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GMR Infrastructure (Rs60) BUYSet to take-off Target Price:
Rs78
26 March 2010
Sector: Infrastructure Saurabh
[email protected]
GMR Infrastructure Ltd is a large business conglomerate with
presence across various verticals in the infrastructurespace, such
as airports, power, road-highways and urban development. The
company has an excellent trackrecord of execution across different
segments, and is in a sweet spot with the pick-up in airport
passengertraffic and improving visibility for monetization of real
estate at premium valuations. It has a strong pipeline ofnew power
projects which will be operational over the period and would unlock
value for the parent company.We initiate coverage with a BUY rating
and a price target of Rs78 based on SOTP (sum-of-the-parts)
valuation.
Pick-up in airport passenger traffic: Driven by a revival in the
economy, passenger traffic (PAX) growth at bothDelhi and Hyderabad
airports has shown a strong rebound over the last six months, which
would benefit DelhiInternational Airport Ltd. (DIAL) and Hyderabad
International Airport Ltd. (HIAL), respectively. In view of
theapproaching Commonwealth Games, improvement in the IT industry
(prime driver of HIAL) and revival of theeconomy, we expect PAX
traffic to show a CAGR of 10% at Delhi airport and 15% at Hyderabad
airport over thenext three years. With the Hyderabad airport
operating at around 60% capacity utilization and the Delhi
airportscheduled to complete an incremental 34mn PAX capacity by
March 2010; we believe a robust growth in PAXtraffic will provide
operating leverage.
Roadmap for airport real estate monetization-a value creator:
GMR Infra has development rights for largeparcels of real estate
adjacent to the two airports (250 acres land for DIAL and 1,500
acres for HIAL). The recentdeal to monetize 45 acres of the total
250 acres at NPV of Rs330mn per acre has provided visibility for
theremaining land bank and added significant value. Accordingly, we
have valued the DIAL real estate at Rs20 pershare-250 acres of land
at an NPV of Rs330mn per acre.
Massive scale-up in power portfolio: GMR Infra has a strong
pipeline of new power projects totaling ~8,000 MW,of which ~4000 MW
are in advanced stages of development. On the international front,
the company has acquireda 50% stake in InterGen NV, with
operational capacity of 7,658 MW, and 100% stake in Island Power,
having alicense to own and operate up to 800 MW. Post the
completion of all these projects, GMR Infra, will have amassive,
diversified (domestic and international) power portfolio.
Value-unlocking of the energy business on the cards: GMR Infra
had contemplated to raise funds for GMREnergy in 2008; however,
that is yet to materialize. Hence, going forward, we believe the
company will take theIPO route to raise funds which could unlock
value for the parent company.
Initiate with BUY rating: We initiate coverage on the stock with
a BUY rating and a price target of Rs78 per sharebased on SOTP
valuation method. We have valued the company on SOTP using DCF
methodology for most of theassets. Accordingly, we have arrived at
a value of Rs78 per share comprising Rs40 (51% of SOTP) for
airports, Rs27(35% of SOTP) for power & coal mining, Rs6 (8% of
SOTP) for roads, and the balance representing cash. In ourSOTP
valuation, we have not factored in projects which are still in the
planning stage. In our price target, 40% ofthe total value is
contributed by operational projects and the remaining 60% comes
from projects which are atvarious stages of development.
GMR Infra (Consolidated) In Rs. Mn FY09 FY10E FY11E FY12E
FY13EReuters/Bloomberg Code GMRI.BO/GMRI.IN Net Sales 40,192 42,214
49,310 58,284 83,840Market Cap. (Rsbn) 220 EBIDTA 10,668 14,412
18,203 23,303 37,819Market cap. (US$bn) 4.8 Adj. Net Profit 2,795
972 1,868 3,611 10,931Shares Outstanding (mn) 3,667 Adj. EPS 0.76
0.26 0.51 0.98 2.9852-week High/Low (Rs) 92/34 EPS Growth % 33 (65)
92 93 203
EBIDTAM% 23.8 30.4 30.7 33.4 38.8NPM% 6.2 2.1 3.2 5.2 11.2PER
(X) 79 226 118 61 20
Major Share Holders (%) P/BV (x) 1.7 3.3 3.3 3.1
2.7Promoter/Majority 74.6 Price/sales (x) 4.9 4.6 3.7 3.2 2.3FIIs
9.5 EV/EBIDTA 28.4 25.7 22.8 19.5 12.6Banks/Fis/MFs 8.1 ROCE (%)
5.2 5.2 5.8 6.7 9.8Public & others 7.8 ROE (%) 4.3 1.5 2.8 5.1
13.3Source: Company and Karvy Estimates
Sanjeev [email protected]
Amit [email protected]
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22
Investment positives
DIAL: Completion of Phase I at opportune and record time
The DIAL Phase I development is on schedule and expected to
becompleted in record time of 37 months, by March 2010, which
issignificantly lesser than the execution period for other
internationalairports. Post the completion of Phase I, the overall
passenger capacitywould increase by 34mn to 60mn. The Delhi airport
is the second-biggestin India, accounting for around 21% of the
all-India traffic (PAX of ~23mnin FY09). During FY09, the passenger
traffic saw de-growth due to theglobal economic recession. The
passenger traffic at Delhi airport haswitnessed a CAGR of 17% from
FY05-09. We expect the passenger trafficto be robust over the next
three years and to show a CAGR of 10% drivenby the economic revival
and the Commonwealth Games. We believe thecapacity addition coupled
with pick-up in demand will increase the non-aero revenue. Using
DCF, we have valued the core assets of DIAL atRs59bn, yielding
Rs31bn (Rs8.7 per share) for GMR's 54% stake in DIAL.
Airport Pax capacity (mn) Months to completeChangi Airport 22
76T5: Heathrow 25 60T3: Beijing 45 60T3: IGI (Delhi) 34 37Source:
AAI, Company & KSBL Research
Pick-up in passenger traffic at HIAL will provide operating
leverage
HIAL commenced commercial operations in March 2008, but was
unableto get the benefit of expanded capacity due to the slowdown
in passengertraffic. HIAL's passenger traffic grew at 15% during
FY04-08. However, inFY09, passenger traffic fell due to slowdown in
the IT industry coupledwith sharp hike in air-fares because of UDF
(user development fee). Butpassenger traffic has shown a strong
recovery over the past six months,and we expect a growth of 15%
over the next three years. We believe thatgrowth in passenger
traffic will provide the operating leverage as capexhas been
undertaken for 12mn passengers and the current passenger trafficis
only 6.3mn.
Passenger Traffic Trend at HIAL
Source: AAI, Company & KSBL Research
(mn)
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1.90
Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10
Q2FY10 Q3FY10
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3Roadmap for monetization of prime real estate-a value
creator
GMR's real estate valuation primarily comes from the 250 acres
landadjacent to the Indira Gandhi International Airport, New Delhi.
The recentdeal to monetize 45 acres of the total 250 acres at NPV
of Rs330 mn peracre has provided visibility for the remaining land
bank and addedsignificant value. Accordingly, we have valued the
DIAL real estate atRs19.7 per share-250 acres of land at an NPV of
Rs330 mn per acre. Theother land parcels comprising 1,500 acres
near Rajiv Gandhi InternationalAirport, Hyderabad and the 2,000
acres at GMR Krishnagiri SEZ are valuedat Rs3.2 per share,
resulting in a consolidated real estate value of Rs23per share of
the GMR Infra stock price.
Monetization of 45 acres at DIAL
Total (Rs mn) GMR's share (Rs mn) % share
Net Upfront Deposit 14,715 7,946 54%Infrastructure Deposit 6,732
3,635 54%NPV of Lease Rentals 11,137 3,252 29%Total 32,584
14,833Source: Company & KSBL Research
Massive scale-up in the power business
GMR Infrastructure has a strong pipeline of new power projects
totaling~8,000 MW, of which ~4,000 MW are in advanced stages of
development.On the international front, the company has acquired a
50% stake inInterGen NV, with operational capacity of 7,658 MW, and
100% stake inIsland Power, Singapore, having a license to own and
operate up to 800MW. It has acquired coal mining assets
internationally-100% stake in PTBarasentoso Lestari, Indonesia and
38.5% stake in Homeland EnergyGroup (HEG)-to mitigate
coal-availability issues and fluctuating coal-price risks. We
believe that owning mining assets abroad is a huge positivefor the
company, considering the visible shortage of coal in India.
Unlocking of the energy business on the cards
GMR had contemplated to raise fund for its subsidiary, GMR
Energy in2008; however, this is yet to materialize. Hence, going
forward, we believethat the company will take the IPO route to
raise funds which could unlockvalue from the energy business for
the parent company.
Financial Year 2009 2010 2011 2012 2013 2014 2015 2016
1,240
2,900
1,370
2,000
768
15
16
0
Total ( in MW) 809 823 838 1606 3,606 4,976 7,876 9,116
Gradual capacity addition expected
in MW from FY 2010 to 2016
Planned power generation capacity addition ( India &
Nepal)
Source: Company & KSBL Research
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4Ample opportunities in roadways
GMR has a portfolio of six BOT projects-three based on toll
collectionand three based on annuity-worth Rs22.7bn. The company
has recentlywon two projects, one on toll and one on annuity.
