DERIVATIVES & RISK MANAGEMENT

PGDM- II (2018-2020)

TEAM C

COMPANY- JAYPEE INFRATECH

SUBMITTED BY-
SUBMITTED TO:
BM-018002 AASHI GUPTA
PROF. ALOK PANDEY &
MR. GAURAV DAWAR BM-018034 AMAN KUMAR JHA
BM-018044 ANNU GUPTA
BM-018050 ANURAJ BAJPAI
BM-018052 ARCHIT GOEL
BM-018054 ARPITA KUMRA
BM-018056 GAGAN SINGH
BM-018064 ARSHIT AGARWAL
BM-018088 BHUMIKA GANDOTRA
BM-018146 KHUSHBU BHISHT
BM-017343 SAHUL RANA
INDEX

S.NO. PARTICULARS PAGE NO.

1. ANNUAL REPORT

1.1 2013-2014
1.2 2014-2015
1.3 2015-2016
1.4 2016-2017
1.5 2017-2018
1.6 2018-2019
2. NEWS

2.1 2009-2013
2.2 2013-2016
2.3 2016-2019
3. REMEDIES

3.1
ANNUAL REPORT

 2013-14

Company’s Yamuna Expressway achieved COD on 7th August,2012, was opened for
public on 9th August, 2012 and commenced Toll collection w.e.f. 16th August,2012.
The average daily traffic (ADT) has registered 69% increase and the Toll collection
Revenue has registered an increase of 44% during the F.Y.2013-14. Jaypee Infratech
Limited was developing five townships over 25 million square meters of land for
commercial, amusement, industrial, institutional and residential purposes etc. across
five different locations.
In order to conserve resources the Directors of your Company express their inability to
recommend any dividend for the Financial Year 2013-14.
Company’s revenue in 2014 is same as previous year’s revenue i.e. 2013 but the
expenses are increasing by around 20% due to which there is decrease in the profits.
Cost of Sales including Operation & Maintenance Expenses on Yamuna Expressway,
Employee Benefits Expenses including increase in interest on term loans which shows
constant increase in loans, Finance Costs, Depreciation and Amortization Expenses all
are increasing as compared to previous year.

 2014-15
The Average Annual Daily Traffic for the year ended on 31st March, 2015 was 16490
PCUs as compared to 13477 PCUs for the previous year ended on 31st March, 2014,
higher by 22.36%. The revenue from toll collection for the year ended 31st March 2015
aggregated to Rs. 168.65 crores as compared to Rs. 135.17 Crores for the previous year
31st March 2014, higher by 24.77%.
The Company developing five integrated Townships over 28 million square meters of
land for commercial, amusement, industrial, institutional and residential purposes etc.
 across five different locations along the Yamuna Expressway.The Company launched
approx. 113.06 million sq. feet area and sold approx. 107.10 million sq. feet area till
31st March, 2015 aggregating to sales value of Rs. 21943 Crores.
The Financial Year has been a successful year for the Company since revenue from toll
collection and real estate sale has shown an increasing trend.

 2015-16
 The Company has defaulted in repayment of principal and interest to banks and
Financial institutions, wherein the period of delay ranges from 2 days to 181
Days.
 During the year the Company has not made any preferential allotment or private
placement of shares or fully or partly convertible debentures
 The company has been constantly increasing its secured loans.
 The assets of the company including receivables, inventories and cash
equivalents are generally seen decreasing in the financial year 2015-16.

 2016-17

Jaypee Infratech Limited was developing five townships over 25 million square meters
of land for commercial, amusement, industrial, institutional and residential purposes
etc. across five different locations including one in Noida, two locations in District
Gautam Budh Nagar (part of NCR) and one location in each of District Aligarh and
District Agra, Uttar Pradesh, along the Yamuna expressway. JIL had commenced
development of its land Parcel-1 at Noida, Land Parcel-3 at Mirzapur, U.P. and Land
Parcel-5 at Agra.

But the revenue from Real Estate sales (land for development) aggregated to rupees
595.57 crores during the year ended 31st march, 2017 as compared to rupees 2525.88
crores for the previous year ended 31st march, 2016. The decline in revenue from real
estate is due to overall slowdown in the economy, because of investor sentiment
towards real estate and consequent delay in construction of the ongoing projects due to
lack of working capital.

 2017-18
 Too much leveraging on assets and too much investment in different projects led to
failure of Jaypee infra and Jaypee group as whole. They tool those projects which look
profitable at one time can turn into bad ones in long run. Jaypee group got the rights of
Formula One for 5 years as Circuit 28 owners in 2011. The source of revenue was
tickets. But in India, there were not many people who wanted to buy such costly tickets.
As a result, operating cost was much more than the revenue earned by selling tickets
leading to losses. But the major project that led to breakdown of firm was failed
Yamuna Expressway project. Firm could not achieve what it had expected from this
project. Due to piling losses from such projects, company could not complete the
construction of apartments, affecting around 32,000 homebuyers. Other reasons could
be attributed to delays in environmental clearances and project approvals, lower GDP
and slowdown in infrastructure sector in 2012- 13, fund shortage, high interest costs
and ban on use of ground water for construction activities by NGT (National Green
Tribunal).

