-plus correction, the stock is close to stress-case value of Rs196. Indeed this is a very bold and conservative move because Citi values JP Associates on business valuations and not private-equity valuations, which is evident from the fact that we value (1) Jaypee Power Ventures at a ~60% discount to P/E valuations, and (2) Jaypee Infratech at a ~37% discount to P/E valuations.

The new target price of Rs300, down from Rs462 factors in – an EV/EBITDA of 12.0x (16.0x previously) for Construction; an EV/ton of US$120 (US$160 earlier) for Cement; Jaypee Power at a 60% discount to P/E valuations as we no longer value projects in the initial planning stages; and a 14% cut in realizations/sq ft for Jaypee Infratech.

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