GMR Infrastructure-Start-up losses impacts 2QFY11 results: BofA ML

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GMR Infrastructure Ltd.
Start-up losses impacts
2QFY11 results
􀂄 Exceptionals offset poor performance, Underperform
GMR Infra had a consol recurring loss of Rs692mn (-229%yoy) on account of
higher fixed costs at DIAL (start of T3) and Turkey airports, lower PLF at Chennai
/ Kakinada plants and lower merchant tariff (-40%yoy). An exceptional gain of
Rs1.4bn in Singapore subs, due to reversal of an impairment loss, led to reported
PAT of Rs711mn. Maintain our Underperform on looming losses at DIAL on full
capitalization of T3 and Turkey airports, losses in road assets and rich valuation.


Airport: Strong traffic, but losses on higher costs
Strong passenger traffic growth of 13-81%yoy during 2QFY11 drove net revenue
to Rs4.8bn (+42%yoy). Non-aero revenue/pax declined due to a change in
commercial terms for duty free and ad revenues (revenue share vs. minimum
guarantee), while cargo revenue/t fell due to outsourcing. Higher fixed costs on
the start of T3 at Delhi /Turkey resulted in loss of Rs800mn from airports. The
mgmt call suggested realty monetization in Delhi may not be coming up soon (vs.
estimates of 30acres of monetization in FY11), and there could be downside risk
here. Delhi realty accounts for ~20% of our SOTP.

Power: Mixed operations, profits driven by exceptionals
Rec. PAT was Rs80mn (-81%yoy). However, reported PAT came in at Rs1.5bn
on a one-time gain of Rs1.4bn from Singapore subs. While Vemagiri PLF was
90%, the Chennai plant suffered (PLF 40%) on high LSHS costs & merchant tariff
fell 40%yoy (sold 100MW of 220MW with APTransco at Rs4.3/kWh until FY11).

Roads remain in red, leverage goes down
The roads division continued in the red, though losses declined to Rs175mn (vs.
Rs270mn in Sep’10). The traffic volume growth of 7-38% and toll rate hike of 0-
12% led to a 28%yoy increase in toll revenues, while annuity income was flat.
Net debt:equity reduced to 1.2x vs. 1.46x in Mar’10, due to QIP / PE issue /
preference share issue partially utilized for prepayment of Rs12.2bn of loan.