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Infrastructure
India
Regular operations continue; but regulatory uncertainties remain an overhang
GVK and GMR reported 2QFY12 results on continued regular operation of existing
assets. However, the companies continue to face regulatory uncertainties related to
potential ADF charges at Mumbai and Delhi airports, treatment of real estate in airport
projects and gas unavailability issues. We continue to await clarity on these issues. We
also note high debt levels straining balance sheet and cash flows (especially for GVK).
GVK results: Sedate power segment sales (on low PLFs) lead to yoy decline in revenues
Some GMRI reported revenues of Rs18.1 bn, recording a strong growth of 48% yoy led by the
airports and EPC segments. Margins contracted slightly by about 150 bps yoy to 27.7%. High
depreciation and interest costs led to a net loss of Rs1.47 bn versus a loss of Rs978 mn in 2QFY11.
Airports: The airports segment reported a strong 73% yoy growth in revenues to Rs8.4 bn in
2QFY12 from Rs4.8 bn in 2QFY11 driven by (1) strong traffic growth across Delhi, Hyderabad
and Sabiha Gokcen airports, (2) revenues from Male International Airport (which was not
present in previous year), and (3) increased UDF charges at Hyderabad airport.
EPC: EPC segment revenues grew almost 4X yoy to Rs2.9 bn in 2QFY12 primarily on execution
of three road projects of GMR.
Power: Power segment recorded a moderate growth of about 10% yoy, to Rs5.4 bn. Revenues
declined 21% sequentially on lower PLFs at the operational power plants on low gas availability.
Roads: Roads segment recorded a muted performance (revenues up 6% yoy to Rs1 bn).
Await clarity on regulatory uncertainties related to airport ADFs, treatment of real estate etc.
The companies continue to faces regulatory uncertainties related to (1) treatment of real estate in
Delhi and Mumbai airport by AERA, (2) renewal of ADF in DIAL (temporarily suspended by the
supreme court until further clarity from the regulatory authority), and (3) tariff order and real
estate treatment in Hyderabad and Bangalore airport project. However, current market price
seems to be pricing in most of these uncertainties. Gas availability issues may also lead to delays in
upcoming plants and lower PLFs for operational plants.
GVK’s balance sheet appears stretched with Rs1.5 bn of loans at standalone level as well
GVK reported Rs1.5 bn of unsecured loans in the standalone balance sheet (attributed to for
general corporate purposes). The company reported a consolidated debt of Rs69 bn at end-
1HFY12, over 11X FY2012E expected EBITDA.
Sedate power segment sales lead to yoy decline in revenues
GVKPIL reported 2QFY12 revenues of Rs4.8 bn, recording a 5% yoy decline form Rs5 bn in
2QFY11. EBITDA margin for the company increased to 30.1%, up 120 bps yoy on lower cost
of fuel as a percentage of sales. GVK reported a sharp increase in other income to Rs139 mn,
versus only Rs31 mn in 2QFY11. The higher other income was attributed to increased cash
balance on receipt of cash for the private equity investment in the power vertical (has a cash
balance of about Rs11 bn). GVK reported a net PAT of Rs379 mn, down 11.4% yoy from
Rs428 mn in 2QFY11.
Power segment leads revenue decline though roads segment margins take a beating
The consolidated revenue decline was led by the power segment which recorded an 8% yoy
decline to Rs4.2 bn in 2QFY12 (contributes to about 87% of total sales). Segment EBIT
margins improved to 16.8% for the quarter from 14.4% in 2QFY11.
Roads segment sales at Rs566 mn (about 12% of total sales) grew at 24% yoy. However,
the segment’s contracted to about 50% in 2QFY12 versus about 69.8% in 2QFY11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Infrastructure
India
Regular operations continue; but regulatory uncertainties remain an overhang
GVK and GMR reported 2QFY12 results on continued regular operation of existing
assets. However, the companies continue to face regulatory uncertainties related to
potential ADF charges at Mumbai and Delhi airports, treatment of real estate in airport
projects and gas unavailability issues. We continue to await clarity on these issues. We
also note high debt levels straining balance sheet and cash flows (especially for GVK).
GVK results: Sedate power segment sales (on low PLFs) lead to yoy decline in revenues
Some GMRI reported revenues of Rs18.1 bn, recording a strong growth of 48% yoy led by the
airports and EPC segments. Margins contracted slightly by about 150 bps yoy to 27.7%. High
depreciation and interest costs led to a net loss of Rs1.47 bn versus a loss of Rs978 mn in 2QFY11.
Airports: The airports segment reported a strong 73% yoy growth in revenues to Rs8.4 bn in
2QFY12 from Rs4.8 bn in 2QFY11 driven by (1) strong traffic growth across Delhi, Hyderabad
and Sabiha Gokcen airports, (2) revenues from Male International Airport (which was not
present in previous year), and (3) increased UDF charges at Hyderabad airport.
EPC: EPC segment revenues grew almost 4X yoy to Rs2.9 bn in 2QFY12 primarily on execution
of three road projects of GMR.
Power: Power segment recorded a moderate growth of about 10% yoy, to Rs5.4 bn. Revenues
declined 21% sequentially on lower PLFs at the operational power plants on low gas availability.
Roads: Roads segment recorded a muted performance (revenues up 6% yoy to Rs1 bn).
Await clarity on regulatory uncertainties related to airport ADFs, treatment of real estate etc.
The companies continue to faces regulatory uncertainties related to (1) treatment of real estate in
Delhi and Mumbai airport by AERA, (2) renewal of ADF in DIAL (temporarily suspended by the
supreme court until further clarity from the regulatory authority), and (3) tariff order and real
estate treatment in Hyderabad and Bangalore airport project. However, current market price
seems to be pricing in most of these uncertainties. Gas availability issues may also lead to delays in
upcoming plants and lower PLFs for operational plants.
GVK’s balance sheet appears stretched with Rs1.5 bn of loans at standalone level as well
GVK reported Rs1.5 bn of unsecured loans in the standalone balance sheet (attributed to for
general corporate purposes). The company reported a consolidated debt of Rs69 bn at end-
1HFY12, over 11X FY2012E expected EBITDA.
Sedate power segment sales lead to yoy decline in revenues
GVKPIL reported 2QFY12 revenues of Rs4.8 bn, recording a 5% yoy decline form Rs5 bn in
2QFY11. EBITDA margin for the company increased to 30.1%, up 120 bps yoy on lower cost
of fuel as a percentage of sales. GVK reported a sharp increase in other income to Rs139 mn,
versus only Rs31 mn in 2QFY11. The higher other income was attributed to increased cash
balance on receipt of cash for the private equity investment in the power vertical (has a cash
balance of about Rs11 bn). GVK reported a net PAT of Rs379 mn, down 11.4% yoy from
Rs428 mn in 2QFY11.
Power segment leads revenue decline though roads segment margins take a beating
The consolidated revenue decline was led by the power segment which recorded an 8% yoy
decline to Rs4.2 bn in 2QFY12 (contributes to about 87% of total sales). Segment EBIT
margins improved to 16.8% for the quarter from 14.4% in 2QFY11.
Roads segment sales at Rs566 mn (about 12% of total sales) grew at 24% yoy. However,
the segment’s contracted to about 50% in 2QFY12 versus about 69.8% in 2QFY11.
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