Looking at factors likethe government thrust on road development,
strong political commitment,and easing liquidity with expected
revision in framework for projects, webelieve that road development
projects are on a steep growth trajectoryand would offer immense
opportunity for GMR. We have valued the totalvalue to GMR from
annuity roads and toll roads at Rs6 bn and Rs16.6 bn,respectively.
Therefore, the total equity value of road assets is Rs22.7
bn,representing Rs6.2 per share.
SOTP valuation provides upside of 29%
We have valued the company based on DCF valuation as most
projectsare long term and have a fixed concession period with
strong predictablityof cash flows. Hence, the value of these
projects would be best capturedby discounting the future cash
flows. We have used a varied cost of equityacross projects to
factor-in the differential business and execution risks.For
instance, the cost of equity has been assumed at 12% for airports
and15% for realty. For power, the cost of equity has been
considered in therange of 10-15% depending on factors, such as
proportion of merchantpower and the stage of development. For
roadways, the cost of equity isassumed to be 11% for annuity-based
and 13% for toll-based projects.Accordingly, we have arrived at an
intrinsic value of Rs78 per sharecomprising Rs40 (51% of SOTP) for
airports, Rs27 (35% of SOTP) forpower & coal mining, Rs6 (8% of
SOTP) for roads, and the balancerepresenting cash. In our SOTP
valuation, we have not factored in projectswhich are still in the
planning stage. In our price target, 40% of the totalvalue is
contributed by operational projects and the remaining 60% comesfrom
projects which are at various stages of development.
Revenue collection Rs mn/month (as on Dec09)
Source: Company, KSBL Research.
67
49
89
14
35
51
0
1020
30
4050
60
70
8090
100
Tambaram-Tin Tuni - Ana Pochanpalli Ambala-Chand Jadcherla
Ulundurpet
Annuity Toll
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5SOTP Valuation (Rsmn)
Airports Asset Value GMR's stake Value of Stake Rs/share
DIALCore 59,088 54% 31,908 8.7DIAL Real estate 72,272
19.7HIALCore 45,355 63% 28,574 7.8HIAL Real estate 10,800 2.9SGIA
8,320 40% 3,328 0.9TOTAL AIRPORTS 112,764 146,881 40
POWER MW Equity Value GMR's stake Value of Stake Rs/shareGMR
Energy Limited 220 7574 100% 7,574 2.07GMR Power Corporation Pvt.
Ltd 200 9534 51% 4,862 1.33Vemagiri Power Generation Ltd 389 8174
100% 8,174 2.23GMR Kamalanga Energy Limited 1,400 15,657 80% 12,526
3.42Vemagiri (Expansion) 768 18,985 100% 18,985 5.18Emco Energy 600
2,286 100% 2,286 0.62GMR Energy,Chattisgarh 1,370 2,705 100% 2,705
0.74Coastal Andhra Pradesh 2,000 11,233 100% 11,233 3.06Badrinath,
Alaknanda 300 55 100% 55 0.02Total Power 9087 76,202 12.11 68,399
19INTERGEN 6,254 32226 50% 16,113 4.4
Valuation- Mining Assets MR Mn Tons Equity Value Stake (%) Value
of Stake Rs/sharePT Barasentosa Lestari, Indonesia 104 3,111 100%
3,111 0.8Homeland Energy Group Ltd 621 28,131 39% 10,831 3.0Mining
asset value/share (Rs ) 3.8Total Power & Mining 27
Project Name Route Length (km) Project Value Stake (%) Value of
stake Rs/shareTambaram-Tindivanam (Tamil Nadu) 93 2,041 74% 1,510.4
0.4Tuni - Anakapalli (Andhra Pradesh) 59 2,711 74% 2,006.1
0.5Adloor-Gunla-Pochanpalli (Andhra Pradesh) 103 2,543 100% 2,543.1
0.7Ambala-Chandigarh (Punjab) 35 (15) 100% (15.2)
(0.0)Faruknagar-Thondapalli-Jadcherla (Andhra Pradesh) 58 6,165
100% 6,164.5 1.7Tindivanam-Ulundurpet (Tamil Nadu) 73 10,521 100%
10,521.4 2.9Total roadways 421 22,730.4 6.2Others 0.5PRICE TARGET
78Source: Company, KSBL Research.
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6Background and Business Model
GMR Infrastructure is a large business conglomerate with a
strong presenceacross various verticals in the infrastructure
space, both within and outsideIndia. It has an excellent track
record of execution across different segmentslike road-highways,
airports, power and urban development. Its zealremains to forge
into large opportunities in the infrastructure space. Thecompany's
proven execution record along with strong balance sheet willgive
further impetus to growth, in our view.
Source: Company Presentation, KSBL Research.
FY10Airport Delhi T3 Turkey
Highways Ulundurpet -
Tindivanam
FY12Energy Kamalanga Vemagiri Expansion EMCO
2,418 MW
1,200 MW210 kms
FY14Energy Coastal Power
Plants Alaknanda Talong
2,460 MW
FY15Energy Bajoli Holi Upper Karnali Upper Marsyangdi
730 MW
54 mn PAX73 kms
FY13Energy Chhattisgarh
Highways Hyderabad-Vijayawada Chennai-Outer ring road
Airports(2)
Energy(13)
Highways(8)
72 mn PAX 7,631 MW 631 kms
HyderabadDelhi
Coal 4Gas 3Liquid fuel 1Hydro 5
Annuity4Toll4
Intl.(2)
25 mn PAX800 MW
TurkeyIsland Power
Mar 2015
Mar 2009Airports(2)
Energy(3)
Highways(5)
Intl.(1)
38 mn PAX 823 MW 348 kms 5 mn
HyderabadDelhi Ph IA
Gas 1Liquid fuel 2
Annuity3 Toll2
Turkey
GMR Infrastructure Limited (GIL)ENERGY ROADS AIRPORT
GMR Tambaram-Tindivanam ExpresswaysPrivate Limited (GTTEPL) - 93
KMs
GMR Tuni-Anakapalli Expressways PrivateLimited (GTAEPL) - 59
KMs
GMR Ambala-Chandigarh ExpresswaysPrivate Limited (GACEPL) -35
KMs
GMR Jadcherla Expressways Pvt Limited(GJEPL) - 58 KMs
GMR Pochanpalli Expressways PrivateLimited (GPEPL) - 103 KMs
GMR Ulundurpet Expressways PrivateLimited (GUEPL) - 73 KMs
GMR Power Corporation Private Limited(GPCL) 200 MW
Delhi International Airport Private Limited (DIAL)
51.0%
Sabiha Gokcen International Airport (SGIA),Istanbul, Turkey
Delhi Aerotropolis (DAPL) 54%GMR Hyderabad International
AirportLimited (GHIAL)
OTHERS
63%
Hyderbad - Vijaywada (GHVEPL)181 kms
Hyderabad Aerotropolis (GHAPL)
100%
100 %
100 %
89 %
100 %
51 %
100 %
74 %
74 %
100 %
100 %
100 %
100 %
100 %
63 %
54 %
40 %
GMR Energy Limited (GEL) 235 MW
Vemagiri Power Generation Limited-(VPGL) 388.5 MW + 768 MW
GMR Energy Trading Limited
GMR Chattisgarh Energy 1200 MW
GMR Mining and Energy Pvt Limited
GMR (Badrinath) Hydro Power Generation Pvt Limited (GBHP) 300
MW
GMR Kamalanga Energy Limited 1050 MW
100 %Emco Energy 600 MW
100 % GMR Bajoli Holi Hydro Power
100 % GMR Londa Hydro Power160 MW
100 % GMR Upper Karnali HydropowerLtd 300 MW
100 % Himatal Hydropower Company250 MW
180 MW
Chennai Outer Ring (GCOREPL)-30 KMs
100 %
Hyderabad Aviation SEZ (GHASL) 63%
100%GMR Aviations Private Limited (GAPL)
GMR Krishnagiri SEZ Limited100%
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7Airports: Blend of growth and opportunity
India's fast-growing economy has seen an unprecedented increase
inpassenger and cargo traffic over the last decade. This has
stretched thecurrent capacity and prompted the government to take
on an ambitiousprogram to modernize existing airports and building
new greenfieldones. The government is considering proposals for
five new airportsand the development of 35 non-metro airports. We
believe the company'sexpertise in the airport segment would provide
the synergy to win newprojects. GMR currently has a portfolio of
three airport assets, two ofwhich are in India (New Delhi and
Hyderabad) and one in Turkey(Sabiha Gokcen International Airport,
Istanbul). The Hyderabad airport,a greenfield project, was
completed in March 2008. On the other hand,the Delhi and Sabiha
Gokcen international airports are brownfieldprojects. We have
valued GMR's airports' core business at Rs64 bn,based on FCFE
valuation method, given the steady and recurring cashflow during
the concession period. GMR's airports' core assets contribute22.5%
of our SOTP. If we include the value of real estate
developments,the airport assets accounts for 51% of our SOTP.
