Stock Idea: GMR Infra

The stock lost 3.83% yesterday to close at Rs.66.50. Post announcement of the results, punters battered down this stock. YoY, for current Q2, GMR Infra reported a 40% drop in net profit and that is all the market looked at and just remained sellers.
We, on our website have been recommending this stock right since the time we launched this site and continue to have conviction in the stock. Take a closer look at the performance we have analysed for GMR Infra and you will realise that the company remains very strong.
For second quarter ended 30th September 2009, net revenue rose 41% (YoY) and by 1% at Rs.1194.29 crore. Sector wise, on a YoY, the highest growth in net revenue was seen in the EPC division at 347%, followed by roads (151%), energy (25%) and airports grew 5%. And in terms of growth in EDIBTA, it was the airports sector which showed the highest growth on a YoY at 170%, followed by roads at 128%, EPC 70% while energy sector showed a de-growth of 1%.
EBIDTA was up by a healthy 54% (YoY) and 18% (QoQ) at Rs.380.06 crore. Given the kind of projects it has undertaken, it comes as no surprise to see higher depreciation outgo and interest costs have increased due to large borrowings for the various huge projects. Interest cost was up 70.86% (YoY) and 11% (QoQ) at Rs.177.14 crore. Depreciation rose 65% (YoY) and 3% (QoQ) at Rs.140.82 crore. Cash profit of the company was up 6% (YoY) and 23% (QoQ) at Rs.190.30 crore.
PAT on a YoY was down 40% but QoQ was up by a whopping 138% at Rs.53.61 crore. The growth in the topline and the EBIDTA levels indicate that the company continues to remain on solid ground. Just as the management of the company has indicated, when companies like GMR Infra take on large infra building projects, they usually build projects with capacities which are larger than the requirement. The Hyderabad airport project has been built by the company to handle a traffic of 12 million capacity but as against this, the current utilisation is around 6.5 million. And at this stage, costs overtake the earnings and it is this under utilisation of the infra capacity which drives down the PAT. And this is a phenomenon typical of all large infra companies and they start showing returns only after the initial 2-3 years.
During Q2, the company acquired 100% ownership interest in EMCO Energy Ltd (EMCO),which is developing a 600 MW coal based power plant, in two phases (of 300 MW capacity each) in the state of Maharashtra. This project has a 15-year debt component of Rs 2,610 crore. Axis Bank has arranged and syndicated the debt, for which the finances were tied up on October 21. Land acquisition, evacuation plans and water allocation for the two-phase project had been completed. Barge relocation work from Mangalore to Kakinada is on and the plant would be operational by end of current fiscal.
What indeed qualifies as ‘breaking news’ is that it will be inaugurating the airport at Istanbul, Turkey on 31st October 2009 and will be ready for commercial operations by second week of November, which is 12 months ahead of schedule.
GMR Infra is a long term stock. Such dips in PAT will be temporary and once it’s infra projects achieve better capacity, the returns would be equally baffling. Stay invested.

Source: Internet (by S P Tulsian www.premiuminvestments.in)

Stock Idea: GMR Infra

GMR Infrastructure Ltd. has been in the news for revealing its mega capital raising plans, resulting in a good value unlocking for the shareholders of the company.

The company operates mainly in 4 verticals, of Airports, Energy, Highways and Urban Infrastructure, with its holding company being GMR Holdings Pvt. Ltd. The company has an immediate plan to take GMR Energy Ltd., public, which is holding company for its power verticals with 100% stake being held by GMR Infra Ltd. This power company has 3 operational power projects for 820 MW, with 8 projects under development of 6,260 MW making total capacity at 7,080 MW. Though it is hinted to raise Rs. 1,500 crores in this company, but no terms, in respect to pricing or stake dilution, has been spelt out.

If we go by the recent IPO of Adani Power, with paid up equity base of Rs. 2,180 crores, resulting in a market capitalization of Rs. 22,000 crores and estimated debt of Rs. 34,500 crores, gives an enterprise value of Rs. 56,500 crores for an effective capacity of 6,600 MW, to be made operational by March 2012.

So broadly, GMR Energy, which has a present paid up equity of Rs. 1,425.08 crores as at 31st March 2009 with the reserves of Rs. 339 crores and total assets of Rs. 2,588 crore and total liabilities of Rs. 824 crores, can very well be compared with Adani Power. However, the company plans to go public after financial closure of its 4 thermal based power projects, to get better valuations in IPO.

