GMR In­fra­struc­ture Ltd: Delever­ag­ing to re­vive for­tunes

(BSE Code: 532754) (CMP: Rs.18) (FV: Re.1)

Money Times - - Stock Analysis - By Rahul Sharma

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.

FY17 High­lights:

 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.

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