Airport PortfolioStake Capex (Rs bn) Project status Passenger
Development rights
traffic (mn)
Delhi Airport 54% 89.8 Expected April'2010 22.9 250 acre
landHyderabad Airport 63% 29.2 Phase I operational 6.20 1500 acres
landSabiha Gokcen Airport 40% 29.3 Operational 4.83 N/A
Valuation details (Rsmn)Airports Asset GMR's Value of Value/
Project Equity
Value stake Stake share cost contributi COE Method
DIALCore 59,093 54% 31,910 8.7 89,754 12,500 12% DCFReal estate
72,272 19.7 15%GHIALCore 45,355 63% 28,574 7.8 29,200 3,780 12%
DCFReal estate 10,800 2.9 15%SGHIA 9,437 40% 3,775 1.0 29,315 2,990
12% DCFTOTAL AIRPORTS 113,885 135,429 37Source: Company, KSBL
Research.
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8Delhi International Airport (Pvt) Limited: Time to dial-in
DIAL,a consortium comprising GMR Infrastructure,AAI (Airports
Authorityof India), Fraport AG and Eraman Malaysia, has been
awarded the projectto modernize, develop and operate the Delhi
international airport. Thisinvolves managing a capacity of 100
million for a concession period of 60years. The Delhi airport is
one of the busiest in India, with a passengercapacity of 23 mn in
FY09, equivalent to around 21% of total passengertraffic in the
country. New Delhi is a hub for economic activity around
thenorthern regions of India and is a popular transit point and
destinationfor tourist traffic. We believe this will maintain the
momentum in passengertraffic over the longer-term period.
Key features
Pay 45.99% of revenue to AAI: According to the
revenue-sharingarrangement, DIAL will pay 45.99% of the revenue to
AAI, besides anupfront fee of Rs1.5bn to the Authority for the
right to develop the airport.
Concession period: The concession period is for 30 years, and is
extendableby another 30 years at the option of the airport.
First right of refusal for any airport within 150 km: During the
concessionperiod, GMR will have the first right of refusal to
develop any new airportwithin an area of 150 km as long as its bid
is within 10% range of thehighest bidder.
Assured return of 11.6% on aeronautical revenue: DIAL is assured
of an11.6% post-tax return on net-invested capital from FY11. The
regulatedaero revenues would be calculated as follows: 11.6% return
on regulatedasset base (90% of fixed assets less upfront fee less
ADF) + depreciation(90% recovered) + operation & maintenance
expenses (90%) + taxes onaero income (90%) - 30% of non-aero
revenues. The regulated aero-revenues would be computed for each
year in a five-year block (e.g.FY11-15), and its NPV would be
worked out using an 11.6% discountrate. The aero charges (for five
years) would then be set by AERA (AirportEconomic Regulatory
Authority), such that DIAL is able to recover theNPV of targeted
revenues for the five-year block under consideration. Webelieve
this will provide stability to the company's cash flow.
Shareholders of DIAL StakeGMR Infrastructure Ltd 44.0%GMR Energy
Ltd (100% subs) 10.0%Fraport AG 10.0%Malaysia Airports Holding
10.0%Airports Authority of India 26.0%
Core AirportInfrastructure
Land Bank
Source: Company, KSBL Research.
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9Land-lease agreement: The Delhi airport is spread over 5,123
acres ofland. Of this, DIAL can develop 250 acres of land for
commercial purposes.The lease period of this land is expected to
run in line with the leaseperiod of the airport.
Project completion plan: The DIAL Phase I development is on
scheduleand expected to be completed in record time of 37 months,
by April 2010,which is significantly lower than the execution
period for otherinternational airports. Post the completion of
Phase I, the overall passengercapacity will increase by 34 mn to 60
mn. The plan is to eventually expandthe capacity to 100 mn
passengers in a phased manner.
Project DetailsPhases Completion PAX capacity Cargo Cap. PTB
Area
(mn) (tones) (Sq. m)
1A 31-Mar-08 26 539,000 110,9731-Jul-08 26 539,000 150,973
1B 31-Mar-10 60 638,000 515,0752 31-Mar-17 60 900,000 515,0753
31-Mar-22 76 1,400,000 976,0174 31-Mar-27 86 2,100,000 1,268,2775
31-Mar-37 100 3,600,000 1,679,844Source: Company, KSBL
Research.
Financing of Phase I: The total project cost for the Phase-I
expansion isexpected to be Rs89.7 bn. The project is being funded
through Rs49bndebt, Rs24.5bn equity (including deposits of Rs12.5
bn made by promotersto be converted into equity), Rs18.27bn Airport
Development Fee (ADF),Rs7 bn deposits from realty, and the balance
through internal accruals.
Funding
Capex Funding Rs mn
Debt 49,863Equity+ Shareholders Adv 12,500+12,000Internal
Accruals 294Deposit from Real Estate deals 8,827ADF 18,270Source:
Company, KSBL Research.
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10
Phase I completion at opportune time
The Delhi Airport is the second-largest airport in India,
accounting foraround 21% of the all-India traffic (PAX of ~23 mn in
FY09). During FY09,the passenger traffic saw de-growth due to the
global economic recession.The passenger traffic at the Delhi
airport has witnessed a CAGR of 17%from FY05-09. We expect
passenger traffic to be robust and to and toshow a CAGR of 10% over
the next three years driven by the economicrevival and the upcoming
Commonwealth Games.
Growth driver-regulated as well as market-linked: DIAL will earn
broadlythree types of revenue streams: aeronautical, aero-related
and non-aeronautical revenues. Aero revenues are a composition of
landing revenue,passenger service fee, aircraft parking charge and
X-ray charge, all of whichare regulated by the AAI. The
aero-related and non-aero revenues compriserevenues mainly from
ground handling, fuel farm, duty-free, food &beverages,
advertising, and car parking and rentals, which are linked torental
and customer spends. Since the aeronautical revenues are cappedby a
fixed formula, we believe, going ahead, the contribution of
non-aerorevenue will increase in the revenue mix and drive
growth.
Aeronautical Aero-related Non-aeronauticalAircraft Landing
Charges: Ground Handling Airport Village RentPassenger Service Fees
(PSF) Aviation Fuel Farm Cargo RentAircraft Parking Charges Office
Space In Flight Kitchen RentX-Ray Charges Ware House Fuel Farm
Rent
In-Flight Kitchen Ground HandlingHangers/ MRO Rent
Assumption sheet
DIAL FY09 Growth% (per annum)
Passenger Traffic (mn) 22.80 10% till FY13Air Traffic Movement
(no.) 245,610 8% in Passenger ATM & 4%
in Cargo ATM till FY13Cargo Tonnage (ton) 426300 8% till
FY13Duty free- Per intl passenger spend $10.00 15% till
FY13Advertising (Rs/sq./month) 38719 8% till FY13Source: Company,
KSBL Research.
Traffic at DIAL
Source: Company, KSBL Research.
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
FY06 FY07 FY08 FY09 FY10E FY11E FY12E
PAX Air Traffic Movements Cargo Traffic movement
{Regulated
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11
Revenue breakup (Rsmn)
Particulars FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Total Aero Revenue 4,096 7,000 9,100 11,830 14,788 18,484Total
Aero related revenue 2,912 2,882 3,074 3,973 4,456 4,999Total Non
Aero related revenue 3,772 6,729 7,806 8,722 9,634 10,598Gross
Revenues 10,780 16,611 19,980 24,525 28,877 34,081Less: AAIs share
(46%) 4,959 7,641 9,191 11,281 13,284 15,677Net Revenues to DIAL
5,821 8,970 10,789 13,243 15,594 18,404Aero (%) 38 42 46 48 51
54Non Aero (%) 62 58 54 52 49 46Source: Company, KSBL Research.
Financial trends-DIAL valued at Rs59 bn: We believe that DIAL's
revenuewill show a 31% CAGR during FY11-15 and the revenue mix for
aero andnon-aero will be 54:46 in FY15. Due to operating leverage,
the EBIDTAmargin is expected to improve from 20% in FY08 to 41% in
FY15. Bydiscounting our FCFE estimates explicitly over FY10-66 at
12.0%, we havevalued DIAL's core operations at Rs59 bn, which
translates to Rs31 bn(Rs8.7 per share) for GMR's 54% stake in
DIAL.
Valuation (Rs mn)
Cash flows to equity FY10 FY11 FY12 FY13 FY14 FY15-66
EBIDTA 2,803 5,087 6,630 9,279 11,343 1,120,326(Inc.)/Dec. in WC
2,557 103 64 99 85 2,305Less: Capex 29,525 - - - - 77,521Less:
Interest 1,139 4,121 4,032 3,853 3,675 19,535Less: Tax - - - - 243
325,130Add: Debt 10,087 - - - - -Less: Repayment - - 1,904 1,904
1,904 44,152Add: ADF, Upfront dep or Adv. 29,697 - - - - 77,521FCFE
9,365 863 630 3,423 5,436 729,204
Present value of (FY10-14) 16,529Present value of (FY15-66)
42,559DIAL's value 59,088GMR'S stake 31,908Rs/share 8.7Risk free
rate 8%Beta 1Risk Premium 4%Cost of Equity 12%Source: Company, KSBL
Research.