It is an accepted fact that all the present power projects, under execution, are financed on a debt equity of 3:1 and this can eventually have a debt of Rs. 20,000 crores on completion of 7,080 MW power project by March 2013. So, expecting an EV of Rs. 56,500 crores, also for this company, market capitalization can be expected to be close to Rs. 36,000 crores. So, even if 10% stake is diluted, which is required, and is minimum, it should be able to garner Rs. 3,600 crores against Rs. 3,000 crores mobilized by Adani Power with 13.50% stake dilution.

However, there is no clarity in respect to ownership of Intergen, in which 50% stake has been acquired by the company or the group, having 8,086 MW operational capacity in 5 countries in 4 continents and further developing 4,686 MW, all being gas based power projects. This stake of 50% in Intergen, looks to have been acquired by an overseas subsidiary of Promoter, of GMR Infra, with 95% stake held and 5% stake held by the company. Also, the company has subscribed to Compulsory Convertible Debentures in GMR Holding (Malta) Ltd. for Rs. 845 crores, which are to be converted into equity at the option of company prior to Feb 2012. It is also stated in the FY 09 Annual Report of the company that the company, through its step down subsidiary GMR Energy Global Ltd has entered into necessary arrangements to acquire 50% stake in Intergen NV and has given a corporate guarantee upto maximum of US $ 1.38 billion to the lenders, on behalf of fellow subsidiary, to enable it to raise debt of financing the acquisition of Intergen.

So, there seems to be great value lying in the energy verticals of the company, and one needs to collate all the financials of this vertical to assess its true enterprise value and means of finance of various projects, under execution.

Company’s Highway vertical has 6 operational road projects of 421 kms. with annuity of 255 km and Toll based for 166 kms. The company is also aggressively bidding for the other road projects which are due to get awarded in the next 12 months.

Its Urban Infrastructure vertical has 3,300 acres in Tamil Nadu, 250 acres Aviation specific SEZ on eastern side of Hyderabad Airport, 250 acre Multiproduct General SEZ on western side of Hyderabad Airport, 250 acres at Delhi Airport and 1,000 acres at Hyderabad Airport.

In Airport vertical, the company is holding 50.10% stake in Delhi Airport, 63% stake in Hyderabad Airport and 40% in Sabiha Gokcen International Airport at Istanbul in Turkey.

The company as at 31-03-09 has a total debt of Rs. 12,024 crores on net worth of Rs. 6,471 crores, resulting in debt equity of 1:85:1. The present market capitalization of the company is at Rs. 25,000 crores, resulting in an EV of Rs. 37,000 crores. The company has cluster of growth oriented infrastructure projects, with each vertical having a valuation of over Rs. 20,000 crores, barring highway verticals.

The company needs to pump in close Rs. 10,000 crores in the company to execute and accelerate these projects, and all the efforts to bring in IPO, of various verticals are in that direction only. However, plans of mobilizing Rs. 7,500 crores by bringing in IPO of holding company of GMR Infrastructure may not be very feasible and convincing, as it will amount to double listing of the same projects and assets. Instead, company can contemplate QIP issue and thus mobilize the desired funds in GMR Infra, which will eventually reduce the stake of the promoters, in GMR Infra.

It is certain that the company has huge asset base with extremely good long term growth potentials which needs to be made operational by infusing need based funds with the most optimum financing patterns and models.

Source: www.premiuminvestments.in (By S P Tulsian)

Stock Idea: GMR Infra

There was major hullabaloo after GMR Infra posted a 70% (YoY) drop in net profit at Rs.22.50 crore for the first quarter. The share price dropped like nine pins and many of our subscribers have got a bit confused, post this result.

There is no need to panic. The drop is net profit is on account of the capitalization of the large assets at Delhi airport which led to huge depreciation and interest outgo. This is a normal phenomena with any large, capital intensive infra company, so no need to panic. And this in turn has affected the net profit. Depreciation outgo was up 72% (YoY) and interest outgo was up by a huge 132%. Naturally, with such huge outgo's it thus comes as no surprise to see the net margin getting affected.
But a look at the performance before these charges, indicates that the company actually has had a robust Q1. Net revenue was up 33% and EBIDTA was up 35%. The highest contributor to the revenue this quarter has been the roads whose sales went up 120%, energy contributed 24%, airports at 17%. But in terms of EBIT margins, airport was the highest at 137%, followed by roads at 128%.

