GMR Infra - A value buy at Rs.80
We have been very bullish on the prospects of GMR Infra, due to its business models. The company is the infrastructure holding company formed to fund the capital requirements of various infrastructure projects in the Group’s Energy, Highways and Urban Infrastructure including SEZ and Airports.
The company is having 50.10% stake in Delhi Airport with an initial term of 30 years which can get extended for another 30 years. The first phase of Delhi Airport is designed to handle 37 million passengers per annum, which would be completed by March 2010, and will be fully operational before the Commonwealth Games. The Delhi Airport is spread over 5,000 acres of land and 5% of such land equivalent to 250 acres is available for development and use for commercial purposes.
The company has 63% interest in Hyderabad Airport which went into commercial operations from 23rd March 08. The airport has capacity to handle 12 million passengers per annum. This airport also has a concession term of 30 years which is extendable for another 30 years. It may be noted that the company would be paying 45.99% of the airports’ gross revenue to AAI for Delhi Airport while 4% would get paid for Hyderabad Airport. The company has been given 5,500 acres of land on lease for Rs.155 crores at Hyderabad for the airport. Major part of this land would be developed by the company including by way of sub-lease for hotels, resorts, flight catering, aircraft maintenance , cargo, convention centres and commercial and residential buildings.
The company has 40% stake in Istanbul Airport in Turkey for a concession period of 20 years, capable of handling 10 million passengers per annum.
The company has recently acquired 50% stake in Netherland based power producer InterGen NV for Rs.4,708 crores (US $ 1.1 Billion). This company has operations in 5 countries with interest in 12 operating power plants with gross capacity of 8,258 MW and 4,822 MW of assets under development. This acquisition has been made at most competitive acquisition at $ 3,60,000 per MW which is half the current cost of similar facility.
In India the company has 8 power projects, of which, 3 are operational and 5 under development with gross capacity of about 3,500 MW. Of these, Orissa and Chattisgarh has thermal power projects of 1,000 MW each.
The company has 6 BOT road projects for 421 kms of which 2 are operational and 4 are under implementation.
The present equity of the company is Rs.364 crores with face value of Rs.2 each. Promoters stake in the company is at Rs.73.28% while 18.14% is held by FIIs and FIs and about 8.58% is held by the Indian public.
The present market capitalization of the company is at about Rs.14,500 crores at its present market price of Rs.80 per share. This is considered quite low considering the value of holdings in its various subsidiaries and the growth expected and visible from all its projects, over the next 2 – 5 years.
For FY 08, on consolidated basis, the total income of the company was at Rs.2,365 crores with profit before tax of Rs.321 crores while net profit was at Rs.210 crores. As the Hyderabad Airport commenced operations only in the last week of March 08, results would start reflecting from FY 09.
The real benefit would accrue to the company on development of its real estate at Delhi and Hyderabad Airports. Since the cost of both the lands are virtually nil for the company, it is not very much affected by the slowdown or impact cost of realty companies, presently going through.
The company’s subsidiaries have also gone for financial closure for all its projects and for its overseas subsidiaries, debt is being raised abroad at the most competitive rates. So interest rates hardening or credit crunch would not affect much for the company’s projects.
Share is now ruling at Rs.80 has very limited downside and even if it falls from hereon it should soon get recovered atleast to the levels of Rs.80. Those who have bought the stock earlier at much higher rates are advised to remain invested with a view of 2 years. Holding the stock with horizon of 2 years would give returns in one go as the company is proxy to India’s infrastructure growth story.
At Rs.80, the share is a safe long term bet, but with 2 year’s time horizon
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Hi Friend,
Thank u very much for publishing such analysis.i am also a investor of this stock.