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12
BALANCE-SHEET 31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13
31-Mar-14 31-Mar-15
Equity Capital 24,500 24,500 24,500 24,500 24,500 24,500
24,500Reserves 928 1,289 953 (937) 1 2,938 7,439Net worth 25,428
25,789 25,453 23,563 24,501 27,438 31,939Loans 39,776 49,863 49,863
47,959 46,056 44,152 40,061Upfront Deposit on Real Estate 8,827
8,827 8,827 8,827 8,827 8,827ADF Capitalized 18,270 18,270 18,270
18,270 18,270 18,270Infra deposit on Real Estate 2,600 2,600 2,600
2,600 2,600 2,600Total 65,204 105,349 105,013 101,219 100,254
101,287 101,697Gross Assets(Including CWIP) 66,229 95,754 95,754
95,754 95,754 95,754 95,754Less: Accumalated Depreciation 664 1,966
3,269 7,757 12,244 16,732 21,220Net Fixed Assets 65,565 93,788
92,485 87,997 83,510 79,022 74,534Other Investments 553 553 553 553
553 553 553Cash 1,112 10,477 11,340 11,970 15,393 20,830
25,625Sundry Debtors 1,753 898 1,383 1,664 2,043 2,405 2,839Loans
& Advances 1,470 1,470 1,470 1,470 1,470 1,470 1,470Less:
Current Liabilities & Provisions 5,293 1,839 2,221 2,437 2,717
2,995 3,327Net Current Assets (2,028) 529 633 697 796 880 982Total
65,204 105,349 105,013 101,219 100,254 101,287 101,697
Financial trend (Rsmn)
P & L 31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13
31-Mar-14 31-Mar-15
Total Revenue 9,476 10,777 16,608 19,978 24,525 28,877 34,081AAI
Revenue Share 4,406 4,957 7,640 9,190 11,281 13,284 15,677Net
Revenues 5,070 5,820 8,968 10,788 13,243 15,594 18,404Operating
costs 4,453 3,017 3,881 4,158 3,964 4,251 4,565EBITDA 617 2,803
5,087 6,630 9,279 11,343 13,838EBITDA Margin 12% 48% 57% 61% 70%
73% 75%Interest cost 539 1,139 4,121 4,032 3,853 3,675
3,429Depreciation 525 1,302 1,302 4,488 4,488 4,488 4,488PBT (342)
361 (336) (1,890) 938 3,180 5,922Tax 107 - - - - 243 1,421PAT (235)
361 (336) (1,890) 938 2,937 4,501Minority Interest (117) 166 (155)
(869) 431 1,351 2,070PAT after minority interest (118) 195 (182)
(1,021) 506 1,586 2,431
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13
Hyderabad International Airport (HIAL)
GMR HIAL (or GHIAL), a consortium of GMR Infrastructure,
MalaysianAirports Holding Berhad, AAI and Government of Andhra
Pradesh,developed a greenfield airport at Hyderabad, which
commencedcommercial operations in March 2008. The project involved
developingthe airport to manage a capacity of 40 million passengers
(current capacity12 mn) for a concession period of 60 years. GHIAL
has the same revenuestream as DIAL: aeronautical, aero-related and
non-aeronautical.However, GHIAL has to share only 4% of the gross
revenue with AAIfrom the 11th year. On the other hand, DIAL has to
share 46% of therevenue from the first year of Phase-I completion.
Moreover, the companyhas development rights of 1,500-acre land
adjacent to the airport.
Key features
Deferred revenue share of 4%: In accordance to the
revenue-sharingarrangement, HIAL will pay 4% of the revenue to AAI.
However, therevenue sharing has been deferred for the first 10
years of operations,and the accrued amount is payable in the
subsequent 10 years in 20equal half-yearly installments.
No competing airport within 150 km: The existing airport was
shut downafter the commissioning of the new airport. No airport
will be allowed tofunction within 150 km of GHIAL for 25 years from
the commissioning ofthe airport.
Concession period: The concession period is 30 years from the
airportopening date and the same is extendable by another 30 years
at the optionof the airport.
Land-lease agreement: GHIAL received 1,500 acres of land on
lease forcommercial development.
Project overviewConcession period 30 + 30 yearsPhases of
development I, II, III & IVLand under development 5,500
acresUltimate pax capacity 40 mm (Current capacity of
12mm)Concession fee 4% of revenue (deferred payment basis from
11th year)Commercial operation 23 rd March 2008Master Planners
Consortium comprising of Cowi of Norway, Avai
Plan of Denmark & Stup of MumbaiSource: Company, KSBL
Research.
Shareholders of DIAL StakeGMR Infrastructure Ltd 63.0%Government
of AP 13.0%Malaysia Airports Holding 11.0%Airports Authority of
India 13.0%
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14
Pick-up in passenger traffic at HIAL will provide operating
leverage:HIAL commenced commercial operations in March 2008, but
was unableto get the benefit of the expanded capacity due to
slowdown in passengertraffic. HIAL's passenger traffic witnessed a
15% CAGR during FY04-08.However, during FY09, the passenger traffic
fell due to slowdown in theIT industry coupled with sharp hike in
air-fares because of UDF. But thepassenger traffic has shown strong
recovery over the past six months,and we expect it to grow at 15%
over the next three years. We believegrowth in passenger traffic
will provide the operating leverage as capexhas been undertaken for
12 mn passengers and the current capacity is6.3 mn.
Assumption sheet
HIAL FY09 Growth % (per annum)
Passenger Traffic (mn) 6.2 15% till FY13Air Traffic Movement
(no) 82639 8% in Passenger ATM & 4%
in Cargo ATM till FY13Cargo Tonnage (ton) 54245 26% till
FY12Duty free - Per intl passenger spend $6 15% till
FY12Advertising (Rs/sq./month) 15000 8% till FY12Source: Company,
KSBL Research.
HIAL Revenue breakup (Rsmn)
Particulars FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Total Aero Revenue 2,619 3,100 3,660 4,269 4,676 5,123Total Aero
related revenue 1,015 1,271 1,551 1,882 2,209 2,593Total Non Aero
related revenue 1,394 1,710 2,097 2,309 2,578 2,815Gross Revenues
(A+B+C) 5,028 6,081 7,308 8,460 9,462 10,531Less: AAIs share (4%)
201.1 243.2 292.3 338.4 378.5 421.2Net Revenues to GHIAL 4,827
5,838 7,016 8,122 9,084 10,109Aero 52 51 50 50 49 49Non Aero 48 49
50 50 51 51Source: Company, KSBL Research.
Traffic trend at HIAL
Source: Company, KSBL Research.
-20%
-10%
0%
10%
20%
30%
40%
50%
FY06 FY07 FY08 FY09 FY10E FY11E FY12E
PAX Air Traffic Movements Cargo Traffic movement
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15
Valuation (Rsmn)
Cash flows to equity FY10 FY11 FY12 FY13 FY14 FY15-68
EBIDTA 2,291 3,146 4,158 5,587 6,387 1,771,927(Inc.)/Dec. in WC
(172) (68) (88) (147) (211) 23,989Less: Capex 529 - - - -
46,000Less: Interest 2,152 2,011 1,853 1,694 1,536 34,597Less: Tax
- - - - - 550,514Add: Debt - - - - - 30,668Less: Repayment 1,126
1,488 1,488 1,488 1,488 47,570FCFE (1,343) (285) 905 2,551 3,574
1,099,925
Present value of (FY10-14) 3,211Present value of (FY15-68)
42,310GHIAL's value 45,521GMR'S stake 28,678Risk free rate 8%Beta
1.0Risk Premium 4%Cost of Equity 12%Rs./share 7.8
Source: Company, KSBL Research.
Financial trends-HIAL valued at Rs45bn: We believe that revenue
willshow a CAGR of 17% in FY10-13E and EBIDTA margin would
improvefrom 36% in FY09 to 66% in FY13E. HIAL is expected to report
a loss untilFY11 due to higher depreciation and interest in the
initial stages post thecompletion. We have valued HIAL's core
operation at Rs45bn bydiscounting our FCFE estimates explicitly
over FY10-68 at 12.0%; thisyields Rs28.5bn (Rs7.8 per share) for
GMR's 63% equity stake in HIAL.
