GMR Infrastructure: AERA takes a harsh stand on tariffs of Delhi Airport:: Emkay

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GMR Infrastructure

Reco: Under Review

CMP: Rs 23

Target Price: Under Review

AERA takes a harsh stand  on tariffs of Delhi Airport

·      Prima facie terms included in consultation paper (CP) are negative for DIAL. CP terms disallows returns on real estate (RE) deposits collected by DIAL, thus capping RE upsides

·      WACC at 10.3%v/sexp. 12%, Non approval returns on RE deposits will hurt profitability. Near term Rev. likely to be higher than our exp. due to reimbursement of accum. losses (Apr09-Mar12) driving 280% increase over FY13&FY14

·      DIAL RE comprised 24% of TP, Regulator has cornered DIAL by offering no return on erstwhile RE deposits & we caution about prospective returns that DIAL can generate from RE

·      Ratings & TP are kept under review for GMR till tariff mechanism is finalized. By Feb–12 the final tariff order is expected to take the final shape & clarity to emerge