GMR's Vemagiri Power Plant is operating at full load at a PLF of 82.2% and this is pursuant to the signing of gas supply agreement. Its Kamalanga Energy1050 MW coal based power project achieved financial closure. It also acquired two key power plants, thereby adding 600 MW in India and 800 MW in Singapore.

In its airports sector, GMR Hyderabad International Airport (GHIAL) was allowed to increase the landing and parking charges at 10%, with effect from July 01, 2009 and the effect of this would now be reflected in the performance of the company in Q2. The construction work in Delhi International Airport Pvt. Ltd. (DIAL) for the integrated Terminal-3 is complete to an extent of 72%. Its airport at Turkey has achieved 78% completion and the project is on track for commercial operation by end October 2009.

In roads, GMR won the bid for Hyderabad - Vijayawada (181 km) road, with an estimated project cost of Rs 2200 crore. It has also won the bid for Chennai Outer Ring Road (30 km) with an estimated project cost of Rs 1100 crore. This is the group's first state highway project. The sixth road project, the toll based GMR Ulundurpet Expressways commenced commercial operation on 24th July 2009 and this too shall start contributing well to the numbers in coming months.
An infra company of GMR's size cannot really be judged based on quarterly results. No need to worry. Stay invested and it holds potential to touch Rs.180 by Jan 2010.
Source: www.premiuminvestments.in (S P Tulsian)

Stock Idea: GMR INFRASTRUCTURE

GMR Infrastructure posted a drop in its PAT for the second quarter ended 30th September 2008 on account of MTM forex losses. The stock has been hammered down relentlessly, yet, the long term growth story remains intact.
For Q2FY09, on a YoY, net sales was up 114.21% from Rs. 395.31 crore to Rs. 846.81 crore. EBITDA rose 58.72% from Rs. 155.71 crore to Rs. 247.14 crore. PAT (before notional forex losses) increased by 135.53% from Rs. 44.80 crore to Rs. 105.52 crore while PAT (after notional forex losses) declined by 6.05% from Rs. 49.58 crore to Rs. 46.58 crore.

The MTM forex loss was to the tune of Rs. 58.94 crore for the quarter, accounted mostly by two of the company’s subsidiaries - Vemagiri Power Generation Limited (VPGL) and GMR Hyderabad International Airport Limited (GHIAL), on the foreign currency project loans borrowed by them. The company has assured that these losses are notional and should the situation arise, these two subsidiaries have adequate dollar revenues to provide natural hedge for the currency fluctuations that may arise with respect to interest and principal payments/repayments. But for this forex loss, which is not an isolated phenomenon with GMR, the company had a very good growth story, a rise of over 100% in PAT despite the circumstances is commendable.

The company used the current global crisis in its favour and managed to renegotiate its acquisition cost of Intergen NV, thus reducing the cost by US$162 million. The Hyderabad Airport has started collecting User Development Fee (UDF) from domestic passengers from last week of August ’08 after getting the necessary approvals from Ministry of Civil Aviation. With this, Hyderabad Airport has also started realising all its revenue streams. The company soft launched its 308 room hotel at Hyderabad Airport. GMR also commissioned the cargo terminal at the Sabiha Gokcen International Airport (SGIA), Turkey, which it is re-building and will have a new passenger terminal by October 2009.
GMR continues to remain a very strong company. It is facing a selling pressure on the bourses, which is in concurrence with the ongoing slaughter by investors on realty and infra companies. At the current rates, GMR is an excellent long term buy. Stay invested, there is no need to panic, it’s long term growth story remains intact.