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16
Financial Trend (Rsmn)
P & L 31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13
31-Mar-14 31-Mar-15
Total Revenue 3,982 5,028 6,081 7,308 8,460 9,462 10,531AAI's
Revenue share 163 201 243 292 338 378 421Net Revenue 3,819 4,827
5,838 7,016 8,122 9,084 10,109Operating costs 2,388 2,536 2,692
2,858 2,535 2,697 2,870EBITDA 1,431 2,291 3,146 4,158 5,587 6,387
7,239EBITDA Margin 36% 46% 52% 57% 66% 67% 69%Interest cost 1,592
2,152 2,011 1,853 1,694 1,536 1,782Depreciation 1,122 1,460 1,460
1,460 1,460 1,460 1,460PBT (1,181) (1,321) (325) 845 2,433 3,390
3,998Tax 19 - - - - - 680PAT (1,200) (1,321) (325) 845 2,433 3,390
3,318Minority interest (444) (489) (120) 313 900 1,254 1,228PAT
after Minority Interest (756) (832) (205) 532 1,533 2,136 2,090
Balance-Sheet (Rsmn) 31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12
31-Mar-13 31-Mar-14 31-Mar-15
Equity 3,780 3,780 3,780 3,780 3,780 3,780 3,780Reserves 610
(711) (1,120) (359) 1,989 5,295 8,529Net worth 4,390 3,069 2,660
3,421 5,769 9,075 12,309Total Loans 23,979 22,853 21,366 19,878
18,390 16,902 22,748Total Liabilities 28,369 25,923 24,026 23,299
24,159 25,978 35,057Application of FundsGross Assets 28,671 29,200
29,200 29,200 29,200 29,200 40,200
Less: Accumalated Depreciation 1,197 2,657 4,117 5,577 7,037
8,497 9,957Net Fixed Assets 27,475 26,543 25,083 23,623 22,163
20,703 30,243
Investment in subsidiaries 132 132 132 132 132 132 132Cash 921
(422) (792) 29 2,496 5,986 5,769Inventories 120 419 507 609 705 788
877Sundry Debtors 688 419 507 609 705 788 877Loans & Advances
2,277 2,277 2,277 2,277 2,277 2,277 2,277Total current asset 3,085
3,115 3,290 3,495 3,687 3,854 4,032Less: Current Liabilities &
Provisions 3,244 3,445 3,688 3,980 4,319 4,697 5,119Net Current
Assets (158) (330) (398) (486) (632) (844) (1,087)Total Assets
28,369 25,922 24,025 23,298 24,159 25,977 35,057
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17
Sabiha Gokcen (Istanbul) Airport
GMR Infrastructure won the competitive bid to operate Istanbul
SabihaGokcen International Airport (SGIA), the second airport in
Istanbul, in aconsortium with Malaysia Airports Holdings Berhad
(20%) and Limak (40%).The project entails a capex of EUR450mn to
build a 25-mn passenger capacityterminal in addition to a
concession fee of EUR1.93bn payable over theconcession period. With
the inauguration of the new terminal on October31, 2009, the
capacity of the airport has increased to 25 million passengers.
Revenue driver: The consortium will earn broadly from passenger
servicefees (EUR12/international PAX and EUR3/domestic PAX),
ground-handlingrevenue, duty-free retail and rentals. It is not
entitled to landing and parkingcharges at this airport. SGIA has
witnessed very high traffic growth in thepast few years on rising
tourist flows to Turkey and some shift in air trafficfrom
Istanbul's larger Ataturk airport. We expect passenger traffic to
showa CAGR of 21% during FY10-15E, which would scale up
revenues.
Financial trends-consortium valued at Rs8.3bn: We believe that
revenuewill grow at a CAGR of 35% in FY10-13E. SGIA would report
net loss tillFY12 due to higher depreciation and interest in the
initial stages postcompletion. We have valued SGIA's core operation
at Rs 8.32bn bydiscounting our FCFE estimates explicitly over
FY10-29 at discountingrate of 12.0%; this yields Rs3.32bn
(Rs1/share) value for GMR's 40% equitystake.
SGIA Revenue breakup (Rsmn)
FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Total Aero Revenue 2,329 2,971 4,087 5,362 6,604 7,115Total Non
Aero related revenue 1,599 2,463 3,315 4,348 5,187 6,267Gross
Revenues 3,928 5,434 7,402 9,710 11,791 13,381Concession fee -
5,018 5,018 5,018 5,018 6,273Net Revenues to GHIAL 3,928 416 2,384
4,692 6,773 7,109Aero 59 55 55 55 56 53Non Aero 41 45 45 45 44
47Source: Company, KSBL Research.
Shareholders of DIAL StakeGMR Infrastructure Ltd 40.0%LIMAK
40.0%Malaysia Airports Holding 20.0%
Airport Capacity
Previous Current
PAX Capacity 5 mn 25 mnCargo Capacity - 145,000 tonsPTB Area
(sq.m) 25,600 198,000
Source: Company, KSBL Research.
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18
Monetization of real estate: A value creator
GMR Infra's real estate valuation primarily comes from the 250
acresland adjacent to the Delhi International Airport, on the back
of the recentmonetization efforts of DIAL consortium. The real
estate portion at theDelhi Airport contributes Rs 19.8 per share of
GMR Infra. The other landparcels comprising of 1,500 acres at
Hyderabad International Airport andKrishna Giri SEZ (2,000 acres
acquired) are valued at Rs 3.2 per share ofGMR Infra, making the
consolidated value of the real estate portion to beRs 23 per
share.
The monetization strategy for the 45 acres of land at Delhi
InternationalAirport has been through a bidding process for 19
asset areas which havebeen carved out of this land parcel. The
successful bidders are hospitalityplayers like Accor, Inter Globe
Hotels, Juniper (partners in Asian Hotels),Aria Hotels (partners in
Asian Hotels), Lemon Tree, Bird Group, DBHospitality, Blue Coast
Hotels, Pride Hotels, Sweta Estates and BhartiRealty. The DIAL
consortium will provide the land on a 57 year lease andwill book
the following three income streams from the successful bidders-
1) Refundable upfront deposit - 3 times the average annual lease
rentalsfor the 57 years lease
2) Non-Refundable Infrastructure deposit - for providing the
basicInfrastructure
3) NPV (Net Present Value) of the lease rentals
The company plans to monetize the remaining 205 acres at the
Delhiairport in a similar manner. We have been conservative and
assumed thesame rate of net realization along with a 15% discount
to value theremaining land at Delhi airport.
Monetization of 45 acres at DIAL
Total (Rs mn) GMR's share (Rs mn) % share
Net Upfront Deposit 14,715 7,946 54%Infrastructure Deposit 6,732
3,635 54%NPV of Lease Rentals 11,137 3,252 29%Total 32,584
14,833Source: Company, KSBL Research.
Source: Company, KSBL Research.
45 Acre
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19
At the Hyderabad International Airport, GHIAL has 1,500 acres of
landmarked for real estate development. Of this, the consortium is
planningto develop 200 acres by building educational institutions
and hospitalityventures to unlock the value for the remaining 1,300
acres. At KrishnagiriSEZ, the company has so far acquired 2,000
acres out of the planned3,300 acres at an average cost of Rs 1 mn /
acre. However, given the longgestation period and no concrete plans
yet, we have only taken the marketvalue of the land parcels at
Hyderabad and Krishnagiri.
Valuation of Hyderabad Airport Land and Krishna Giri SEZ
Land
Particulars
Land Area for real estate development at GHIAL (acres)
1,500Value per acre (Rs mn) 11Valuation (Rs mn) 16,500Share of GMR
Infra 60%Net Realizable value for GMR Infra (Rs mn) 9,900Value per
share of GMR Infra (Rs) 2.7Land acquired at Krishna Giri SEZ
2,000Vale per acre 2Valuation 4,000Les: Acquisition cost 2,000Net
Value of Krishna Giri SEZ Land 2,000Value per share of GMR Infra
(Rs) 0.5Source: Company, KSBL Research.
Assumptions
1) For the 45 acres monetized until now, the annual lease
rentals havebeen taken at Rs17 mn per acre with an increase of 5.5%
per annumfor the 57-year lease period.
2) We have assumed the WACC of real estate projects of the
company asthe discount rate, which is 12.5%.
3) The net upfront deposit has been calculated as three times
the averageannual lease rentals for the 57-year lease minus the
present value ofthe refund payment of the upfront deposit in the
last three years oflease.
4) Net realization per acre for the remaining 205 acres has been
taken atthe same value and then discounted at 15% in order to
incorporatethe uncertainty and market risk.
Valuation of remaining 205 acres Rs mn
Net Realization per acre for GMR (from 45 acres) 330
Gross Value of 205 acres at same rate 67,574Less: Discount
15%Net Realizable value for GMR Infra 57,438GMR's share of real
estate value 72,272Value per share of GMR Infra (Rs) 20Source:
Company, KSBL Research.
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20
Roadways: Ample opportunities
Currently, GMR has a balanced road portfolio of six operational
BOTprojects, three based on toll collection and three on annuity,
aggregatingRs22.7 bn. GMR has recently won two more road projects,
one of whichis Hyderabad-Vijayawada (toll-based) and the other is
at Chennai OuterRing (annuity-based). These two assets are
currently under developmentand are expected to achieve CoD during
April-August 2012. It translatesinto a length of nearly 421 km
operational and 210 km under construction.GMR deals with not only
improvement of roads but also construction ofhighways that stretch
across the country. The company's revenue fromthis segment accrues
on both annuity and toll basis. The first two roadprojects were
both annuity-based that commenced operations in October-December
2004. The next four projects got operational during November2008 -
July 2009.
Looking at factors like the government thrust on road
development, strongpolitical commitment, and easing liquidity with
expected revision inframework for projects, we believe that road
development projects are ona steep growth trajectory and would
offer immense opportunity for GMR.
