India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GMR Infrastructure Ltd.
Private equity investment in
subsidiaries, Neutral
2nd fund raising in the airport vertical
GMR reported that it has raised Rs5.8bn at the airport holding company level from
Standard Chartered Private Equity, JM Financial - Old Lane India Corporate
Opportunities Fund and Build India Capital Advisors. This follows the recent fund
raising of Rs8.9bn in March 2011 at the airport holdco from Macquarie SBI
Infrastructure Investments. In both the cases, the money was raised through the
issue of compulsorily convertible preference shares. Accordingly to the
management, the convertible preference shares carry a nominal dividend of
0.0001%, hence there is no earnings impact. The proceeds could be used for
general corporate expenses and fund future capex.
Airport holdco would include all airport assets
Currently, GMR Airport Holdings Company, a 100% subsidiary of GMR
Infrastructure Ltd, includes the Delhi and Hyderabad airport. It would potentially
include the other international airports at Sabiha Gokchen, Turkey and Male
airports as GMR intend to bring all airport assets under the airport Holdco.
Cut PO to Rs42; Risk of potential dilution in power / airport
We have cut our PO to Rs42 to factor in the cash outflow impact to the private
equity investors in the power and airport holding company assuming the return on
their investment at 18% and cost of equity of 14%. However, IPO could provide
an exit option for these investors, leading to potential dilution. According to the
management, the likely timeline for IPO of the power holdco is about two years
during FY13-14E and for the airport holdco is about 3-4 years during FY15-16E.
The terms of the conversion into equity share is not known and would be
contingent on the valuation at the IPO time. At our SOTP valuation, the extent of
dilution is estimated at 14% in airport vertical and 31% in the energy vertical
leading to a potential downside risk to the SOTP at 10%. Reiterate Neutral
No comments:
Post a Comment