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UBS Investment Research
GMR Infrastructure
N ews reports suggest road project win
Event: Likely winner in 555-km highway project with bid of Rs6.36bn
News reports suggest that GMR is the highest bidder for the 555km Ahmedabad-
Udaipur-Kishangarh project (NHDP Phase V project) that has a cost of ~Rs55bn.
This is the largest project of NHAI and likely had seven bidders. News reports also
suggest that GMR bid a negative grant of Rs6.36bn (increases 5% pa, to be paid
for the concession period of 26 years) and GVK consortium was the second lowest
bidder with a bid of Rs5.16bn (earlier media reports had suggested that NHAI
benchmark was Rs2.98bn while they were expecting a bid of Rs4bn+).
Impact: Bid details hold the key
Currently there is no information from the company and the bid details are as per
media reports (bids of other companies/consortiums like L&T, IRB and Reliance
Infrastructure, Isolux-Soma, HCC-Vinci are not known). Management expectation
on traffic, toll revenues, completion timelines and project IRRs hold the key for
ascertaining the valuation of the project.
Action: GMR currently has a portfolio of nine road assets
Out of its nine projects, six are operational and three are under-construction. It has
four annuity projects (one under-construction) and five are toll-based. It has 100%
stakes in four of its projects (this bid is also not in consortium).
Valuation: SOTP-based PT of Rs38
We have a Buy rating with power/airports/roads comprising ~40%/32%/9% of our
PT. Our asset-based valuation model does not ascribe value to future projects
GMR Infrastructure
GMR is one of India's leading infrastructure developers, with an asset portfolio
(attributable) of: (1) 765 acres of real estate near Delhi and Hyderabad airports;
(2) about 3,900MW of power capacity (+4,100MW at an early development
stage); (3) three airports with ultimate pax handling of 89m; (4) eight road
projects (more than 520km); (5) three SEZs of more than 3,400 acres; and (6)
stakes in coal mines with mineable reserves of over 150m tons. Additionally,
GMR holds 50% of Intergen, which has global power assets of 6,600MW (and
2,700MW under development).
Statement of Risk
In our view the key risks for GMR with regard to airport projects are: a)
execution delays; b) regulatory risks related to revenue; and c) traffic risks. With
regard to power projects, we believe the key risks are: a) shortages in fuel
supply; and b) collection risks. For road projects: a) traffic; and b) collection are
key risks. All of GMR’s projects face interest rate-related risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
GMR Infrastructure
N ews reports suggest road project win
Event: Likely winner in 555-km highway project with bid of Rs6.36bn
News reports suggest that GMR is the highest bidder for the 555km Ahmedabad-
Udaipur-Kishangarh project (NHDP Phase V project) that has a cost of ~Rs55bn.
This is the largest project of NHAI and likely had seven bidders. News reports also
suggest that GMR bid a negative grant of Rs6.36bn (increases 5% pa, to be paid
for the concession period of 26 years) and GVK consortium was the second lowest
bidder with a bid of Rs5.16bn (earlier media reports had suggested that NHAI
benchmark was Rs2.98bn while they were expecting a bid of Rs4bn+).
Impact: Bid details hold the key
Currently there is no information from the company and the bid details are as per
media reports (bids of other companies/consortiums like L&T, IRB and Reliance
Infrastructure, Isolux-Soma, HCC-Vinci are not known). Management expectation
on traffic, toll revenues, completion timelines and project IRRs hold the key for
ascertaining the valuation of the project.
Action: GMR currently has a portfolio of nine road assets
Out of its nine projects, six are operational and three are under-construction. It has
four annuity projects (one under-construction) and five are toll-based. It has 100%
stakes in four of its projects (this bid is also not in consortium).
Valuation: SOTP-based PT of Rs38
We have a Buy rating with power/airports/roads comprising ~40%/32%/9% of our
PT. Our asset-based valuation model does not ascribe value to future projects
GMR Infrastructure
GMR is one of India's leading infrastructure developers, with an asset portfolio
(attributable) of: (1) 765 acres of real estate near Delhi and Hyderabad airports;
(2) about 3,900MW of power capacity (+4,100MW at an early development
stage); (3) three airports with ultimate pax handling of 89m; (4) eight road
projects (more than 520km); (5) three SEZs of more than 3,400 acres; and (6)
stakes in coal mines with mineable reserves of over 150m tons. Additionally,
GMR holds 50% of Intergen, which has global power assets of 6,600MW (and
2,700MW under development).
Statement of Risk
In our view the key risks for GMR with regard to airport projects are: a)
execution delays; b) regulatory risks related to revenue; and c) traffic risks. With
regard to power projects, we believe the key risks are: a) shortages in fuel
supply; and b) collection risks. For road projects: a) traffic; and b) collection are
key risks. All of GMR’s projects face interest rate-related risk.
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