Highways: Balanced Portfolio of Annuity & Toll Assets
Operational Projects Under Construction
GTAEPL GPEPLGTTEPL GACEPL GUEPLGJEPL GHVEPL GCORRPL
Location Tuni AnakapalliTambaram -Tindivanam Pochanpalli
Ambala -Chandigarh
Faruknagar -Jadcherla
Tindivanam- Ulundurpet
Hyderabad Vijaywada
Chennai Outer Ring Road
Project Cost (Rs. mn) 3,040 3,900 6,900 4,985 4,713 7,950 22,000
* 11,000 *
Concession Period
17.5 years from May 02
17.5 years from May 02
20 years from Sep 06
20 years from May 06
20 years from Aug 06
20 years from Oct 06
25 years from Jan 10*
20 years from Mar 10*
Road Length 93 kms 103 kms59 kms 58 kms 73 kms35 kms 29 kms181
kms
CoD Oct 2004 Oct 2004 Mar 2009 Nov 2008 Feb 2009 Jul 2009 Apr
2012* Aug 2012*
Scope of Work 2 to 4 lanes 2 to 4 lanes 2 to 4 lanes 2 to 4
lanes 2 to 4 lanes 2 to 4 lanes 4 to 6 lanes6 lanes &2 Service
Lanes
Project Name
* Estimated
Concession Type Annuity AnnuityAnnuity Toll TollToll
AnnuityToll
Source: Company, KSBL Research.
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21
Road projects to add nearly Rs22 bn to SOTP valuation
Using FCFE valuation methodology, we considered a combined value
ofRs22.7 bn for the six road projects. The three annuity roads
contributeRs6 bn and the three toll roads constitute Rs16.6 bn,
resulting in Rs6.2per share. We have not included the valuation of
the projects which areunder construction.
Road portfolio (Rsmn)Project Name Equity Inv Value Stake Value
of Rs/share
(Rs mn) GMR's stake
Tambaram-Tindivanam 788 2,041 74% 1,510 0.4Tuni - Anakapalli 788
2,777 61% 1,694 0.5Adloor-Gunla-Pochanpalli 1,380 2,543 100% 2,543
0.7Ambala-Chandigarh 1,400 (15) 100% (15)
(0.0)Faruknagar-Thondapalli-Jadcherla 1,178 6,165 100% 6,165
1.7Tindivanam-Ulundurpet 1,990 10,521 100% 10,521 2.9Total 7,524
22,419 6.1Source: Company, KSBL Research.
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22
Power segment: Strengthening domestic foothold but theworld is
the new market
GMR Infrastructure has three operational power generation plants
in India,with a total capacity of 823 MW currently. Moreover, it is
planning to addmore than 8,000 MW of generation capacity in India,
of which ~4,000MW are in advanced stages of development. On the
international front,during October 2008, GMR acquired a 50% stake
in InterGen NV, aNetherlands-based power-generating company with
operational capacityof 7,658 MW (excluding capacity under
construction, 428 MW). Also, GMRacquired a 100% stake in Island
Power from InterGen in May 2009; it isSingapore's only
privately-owned IPP (independent power producer),with a license to
own and operate up to 800 MW of power-generatingcapacity in
Singapore.
Meanwhile, the company has extended its hands to acquire coal
miningassets internationally, a step to mitigate coal-availability
issues andfluctuating coal-price risks. GMR has acquired a 100%
stake in PTBarasentoso Lestari, Indonesia, and a 38.5% stake in
Homeland EnergyGroup (HEG). HEG, through its subsidiaries, holds a
75% stake in Kendal& Eloff mines in South Africa. We believe
owning mining assets abroad isa big positive for the company,
considering the visible shortage of coal inIndia. According to our
report titled 'Coal will be the key to India's powerambitions',
released on September 18, 2009, we expect coal demand inIndia to
widely outstrip supply in the coming years. Moreover, we expectcoal
imports to rise in the next few years due to the supply shortfall
ofdomestic coal and the potential increase in coal blending at the
upcomingthermal power stations.
Operational Capacities
Projects Location MW CoD Fuel Fuel Linkage
GMR Energy Limited Mangalore, Karnataka 220 2001 Naphtha Gas
from KG BasinGMR Power Corporation Pvt. Ltd Chennai, TN 200 1999
LSHS Open sourceVemagiri Power Generation Ltd Rajahmundry, AP 389
2008 Natural Gas Gas from KG BasinInterGen (net equity capacity)
Netherlands 6,254 NA Mix of all NA
Project under implementation
Projects Location MW Exp. COD Fuel Fuel Linkage
GMR Kamalanga Energy Limited Dhenkanal,Orissa 1,400 FY13 Coal
Captive MinesVemagiri (Expansion) Rajahmundry, AP 768 FY12 Natural
Gas Gas from KG BasinEmco Energy Varora, Maharastra 600 FY13 Coal
Coal LinkageGMR energy,Chattisgarh Raipur, Chattisgarh 1,370 FY14
Coal Coal Linkages ExpectedKakinada, Andhra Pradesh Andhra Pradesh
2,000 FY15 Imported Coal Coal from IndonesiaBadrinath Uttaranchal
300 FY16 Hydro NATalong Arunachal Pradesh 160 FY16 Hydro NABajoli
Holi Himachal Pradesh 180 FY16 Hydro NAUpper Karnali Nepal 900 FY15
Hydro NAUpper Marsyangdi Nepal 600 FY16 Hydro NASource: Company,
KSBL Research.
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23
Existing power capacities in India
GMR has three operational power plants with a total generation
capacityof 823 MW. These three plants are: (1) low sulphur heavy
stock (LSHS)based 200 MW plant in Chennai, Tamil Nadu; (2)
naptha-based 220 MWplant in Mangalore, Karnataka; and (3) natural
gas-based 388.5 MW plantin Vemagiri, Andhra Pradesh.
GMR Power Corporation Pvt Ltd (Chennai plant)
GMR's oldest plant (200 MW) is in Chennai, operating since 1999
on lowsulphur heavy stock (LSHS). GMR Infra holds a 51% stake in
GMR PowerCorporation Pvt. Ltd. The plant is operating currently
above a PLF of 80%and selling ~1.4 bn units of energy (kWh)
annually. This plant sells itsentire power at a regulated price
with Tamil Nadu State Electricity Boardunder a 15-year Power
Purchase Agreement (PPA) valid until 2014.
GMR Energy Ltd (Mangalore plant)
GMR's second plant in operations is currently located in
Mangalore,Karnataka. The company plans to relocate this plant from
Mangalore tothe east coast, near Kakinada, Andhra Pradesh, in
Q4FY10, and to convertthe plant from the current naptha-based to
gas-based. Also, the existingcapacity of the plant is likely to
improve from 220 MW to 235 MW. Therelocation of the plant near
Kakinada (closer to the Krishna-Godavaribasin) and the change in
fuel base to natural gas is a strategic move bythe company,
considering the gas availability in the Krishna-Godavari(KG) basin.
The gas supply is expected once the plant is relocated.
Theseven-year PPA got over in 2008, and the plant is currently
operating onmerchant basis. Due to the relocation exercise, PLF is
likely to remainlow in FY10; however, we estimate PLF to touch 50%
in FY11 and 75%from FY11. This relocation would not only improve
its efficiency but alsohedge fuel supply and price fluctuation
risks, given the adequateavailability of natural gas in the new
location.
Vemagiri Power Generation Ltd (Andhra Pradesh plant)
The third and latest (operational since 2008) operational power
plant islocated in Vemagiri, Andhra Pradesh. This plant is natural
gas-based, witha capacity of 388.5 MW. In FY09, the PLF of this
plant was quite low dueto gas unavailability. However, it has
improved significantly in recenttimes with gas supply coming in
from the KG basin. We expect the PLF toimprove significantly and
cross ~80% from FY10 onwards. This plant isproposed to have a mix
of PPA and merchant, wherein 20% of the capacitycould be sold on a
merchant basis. However, the company is still expectingapproval for
the merchant mix of 20%; therefore, currently, we haveassumed PPA
of 100%. GMR is planning to expand capacity in the samelocation by
adding another 768 MW, which is likely to be operationalin
FY12.
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24
Global existing power capacities
InterGen, Netherlands
GMR Infrastructure, as part of its business strategy to have a
presence inthe global energy market, has acquired a 50% stake in
InterGen, a leadingglobal power generation company, headquartered
in the Netherlands.GMR acquired the 50% stake from AIG Highstar in
October 2008. Theremaining 50% of InterGen is held by Ontario
Teachers' Pension Plan(OTPP), a large professional pension plan in
Canada. GMR acquired the50% stake in InterGen at ~Rs60,000 mn,
sourced by long-term debt ofRs41,850 mn and short-term bridge loan
(to be refinanced in October2010) of Rs13,500 mn and equity of
Rs6,750 mn.
InterGen has 12 power plants located across the UK, the
Netherlands,Mexico, Australia and the Philippines, with 8,086 MW of
net operationalcapacity (including 428 MW under construction in the
Netherlands). Ofthe 8,088 MW, its net equity capacity is 6,254 MW.