Source: sptulsian.com

STOCK IDEA: GMR INFRA

All those familiar with this website, would know that this has been one of the stocks which we have been recommending steadfastedly. The stock price has come down, keeping in tandem with the stock indices, which have also slipped down considerably. Yet despite the fall in the stock price and the current Q1 results, which have not exactly been trailblazing, we stand by our recommendation. This is a stock, which should not be viewed on a QoQ basis, GMR Infra is more of a long term stock and its real value would get recognized only on a long term basis.
For the first quarter ended 30th June 2008, the consolidated performance of the company has been good when one looks at the improvement in the sales but the forex losses, higher fuel charges, depreciation and interest outgo, plus the not-so-good performance of some of its subsidiaries have dented the profit margins. YoY, net sales was up 86% at Rs.885.47 crore. Operating expenses rose by a whopping 91% and of this, over 59% constituted of the fuel cost. EBITDA was up 55% at Rs.244.92 crore. The interest outgo rose from Rs.37.53 crore to Rs.68.91 crore. Depreciation was up from Rs.40.64 crore to Rs.80.16 crore. This higher interest and depreciation outgo is on account of the starting of its Hyderabad airport.Profit before tax and exceptional item was at Rs.96.57 crore as against Rs.79.58 crore in Q1FY08, a rise of 21%. Its subsidiaries, Vemagiri Power Generation Ltd (VPGL) and GMR Hyderabad International Airport Ltd (GHAIL) together have accounted for a notional foreign exchange translation loss of Rs.45.59 crore as against an exchange gain of Rs.9.33 crore in previous quarter. This loss/gain is with reference to their project loans. However, both these subsidiaries have adequate foreign currency revenues to provide hedge against any currency fluctuation risks that may arise as and when the interest payments and principal repayments of these loans are made. Also, GHIAL has not been able to levy the User Development Fee (UDF) on overseas passengers for three weeks in April 2008 and on domestic passengers for the entire current quarter, pending approval from the Government of India.
After maintaining its tax at almost the same levels, the PAT was down 9.72% at Rs.41.90 crore. These consolidated results include the accounts of GMR Infrastructure Ltd, its subsidiaries, joint ventures and associates. The overseas joint venture entity, being ´Istanbul Sabiha Gocken Uluslarasi Havalimani Yatirim Yapum Ve Isletme Sirketi (SGIA)´ has been accounted as per Accounting Standard 27 on Financial Reporting of Interests in Joint Venture based on 40% shareholding.VPGL has now suspended its power generation activities due to non-availability of natural gas and it has also incurred an operating loss of Rs.27.52 crore in current Q1. This too has dented GMR’s margins. Following the expiry of the seven year Power Purchase Agreement, GMR Energy Ltd´s 220 MW plant at Tanir Bavi near Mangalore in Karnataka ceased to operate. Work has been undertaken to relocate the plant to KG Basin, near Kakinada in Andhra Pradesh to operate it as merchant plant after changes to run the plant with natural gas as fuel. This will take some time to generate income and by next fiscal, this unit too should be able to contribute to the margins. Also through its step-down subsidiary, GMR Energy Global, has entered into necessary arrangements to acquire 50% equity stake in a Dutch company - InterGen NV by means of compulsory convertible debentures. It has also given a corporate guarantee up to a maximum of US$1.3 billion to the mandated lead arrangers on behalf of a fellow subsidiary to enable it to raise debt for financing the aforesaid acquisition.
This blip in the performance is just that, just a blip. GMR Infra is a great infrastructure story - its presence in the airport, in the road project, in the power generation, SEZ, property development all still makes it a great stock. Things will only get better once its realty development begins at Delhi and Hyderabad. The stock price is just a reflection of all the infrastructure and realty stocks listed on the bourses.One must take a long term call in GMR Infra because all these infrastructure projects would start giving profits in one year’s time. There is no point in taking a day to day call. Keep some patience and the returns would come, stay invested.

Source: sptulsian.com

Stock Idea: GMR INFRA

As expected, GMR Infra has done well for itself for the year ended 31st March 2008.

