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Equity requirement over next two years in place with cash
Airport profitability: The airports operated by GMR at Delhi and Hyderabad are both reporting losses due to financing and
capital costs. The company expects them to turn PAT positive in next 2-3 years.
Funding for power and road projects: Over the next two years, GMR needs to contribute equity of INR32bn for its power and
road projects under construction. The company is well funded with cINR31bn of cash and cash equivalents and expects to
receive INR10bn by end April 2011 from the completion of the sale of its stake in Intergen announced in Nov 2010.
Sale of stake in GMR Energy: Temasek and IDFC injected private equity of INR13.5bn into GMR Energy (a subsidiary of
GMR Infra) last year. We estimate this will result in dilution of GMR Infra's stake in the power subsidiary to an extent of
15-20%, depending on the valuation at the time of exit over the next two years.
Valuation and risks
We use SOTP to value GMR. We value its airport business (including real estate) at INR18.4 per share (35.4% of total
valuation), power business at INR24.2 (46.8%) and roads at INR3.6 (6.9%) and arrive at a target price of INR51.9.
Key upside risks: Faster than expected execution and higher-than-expected merchant tariff.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Equity requirement over next two years in place with cash
Airport profitability: The airports operated by GMR at Delhi and Hyderabad are both reporting losses due to financing and
capital costs. The company expects them to turn PAT positive in next 2-3 years.
Funding for power and road projects: Over the next two years, GMR needs to contribute equity of INR32bn for its power and
road projects under construction. The company is well funded with cINR31bn of cash and cash equivalents and expects to
receive INR10bn by end April 2011 from the completion of the sale of its stake in Intergen announced in Nov 2010.
Sale of stake in GMR Energy: Temasek and IDFC injected private equity of INR13.5bn into GMR Energy (a subsidiary of
GMR Infra) last year. We estimate this will result in dilution of GMR Infra's stake in the power subsidiary to an extent of
15-20%, depending on the valuation at the time of exit over the next two years.
Valuation and risks
We use SOTP to value GMR. We value its airport business (including real estate) at INR18.4 per share (35.4% of total
valuation), power business at INR24.2 (46.8%) and roads at INR3.6 (6.9%) and arrive at a target price of INR51.9.
Key upside risks: Faster than expected execution and higher-than-expected merchant tariff.
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