This acquisition hascatapulted GMR into the league of one of the
largest private powergenerators in India. About 70% of InterGen's
capacities are sold on along-term basis and the remaining on
merchant basis. InterGen has atotal debt of US$4.1 billion on its
balance sheet.
Island Power, Singapore
The GMR Group acquired a 100% stake in Island Power from
InterGen inMay 2009. Island Power is a Singapore-based,
power-generation entitywith a license to own and operate up to 800
MW of electricity-generatingcapacity in Singapore. It is
Singapore's only privately-owned IPP.
Island Power has selected a site on Jurong Island (Singapore's
oil, gasand petrochemicals hub) for the development of an 800-MW
natural gas-fired combined cycle facility. The construction of the
power plant isexpected to be completed by 2013.
InterGen-existing and up coming capacities
Name Location COD MW Stake (%) Net Cap. MW
Quezon Power Mauban, Philippines 2000 460 45.9% 211 CoalCallide
C Power Project Queensland, Australia 2001 920 25% 230
CoalMillmerran Power Millmerran, Australia 2003 850 29.30% 249
CoalRijnmond Rijnmond, Netherlands 2004 820 100.0% 820 Natural
GasSpalding Energy facility Lincolnshire, UK 2004 860 100.0% 860
Natural GasRocksavage Power Station Runcorn, UK 1998 748 100.0% 748
Natural GasCoryton Plant Essex, UK 2002 779 100.0% 779 Natural
GasEnerga Campeche Campeche, Mexico 2003 252 100.0% 252 Natural
GasBajio power project San Luis de la Paz, Mexico 2002 600 51.0%
306 Natural GasEnerga Chihuahua Chihuahua, Mexico 2003 271 100% 271
Natural GasLa Rosita Power Project Mexicali, Mexico 2003 1100 100%
1100 Natural GasMaasStroom Energie Rotterdam, Netherlands 2010E 428
100% 428 Natural GasTotal 8088 6254Source: Company, KSBL
Research.
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25
Upcoming projects
Currently, GMR is adding significant capacities, which are under
differentstages of construction. In India and Nepal, GMR is
planning to add 8,307MW by FY16. Of these upcoming projects, 5,370
MW (~65% of total) arethermal, 2,140 MW (~26%) hydro, and 783 MW
(9%) gas-based projects.The gas-based capacity addition includes 15
MW expansion duringrelocation of the existing 220-MW Mangalore
plant to Kakinada. Effectively,over the next seven years, GMR is
likely to catapult its total generationcapacity by more than 10x,
to 9,116 MW compared to the current 809MW. Of the planned capacity
addition of 8,307 MW, projects worth 4,150MW are under different
stages of construction, while the remaining(mostly hydro projects)
are in planning stages currently.
Project under construction
Projects MW Exp. COD Development
Expansion & relocation of 15 FY11 All contracts awarded
including BoP, Construction as per scheduleMangalore plantGMR
Kamalanga Energy 1,400 FY13 Achieved financial closure for ~Rs. 45
bn, EPC contract awarded to SEPCO,
China and Construction activities commencedVemagiri (Expansion)
768 FY12 Land and water available, EPC contract awarded, BTG
contract finalised,
STG contract finalisedEmco Energy 600 FY13 Finance tied-up, Land
acquired & water allocation received, Coal Linkages
and MOEF Approval received for 300 MW, BTG supply contract
awarded,Construction to commence in Q4 FY2010.
GMR energy,Chattisgarh 1,370 FY14 Land acquired, EPC contract
for BTG awarded to Doosan, Korea,Recommended for Coal Linkage by
CEA
Project under planningKakinada, Andhra Pradesh 2,000 FY15 Under
planning stage, land aquired, financial closure expectedBadrinath
(alaknanda) project 300 FY16 CEA concurrence received for DPR,
Environmental Clearance
received,Forest Clearance & Private Land Acquisition in
progressTalong 160 FY16 Memorandum of Agreement (MoA) signed with
the Government of
Arunachal PradeshBajoli Holi 180 FY16 DPR & EIA studies
completed for BajoliHoliUpper Karnali 900 FY15 Approval obtained
from Govt of NepalUpper Marsyangdi 600 FY16 Approval obtained from
Govt of NepalSource: Company, KSBL Research.
Financial Year 2009 2010 2011 2012 2013 2014 2015 2016
1,240
2,900
1,370
2,000
768
15
16
0
Total ( in MW) 809 823 838 1606 3,606 4,976 7,876 9,116
Gradual capacity addition expected
in MW from FY 2010 to 2016
Planned power generation capacity addition ( India &
Nepal)
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26
Mining (coal) assets to feed ambitious growth plan in power
segment
Coal mine in Indonesia
In February 2009, GMR Energy, a subsidiary of GMR
Infrastructure,acquired an Indonesia-based greenfield coal mining
company, PTBarasentosa Lestari, with proven reserves. PT
Barasentosa Lestari holds a30-year mining authorization over two
separate coal blocks in SouthSumatra, Indonesia, issued by the
Government of Indonesia. The dealsize was ~Rs4,000 mn (US$80
million) for minable coal reserves of 104mn tonnes, indicating a
valuation of ~US$0.77 per tonne. We expect miningoperations to
begin from FY11 at this mine with capacity of ~2 milliontonnes per
annum (MTPA) which will gradually reach 6 MTPA by FY14.We believe
that GMR will import the extracted coal from this mine toIndia for
its coastal power project. We believe that the company's movehas
strengthened its plan to scale up the power business by
ensuringcoal supply. Moreover, this acquisition would help to hedge
against coal-price fluctuation risks. We believe that owning mining
assetsinternationally is a big positive for the company,
considering the expectedshortage of coal in India.
Stake in Homeland Energy Group for coal mining assets
In February 2009, the GMR Group acquired a 33.5% stake in
Canada-based, Homeland Energy Group Ltd. (HEG), a listed company
whichowns coal properties in South Africa through its subsidiary,
the HomelandMining and Energy (HMESA). GMR Energy acquired 75.7 mn
shares, or~33.5%, of HEG Canada in exchange for 10% voting and
equity interestheld by GMR in HMESA. GMR had bought the 10% stake
in HMESA inApril 2008 for Rs1,500 mn (US$30 mn). Earlier, GMR was
holding a 5% inHEG; therefore, post the acquisition, it now holds a
38.5% stake in HEG.
HEG is a coal producer with operations in the Witbank area of
SouthAfrica. HEG owns a controlling interest in the already
operational Kendalmines, fully explored Eloff mines and other
exploration sites, with totalmineable reserves of around 300
million tonnes. The Eloff mines, whichhas significant coal reserves
that are under the pre-feasibility stage, havebeen fully explored.
In addition, HEG also holds a 39% stake in HomelandUranium, Inc., a
Canadian uranium exploration and development companyfocused on
projects in Niger and the US, and around 12% stake in
AltonaResources with coal assets in Australia.
Coal Reserves of HEG (Million Tons)Kendal, South Africa 25
operationalEloff, South Africa 275 under development4 other mines
in SA 321 under developmentSource: Company, KSBL Research.
HEG effectively controls 621 mn tonnes of coal resources in six
coal mines.This includes 25 mn tonnes of coal reserves in Kendal,
SA (an operationalopen-cast coal mine producing 1.2 MTPA), 275 mn
tonnes of coal reservesin Eloff mines, SA (an open-cast mine under
development with expectedproduction of 4 MTPA in 2012), and 321 mn
tonnes of coal resources infour other coal mines in SA.
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27
We believe that GMR will not import its share of coal to India
due tooperational constraints. Hence, either it will trade the coal
in South Africaor look out for a South African counterpart to work
on a barter system toexchange coal. In either case, it is a natural
hedge for the company,considering its huge requirement of coal in
future to feed the upcomingthermal plants in India.
Likely to unlock value from power segment through IPO
GMR had contemplated to raise funds for its subsidiary, GMR
Energy in2008; however, that is yet to materialize. Hence, going
forward, we believethe company will take the IPO route to raise
funds which could unlockvalue from the energy business for the
parent company.
Inorganic growth not ruled out
Given GMR's ambitious growth plans and strong balance sheet,
inorganicgrowth cannot be ruled out, in our view. Historically,
too, the companyhas been aggressive in acquiring mining assets and
power generationcapacities in the international market. Even
domestically, GMR Infra hasalready acquired full stake in EMCO
Energy, which is setting up a 600MW coal-based power plant. We
believe that strong cash flow generationfrom the existing power
plants coupled with strong balance sheet willsupport its inorganic
growth opportunity.
Valuation: Power business
We have valued GMR's power segment project-wise. While
existingdomestic power projects are valued on DCF basis, upcoming
projects(under construction only) are valued on EV/MW basis due to
lack ofoperational track record. Based on the DCF method, we arrive
at a valueof Rs6 per share for its three existing power plants.
Valuation - Domestic Power BusinessCapacities CoD Valuation Beta
Discount Equity GMR's Value per
(MW) Method rate % Value(Rsmn) stake % share (Rs)
GMR Energy Limited 220 2001 DCF 1.1 13.9% 7574 100% 2GMR Power
Corporation Pvt. Ltd 200 1999 DCF 0.9 14.6% 9534 51% 1Vemagiri
Power Generation Ltd 389 2008 DCF 1.0 10.5% 8174 100% 2Value/ share
(Rs) 6
Source: Company, KSBL Research.
