GVK Power & Infrastructure -Additional 14% BIAL stake; interest costs to dilute EPS ::Anand Rathi

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


GVK Power & Infrastructure
Additional 14% BIAL stake; interest costs to dilute EPS
GVK is to acquire 14% equity stake in Bangalore airport (BIAL)
for US$135m from Siemens, subject to regulatory approvals. The
implied value works out to US$962m (10x P/B) including real
estate, ~+65% than our DCF value (US$583m).
 Event. GVK subsidiary, Bangalore Airport & Infrastructure
Developers Pvt. Ltd. (BAIDPL – holding company of BIAL) is to
exercise its Right of First Refusal (RoFR) to acquire additional
14% equity stake in BIAL for US$135m from Siemens Project
Ventures, subject to regulatory approvals. Management intends to
buy-out the remaining 26% equity stake from Siemens as and
when it is due for sale.
 Deal implications. Assuming 100% debt funding of ~`6bn and
43% share of BIAL profits, interest costs would more than offset
gains from higher share of profits. This deal value is 8.5% higher
than the earlier L&T deal value (`6.9bn-17% equity). Media reports
suggest that Changi and Tatas were keen to invest in BIAL, and a
buy-out by GVK at higher valuations was thus imperative.
 Revised equity holding. Upon the share transfer, GVK would
hold 43% in BIAL (associate) and Siemens would hold 26%.
 Valuation. The deal would be neutral to our GVK SOTP value of
`39 after adjusting for further BIAL stake and acquisition debt.
Higher share in BIAL real estate proceeds could be SOTP positive.
However, interest payments could dilute consolidated earnings.