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GVK Power and Infrastructure (GVK) reported Q3FY12 loss of INR145mn
against our expectations of INR530mn profits. The fall in earnings is
largely due to INR820mn interest costs on restructured leveraged loan
(for BIAL and MIAL stake acquisition). While capacity additions in power
and accretion to road projects are couple of years away, the highly
leveraged greenfield Hancock coal asset acquisition would be the key
overhang on the stock. Maintain `HOLD/SU’.
Interest costs of INR820mn impact earnings
GVK’s Q3FY12 earnings were impacted due to INR820mn in interest costs from loans
taken to fund BIAL and MIAL stake acquisition. The management indicated that due to
non‐approval from the RBI, the company had shelved its plan to borrow USD231mn
debt for MIAL stake acquisition. Instead, it resorted to domestic borrowings of INR15bn
(at 13.95% rate). In addition, by securitizing JKEL receivables, it further borrowed
INR6bn (at 12.98% interest rate).
Operational parameters of roads, airports intact, power PLFs dip
Road revenues grew 21% YoY (equally contributed by traffic growth and fare hike)
while pax growth for BIAL was 8.5% YoY and for MIAL, it was 3.5%. Non‐aero revenues
for both airports grew by 17% YoY. PLFs of JP1, JP2 and Gautami power projects fell to
76%, 68% and 69% respectively during Q3FY12 compared to 80%, 87% and 79% in
Q3FY11 mainly due to lower gas availability.
Outlook and valuation: Consolidation to hurt; maintain HOLD
In addition to the impact from leveraged debt funding, fixed costs (post the completion
of MIAL capex) and capex/financing expenses of Hancock coal assets as well as road
projects would affect consolidated earnings going forward. While the management
believes that the proposed private equity fund raising across its various asset verticals
would ease the strain, cash flows and the balance sheet would remain stretched. We
maintain ‘HOLD/UP’ based on our SOTP based target price of INR17/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GVK Power and Infrastructure (GVK) reported Q3FY12 loss of INR145mn
against our expectations of INR530mn profits. The fall in earnings is
largely due to INR820mn interest costs on restructured leveraged loan
(for BIAL and MIAL stake acquisition). While capacity additions in power
and accretion to road projects are couple of years away, the highly
leveraged greenfield Hancock coal asset acquisition would be the key
overhang on the stock. Maintain `HOLD/SU’.
Interest costs of INR820mn impact earnings
GVK’s Q3FY12 earnings were impacted due to INR820mn in interest costs from loans
taken to fund BIAL and MIAL stake acquisition. The management indicated that due to
non‐approval from the RBI, the company had shelved its plan to borrow USD231mn
debt for MIAL stake acquisition. Instead, it resorted to domestic borrowings of INR15bn
(at 13.95% rate). In addition, by securitizing JKEL receivables, it further borrowed
INR6bn (at 12.98% interest rate).
Operational parameters of roads, airports intact, power PLFs dip
Road revenues grew 21% YoY (equally contributed by traffic growth and fare hike)
while pax growth for BIAL was 8.5% YoY and for MIAL, it was 3.5%. Non‐aero revenues
for both airports grew by 17% YoY. PLFs of JP1, JP2 and Gautami power projects fell to
76%, 68% and 69% respectively during Q3FY12 compared to 80%, 87% and 79% in
Q3FY11 mainly due to lower gas availability.
Outlook and valuation: Consolidation to hurt; maintain HOLD
In addition to the impact from leveraged debt funding, fixed costs (post the completion
of MIAL capex) and capex/financing expenses of Hancock coal assets as well as road
projects would affect consolidated earnings going forward. While the management
believes that the proposed private equity fund raising across its various asset verticals
would ease the strain, cash flows and the balance sheet would remain stretched. We
maintain ‘HOLD/UP’ based on our SOTP based target price of INR17/share.
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