For the year ended 31st March 2008, net sales rose 35% at Rs.2294.78 crore., of this power sector accounts for 64.29%, Airports 25.03%, Roads 4.78% and others 5.90%. EBITDA has gone up by 18.90% from Rs.562.01 crore to Rs.668.25 crore. PBT was up 33% at Rs.321.03 crore. PAT before minority interest was up 8.64% from Rs.241.77 crore to Rs.262.65 crore. And PAT after minority was at Rs.210.08 crore, up 20% from last years Rs.174.43 crore.
A loss of Rs.57.81 crore was incurred by GMR Hyderabad International Airport Ltd (GHIAL), a subsidiary of the company which commenced operations on March 23, 2008. The said loss for the quarter / year includes (a) Rs.26.61 crore, being non-recurring pre operative expenditure in the nature of revenue expenditure, and (b) Rs.23.38 crore being the inception costs, both of which are largely non-recurring in nature.
A provision of Rs.25 crore was made during the current quarter, by Delhi International Airport Pvt Ltd (DIAL), a subsidiary of the Company towards estimated arrears that may be payable on account of the implementation of VI Pay Commission recommendations for the employees of the Airport Authorities of India.
A loss of Rs.12.43 for the quarter (previous quarter Rs.35.21 crore ) and Rs.109.15 crore for the year (previous year Rs.85.13 crore) incurred by Vemagiri Power Generation, a 100% step down subsidiary of the company. It declared the Commercial Operations (COD) in September, 2006 but could not continue the operations due to non-availability of gas, resumed generation of power in February, 2008. The said loss is mostly due to interest on project borrowings and depreciation on idle assets which need to be charged to profit and loss account, in accordance with the GAAP (Generally Accepted Accounting Principles), during the post COD period regardless whether the project is in operation or otherwise.
On November 26, 2007, the company has made a Preferential offer to Qualified Institutional Buyers. It allotted 16,52,38,088 shares of Rs.2 each at a premium of Rs.238 per share on December 12, 2007 and received an amount of Rs.3965.71 crore. The net proceeds after the issue expenses are to be utilized towards capital expenditure for various projects under development (either directly or through our subsidiaries, joint ventures or affiliates) and general corporate purposes including working capital & strategic initiatives and acquisitions in India and abroad.
GMR Infra has four principal business verticals namely, Airports, Energy Highways and Urban Infrastructure. These are administered through Special Purpose Vehicles for the operations and management of various infrastructure projects. During the year, the company was able to commission the world class Rajiv Gandhi International Airport at Hyderabad ahead of schedule. During the year, GMR also built a satisfactory pipeline of projects. GIL forayed into a new sector with Krishnagiri SEZ. The company also made its first international footprint with Sabiha Gokcen Airport, Istanbul, Turkey, financial closure for which is likely to be achieved by 1st week of June.
The 388.5 MW gas based Vemagiri Power Plant resumed operations in February, 2008, ahead of the expected date of availability of gas. Though there is a temporary shutdown in May 2008, it will resume operations again shortly. Gas is expected to be continuously available from the second half of the current year.
The expansion and upgrading work at Delhi airport is progressing exceedingly well. Runway work is ahead of schedule and all other modernisation and upgrading works are on schedule. Runways and taxiways have achieved an overall progress of 86.20%. Terminal 1 registered an overall progress of 58.12%, while Terminal 2 recorded an overall progress of 80.58%. Terminal 3, scheduled to be commissioned by March 2010, has achieved an overall completion of 26.80%. Over Rs.3000 crore has already been spent on the development work at the airport, of the total project cost, exceeding Rs.8900 crore, post financial closure of the project.
The construction work of the four Highway projects is progressing well on schedule and will be commissioned before end of March 2009, within the concession timelines.

During the year, GMR won / acquired /signed MoUs for four hydro projects, two in Nepal and one each in Himachal Pradesh and Arunachal Pradesh, with an aggregate capacity of about 900 MW. The company also signed an MOU for a 1000 MW coal project in Chhattisgarh. The development work of all these projects is going at brisk pace. EPC contract for 1050 MW Orissa Kamalanga Project has been awarded while the 300 MW Alakananda Hydel Project has received environmental clearance.
GMR Energy Limited (GEL), 100% subsidiary of GIL, has entered into an MOU with Homeland Energy Corporation, Toronto, pursuant to whereof GEL acquired 10% equity interest in Homeland Mining and Energy SA (Pty) Limited, (HMESA), South Africa. HMESA owns three advanced development / pre-development stage coal project in South Africa. GEL also has non-obligatory option to acquire up to an additional aggregate 40% equity interest prior to December 31, 2008.

The land acquisition for Krishnagiri SEZ is progressing as per schedule and the company has already entered into arrangements for the acquisition of almost one third of the land requirement for the project.
GMR Infra would soon be diversifying into corporate jet business and would be investing Rs.800 crore for the same. The company will be buying three Faulkner and two Hawker aircraft along with one Bell helicopter for commencing charter operations by end of current financial year. The company has also placed an order for one more aircraft, which would be delivered only by 2010-2011. GMR Infra’s board of directors approved the proposal of amalgamation of GMR Aviation Pvt Ltd with the company.
GMR Infra is currently quoted at Rs.144, making it an excellent buy for safe 40-50% returns over next 10-12 months.

Source: sptulsian.com