 2018-19

Jaypee Infratech Limited (JIL) has developed Yamuna Expressway project which inter-
alia includes 165 km six lane access controlled expressway from Noida to Agra with
provision for expansion to eight lanes with service roads and associated structures.
Yamuna Expressway was opened for the public on 9th August, 2012 and commenced
toll collection from16th August, 2012.
The revenue from Toll Collection for the year ended 31st March, 2019 aggregated to
Rs.345.70 crores as compared to Rs. 325.73 Crores for the previous year ended 31st
March,
2018, which is higher by 6.13% over the previous year.

No dividend was given to shareholders. No amount is proposed to be transferred to the

Reserves.
M/s Dass Gupta & Associates is an auditor of this company. Based on the audit
procedure and according to the information and explanations which is given to them
they told Jaypee Infra had delay ranged from 1 to 1217 days. Overdue interest on
borrowings amounting to Rs. 3,77,223.25 Lacs.
NEWS

 Jaypee Infra insolvency: Creditors' meet on May 30 to discuss NBCC bid

May 26, 2019, 01.58 PM IST
A meeting of Committee of Creditors (CoC) has been called on May 30, sources said.
As many as 13 banks and 23,000 homebuyers have voting rights in the committee.
 Jaypee Infratech row: Homebuyers seek government's intervention

June 24, 2019

In a letter addressed to PM Modi and FM Nirmala Sitharaman, homebuyers have
appealed to the government to direct IDBI Bank and NBCC to resolve their differences
on the resolution plan.
 Complete Insolvency Resolution Process within 90 Days: Top Court to Jaypee Infratech

November 06, 2019

In a jolt to the Jaypee Group, the Supreme Court on Wednesday directed completion of
corporate insolvency resolution process within 90 days for Jaypee Infratech and said
the revised resolution plan will be invited only from NBCC and Suraksha Realty.

 Supreme Court Orders Status Quo on Jaypee Group's Plea Against Tribunal's Order

August 02, 2019

The Supreme Court on Friday ordered a status quo for two weeks on Jaypee Group's
plea against the National Company Law Tribunal (NCLAT) order which allowed fresh
bidding for debt-laden Jaypee Infratech.
COSO Remedies
It can be seen from annual report that the company had took huge amount of debt which has
increased its cost of capital, finance cost, and various other expenses in order to invest in
Yamuna Express Highway Project because of which they didn’t paid dividend to their
shareholders hence it can’t be said they had not properly assessed the risk. Whereas, further it
was observed that company has generated huge revenue through real estate business but the
conflict was that besides generating so much revenue they were not able to repay principal as
well as interest on principal because of which more and more change on assets was created and
this depicts that there was not proper monitoring of all the funds.

The main areas from where JP Infra were generating revenues were Yamuna Express Highway
Taxes and Real Estate but suddenly the company started that they are into loss of real estate
business and hence lack of disclosure was there as they gave generalised statement that there
was slow down in economy. And later the Yamuna Express Highway project failed and hence
company lost itself most of revenue and therefore reported insolvent.

But as per COSO remedies, company can improve its conditions and not declare insolvent if it
provides proper disclosures and regular monitoring of loans should be done along with
compliance activities. Hence, company should focus on long-term project and feasibility
projects rather than short-term projects.

ISO31000 Remedies
The company did not focused on some internally driven and externally driven key drivers of
risk management given in ISO31000 framework.

Key Drivers that had to be managed as per ISO framework:

 Financial Risks:
Internal Control was to be done when the operational costs for the company were
increasing. They were not able to manage the increasing operational costs due to which
profits decreased.
Investments were done in huge projects and they cannot be completed on time due to
less revenue earned by the company. Company should consider investing on the
projects in an effective manner so that at the time when revenues were not earned, they
are not overburdened with expenses done to complete those investments.
 Interest rates on loan also increased and due to presence of huge debt in capital structure
of the company. It was not able to pay even interest on loans. Even after that they didn’t
go for any other share allotment but increased secured loans. This has given lenders
control over company’s assets. Increasing leverage with decreasing revenues had not
to be done to control financial risks. Also company has to take some capital expenditure
decisions after complete study. The formulae one track did not given company enough
revenues because the tickets were not sold in India to meet expenses and maintenance.

 Marketplace Risks:
The contacts they JIL took were not completed on time due to which customers got
irritated and few of them defaulted. Company should complete few projects so that they
could earn revenues and recover remaining amount from those properties which were
completed. But due to huge investments in diverse projects all based of debt, company
was not able to complete projects. Company should follow their contractual agreement
and must make contract as per their eligibility of completing them. Company should
also consider delays in contracts that can happen due to other issues like
demonetization, slowdown in company or economy etc.

 Reputational Risks:
Control environment of the company must be efficient enough so that they can meet
future challenges that can arrive due to economic factors in the company. Company
was not able to meet maintenance expenses and costs due to which their profits
decreased. Also, company did not declared dividend can change shareholder’s
perception about company. Some projects were not completed and company was not
able to complete contracts on time has changed perception of public about Jaypee Infra
and public, banks and other lenders started to make pressure on company. Company
should have taken care of what perception they will build in the mind of shareholders
after not declaring dividend. Maybe due to this they had to take more secured loans
rather that issuing shares.