GMR Infrastructure Ltd: Deleveraging to revive fortunes
(BSE Code: 532754) (CMP: Rs.18) (FV: Re.1)
Company overview: Founded in 1987, the GMR group is a leading global infrastructure conglomerate with interests in Airports, Energy, Transportation and Urban Infrastructure. Beginning with a small jute mill, the group has fifteen power generation projects of which ten are operational and five are under development. The group has developed and operates India's busiest and currently world's No.1 Indira Gandhi International Airport in New Delhi and the greenfield Rajiv Gandhi International Airport at Hyderabad.
GMR Infrastructure Ltd (GMR) in partnership with Mega Wide Construction Corporation is developing an airport in Philippines - Mactan Cebu International Airport (MCIA). It is also developing two special investment regions (SIRs) at Krishnagiri and Kakinada and India's largest Smart Airport City near the Hyderabad International Airport. Using the Public Private Partnership model, it has successfully leveraged its core strengths to implement several iconic infrastructure projects in India.
Gross debt reduced significantly to Rs.19856 crore from Rs.37480 crore
Net debt to EBITDA improved to 4.3x from 10.x in FY16
Airport division reported higher profitability – The Delhi and Hyderabad airports declared dividends for the first
Energy division witnessed a turnaround – GMR Warora posted PAT of Rs.143 crore for the first time
Restructured the Energy platform with the induction of Tenaga as a strategic partner
Added the Goa Airport to its Airport portfolio
It received a compensation of ~Rs.1800 crore for winning an arbitration award for the Maldives Airport.
Consolidated Financial Highlights:
With significant reduction of debt from Rs.37480 crore in FY16 to Rs.19856 crore in FY17 and the improvement in
Debt:EBITDA ratio by more than 100%, GMR has substantially brought down its leverage
Significant improvement of 12% in EBITDA to Rs.3497 crore from Rs.3114 crore in FY16 following a robust
improvement in the performance of its Airports and Energy verticals.
Recorded profit before minority and share of associates of Rs.9 crore from a loss of Rs.2664 crore in FY16.
Financial initiatives to strengthen the balance sheet
Consolidate and strengthen the balance sheet through deleveraging;
Continuous reduction of Corporate debt:
Capital raising through IPO of Airport Assets;
Induction of strategic/ financial partner in Airport holding company;
Divestment of certain operational Energy or Highway projects;
Recovery of receivables from Energy Distribution companies, Airlines, etc;
Refinancing of project debt through capital market (Bonds)/ bank refinancing route to result into:
Reduction of interest rate;
Projects getting longer moratorium;
Extending maturity of debt primarily to align the repayment schedule with the cash flows of the project. Conclusion: Our recommendation is based on the latest achievements made by the Company - GMR Airports Ltd in a competitive bid won the Mopa Greenfield Airport in North Goa; won the Delhi Noida Airport plan; Traffic grew 19% YoY to cross 82 mn passengers adding 13 mn in FY17. Overall, the group is performing well in all aspects and we believe that the stock is a potential multibagger. We have a Buy on the stock with price targets of Rs.25 in the short-term and Rs.40 in the long-term.