Macquarie Research, :: GMR Infrastructure -Gearing to take off

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GMR Infrastructure
Gearing to take off
Event
 GMR is one of the largest pure-play infrastructure asset-owning
companies listed on the Indian exchanges. It is one of the early entrants in
the space and focuses on asset ownership rather than construction, in
contrast to most of its competitors. GMR’s asset portfolio consists of nine road
concessions, eight power generation projects and five airports.
 Of the existing portfolio, six road projects, three power projects and
three airport projects are operational, with the rest in the implementation
phase.
 Two airports – Delhi and Hyderabad – are the second- and fifth-largest in
the country, together accounting for ~28% of air traffic in India. GMR has
taken over the operations of the Delhi airport and the newly expanded
capacity was commissioned a few days ago.

Impact
 Large power development portfolio: GMR has 810MW of operational
projects and 5,508MW of projects under construction and development. Of
the total portfolio, 60-70% is likely to be sold on a merchant basis. Projects
under construction are likely to be commissioned by FY14.
 Recent fund raising to take care of near-term requirements: GMR has
raised US$600mn via QIP and PE in 1QFY11. This takes care of its near-term
funding requirements.
 Sale of Intergen removes consolidation overhang: GMR sold its 50%
stake in Intergen to Huaneng Power in November 2010. This removes a major
overhang of high debt on GMR’s balance sheet when the consolidation would
have had to have been done under IFRS.
 Developing in-house EPC capability: GMR has decided to build in-house
capabilities for EPC as it has a significant project portfolio under construction
in the power and road segments. To begin with, it is undertaking 33% of the
EPC work for the Hyderabad-Vijaywada road which is currently under
construction.
Action and recommendation
 Big infrastructure player in the making: With projects spread across major
infrastructure verticals – power, roads and airports – GMR appears to be one
of the largest infrastructure developers in the making.
 Regulatory uncertainty weighing negatively on the stock: There is high
amount of uncertainty around airport regulation in India which has led to a
serious underperformance by the stock in the near past. Clarity on the same
would be a positive for the stock.


GMR Infrastructure Aide Memoire
1. What are the stages of development of the various projects in your portfolio?
2. What are the funding requirements for your projects in the medium term? How do you intend to fund this?
3. There have been concerns that your recent fund raising in GMR Energy is coming with significant dilution? Is this true?
When do you foresee the IPO of GMR Energy?
4. What’s your roadmap for real estate monetization at the Delhi and Hyderabad airports?
5. What’s your view on the latest AERA proposal of adopting a single-till revenue model at airports and excluding the market
value of real estate from the regulated asset base of airports?