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I n t e r e s t o n ac q u i s i t i o n d e b t d e n t s b o t t oml i n e…
GVK Power’s (GVK) Q3FY12 performance was below our expectation
mainly on account of higher interest expenses on account of debt for
acquisition of additional stake in MIAL and BIAL. The company incurred
additional interest cost of | 82 crore in Q3FY12 vs. | 31 crore booked in
Q2FY12 for the same and they booked forex loss of | 9 crore in the power
segment during the quarter. The power segment also continued to report
lower PLF on account of restricted gas supply. We maintain BUY with a
revised SOTP price of | 28/share.
ƒ Higher interest cost leads to poor bottomline show…
GVK consolidated its MIAL revenues in Q3FY12. Consequently, the
topline came at | 744.6 crore vs. | 477.5 crore in Q2FY12. The EBITDA
margin at 28.3% was lower than our estimates mainly due to lower
margins in the power segment. The company reported a loss of | 14.5
crore in Q3FY12 vs. our estimate of profit of | 34.7 crore due to lower
margins and higher interest cost. GVK incurred an additional interest cost
of | 82 crore in Q3FY12 on debt for acquisition of an additional stake in
airports vs. | 31 crore booked in Q2FY12 for the same.
ƒ Funding for airport acquisition done through debt…
GVK completed the acquisition of an additional 13.5% stake in MIAL and a
14% stake in BIAL in Q3FY12. For the acquisition of the same and earlier
stake buy in BIAL, total debt of ~| 2400 crore has been raised (including
| 650 raised through securitisation of JKEL toll revenues to raise debt for
additional stake in MIAL). The average cost of the debt is ~13-13.5%.
While we believe these acquisitions are strategic in nature, these would
be earnings dilutive in the near term as incremental earnings from a rise
in stake is likely to be more than offset by higher interest on debt raised
for acquiring the stake.
V a l u a t i o n
At the CMP of | 19, the stock is trading at 0.8x FY13 P/BV. We highlight
that uncertainty over AERA guidelines, gas supply constraints, delay in
the real estate monetisation, lack of clarity over the Hancock deal and on
funding gap across projects and ADF issue still remain. However, any
development on these fronts would be a key trigger for the stock. We
maintain BUY puerly on valuation and revise our SOTP price to
| 28/share to account for incremental stake buy and borrowings in BIAL
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
I n t e r e s t o n ac q u i s i t i o n d e b t d e n t s b o t t oml i n e…
GVK Power’s (GVK) Q3FY12 performance was below our expectation
mainly on account of higher interest expenses on account of debt for
acquisition of additional stake in MIAL and BIAL. The company incurred
additional interest cost of | 82 crore in Q3FY12 vs. | 31 crore booked in
Q2FY12 for the same and they booked forex loss of | 9 crore in the power
segment during the quarter. The power segment also continued to report
lower PLF on account of restricted gas supply. We maintain BUY with a
revised SOTP price of | 28/share.
ƒ Higher interest cost leads to poor bottomline show…
GVK consolidated its MIAL revenues in Q3FY12. Consequently, the
topline came at | 744.6 crore vs. | 477.5 crore in Q2FY12. The EBITDA
margin at 28.3% was lower than our estimates mainly due to lower
margins in the power segment. The company reported a loss of | 14.5
crore in Q3FY12 vs. our estimate of profit of | 34.7 crore due to lower
margins and higher interest cost. GVK incurred an additional interest cost
of | 82 crore in Q3FY12 on debt for acquisition of an additional stake in
airports vs. | 31 crore booked in Q2FY12 for the same.
ƒ Funding for airport acquisition done through debt…
GVK completed the acquisition of an additional 13.5% stake in MIAL and a
14% stake in BIAL in Q3FY12. For the acquisition of the same and earlier
stake buy in BIAL, total debt of ~| 2400 crore has been raised (including
| 650 raised through securitisation of JKEL toll revenues to raise debt for
additional stake in MIAL). The average cost of the debt is ~13-13.5%.
While we believe these acquisitions are strategic in nature, these would
be earnings dilutive in the near term as incremental earnings from a rise
in stake is likely to be more than offset by higher interest on debt raised
for acquiring the stake.
V a l u a t i o n
At the CMP of | 19, the stock is trading at 0.8x FY13 P/BV. We highlight
that uncertainty over AERA guidelines, gas supply constraints, delay in
the real estate monetisation, lack of clarity over the Hancock deal and on
funding gap across projects and ADF issue still remain. However, any
development on these fronts would be a key trigger for the stock. We
maintain BUY puerly on valuation and revise our SOTP price to
| 28/share to account for incremental stake buy and borrowings in BIAL
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