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28
Currently, although 8,257 MW projects are under construction
andplanning, for valuation purposes, we have considered only those
projectsthat have achieved significant progress in the planning
stage and all theprojects under construction. Projects totaling
more than 4,100 MW capacityare under construction, including
Dhenkanal project (1,400 MW), Vemagiriexpansion (768 MW), Emco
Energy (600 MW), and Raipur project (1,370MW). Furthermore,
considering the relative development, we haveincluded the 2,000-MW
Kakinada project and the 300-MW Badrinath(Alaknanda) project in the
planned list.
Currently, in India, ~Rs50 mn per MW is required to set up a
thermalpower plant and ~Rs60-70 mn per MW for a gas-based plant.
Hence, wehave considered those respective multiples as the base
multiple to valueupcoming power plants. Moreover, we have assigned
a discount of 10%to our base valuation multiples (EV/MW) for every
subsequent year, tocapture the execution risk over time. Factoring
the debt to be raised forthese projects, we arrive at an equity
value of Rs14 per share for allupcoming projects.
InterGen (Valuation) Rs mnCapacity (MW) 6,254EV/MW 53EV
330096Debt of InterGen 186550Mkt Value of InterGen 143546GMR's
stake 50%Mkt Value of InterGen-GMR stake 71773Debt raised by GMR
for InterGen 55660Equity Value of GMR's holding in InterGen
16113Per share value (Rs) 4.4USD ( exchange rate in Rs) 45.5Source:
Company, KSBL Research.
Valuation - Projects under construction/planningCapacity Exp.CoD
Valuation Multiple Discounted Stake EV
(MW) multiple (%) (Rs mn)
GMR Kamalanga Energy Limited 1,400 FY13 EV/MW 50 42 80%
47,134Vemagiri (Expansion) 768 FY12 EV/MW 60 51 100% 38,785Emco
Energy 600 FY13 EV/MW 50 39 100% 23,166GMR energy,Chattisgarh 1,370
FY14 EV/MW 50 35 100% 48,527Coastal Andhra Pradesh 2,000 FY15 EV/MW
50 32 100% 64,993Badrinath, Alaknanda 300 FY16 EV/MW 70 35 100%
10,639Talong 160 FY16 EV/MW 0 100% 0Bajoli Holi 180 FY16 EV/MW 0
100% 0Upper Karnali 900 FY15 EV/MW 0 100% 0Upper Marsyangdi 600
FY16 EV/MW 0 80% 0EV (Rs mn) 233,244Net debt (Rs mn) 182,324Equity
Value (Rs mn) 50,920Value / Share (Rs) 14Source: Company, KSBL
Research.
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29
We have valued InterGen, based on EV/MW (in line with global
peers).The power-generation entities in the US and Europe are
trading at 1.16x(see Global Peers) their capacity (MW).
Furthermore, adjusting the debtraised by GMR to acquire a 50% stake
in InterGen, we arrive at a value ofRs4.4 per share for GMR's stake
in InterGen. However, we have notfactored Island Power (800-MW
plant in Singapore) currently in our modeldue to insignificant
progress in that project.
Valuation: Coal assets
GMR Energy has economic interest in Indonesia-based greenfield
coal-mining company, PT Barasentosa Lestari (100%) and 38.5% in
Canada-based Homeland Energy Group Ltd. (HEG), a listed company
which ownscoal properties in South Africa through its subsidiary,
HMESA. We valuethese coal assets of GMR at US$1 per tonne of
reserves, in line with thevaluation of similar deals done by Indian
companies in the recent past toacquire coal mining assets in
Indonesia and the African regions.Accordingly, we arrive at a value
of Rs4 per share for GMR's miningassets.
Global Peer Group
Company Country Installed Mcap/MW EV/MW (US$ P/BV (X) EV/EBITDA
(X)Capacity (MW) (US$ Mn per MW) Mn per MW) CY09 CY08 CY09
Exelon Corporation US 33,000 0.91 1.23 2.4 5.5 6.3Entergy
Corporation US 30,000 0.52 0.87 1.8 7.5 7.5Southern Company US
42,000 0.63 1.12 1.7 8.8 9.3FPL Group US 39,000 0.51 0.96 1.5 8.1
8.3USA - Median 0.58 1.04 1.8 7.8 7.9Electricite de France S.A.
France 159,313 0.65 1.16 2.7 8.1 6.7E.ON AG Germany 74,000 1.08
1.87 1.4 10.7 6.7RWE AG Germany 45,196 1.09 1.33 2.7 5.0 5.0Enel
SpA Italy 94,300 0.61 1.76 1.3 7.4 6.7Europe - Median 0.86 1.55 2.1
7.8 6.7Total Median 0.70 1.16Source: Bloomberg, Reuters, Company
Reports & Karvy ResearchNote:(a) Tenaga Nasional BHD has a
Financial Year ended August. Therefore, instead of CY08 & CY09
the data is of August 2009 & August 2010respectively.(b) NTPC
has a Financial Year ended March. Therefore, instead of CY08 &
CY09 the data is of March 2009 & March 2010 respectively.(c)
All price sensitive information is dated as of October 30,
2009.
Valuation- Minning AssetsMineable Mining Equity Equity
Equityreserves Value EV Value Value Value perMn Tons ($/ton) (Rs
mn) (Rs mn)* Stake (%) (GMR's share) share (Rs)
PT Barasentosa Lestari, Indonesia 104 1 4,711 3,111 100 3,111
1Homeland Energy Group Ltd 621 1 28,131 28,131 38.5 10,831 3Mining
asset value/share (Rs ) 4Source: Company, KSBL Research.* USD is
taken as Rs 45.3
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Financial Analysis
Revenues to show 21% CAGR
Net sales are likely to show a CAGR of 21% during FY10-13, to
Rs58.2 bnand Rs83.8 bn in FY12E and FY13E, respectively. We expect
the airportssegment to start contributing significantly to revenue
from Q1FY11,considering robust growth in PAX traffic and completion
of the DIALPhase-I development by end-FY10. The contribution from
power projectsis likely to start rising from FY13 onwards as most
of the capacity expansionwould start contributing to revenue.
EBITDA margins to expand sharply
We expect GMR's EBITDA margins to expand from 23.8% in FY09 to
38.8%in FY13E on the back of improving margins from the DIAL and
HIALairports.
Profits to be under pressure due to higher depreciation and
interest
We expect profitability to be under pressure during FY10E-11E
due tohigher depreciation and interest post-commercialization of
DIAL andHIAL. Thereafter, in our view, reported profit is likely to
show a CAGR of148% in FY12E-13E, largely driven by operating
leverage of high-marginassets such as HIAL and DIAL.
Revenue break up (% of total)
Source: Company, KSBL Research.
44 4337 36
46
1721 21 21
16
39 3742 43
38
-
10
20
30
40
50
FY09 FY10E FY11E FY12E FY13EPower Projects Road and other
Projects Airports
EBIDTA Margin trend(%)
Source: Company, KSBL Research.
22 24
30 3133
39
10
1520
2530
3540
45
FY08 FY09 FY10E FY11E FY12E FY13E
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Investment concern:
Passenger traffic risk at airports: Any slowdown in passenger
traffic willhurt financial performance of the airports. We have
assumed passengertraffic to grow at a CAGR of 10% over next three
years at Delhi airportand 15% at Hyderabad Airport.
Traffic risk at toll based BOT projects: Vehicle traffic is the
source ofrevenue for toll-based projects so any slowdown or change
in our vehicleestimates would have an adverse impact on the overall
profitability ofthe projects.
Project execution risk: The company is adding significant power
generationcapacity which will determine future profitability and
valuation of powersegment. Any delay or failure in execution of
these expected projects couldlead to cost and time overrun,
affecting adversly power segment'sfinancials and valuation.
Financial closure risk: Several of the company's projects are in
the initialplanning stages and due for financial closure. Delay or
failure in financialclosure could cause increase in interest rates
and subsequently increasein the cost of the project.
Equity dilution risk: As on Dec. 2009, the company had net
debt/equityof 1.62x and we expect by the end-March 10 the company
would havenet debt/equity ratio of 2.5x which would further
increase to 3.3x by end-March 13 due to series of projects in
pipeline. We believe that the companywould have to dilute its
equity to improve leverage in the book leadingto dilution in return
ratio.
Equity dilution
Year Method of dilution Price** Amount (Rsmn) Equity capital
Aug'2006 IPO 21 7,950 3,310Dec.'2007 QIP 120 39,600
3,641June'09* QIP 57 148 3,667* Issue to IDFC Fund** Adjusted price
for split of FV from Rs 10 to Rs 1
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Balance sheet(Rs mn) FY09 FY10E FY11E FY12E FY13EEquity Share
Capital 3,641 3,667 3,667 3,667 3,667
Reserves and Surplus 61,070 62,042 63,909 67,520 78,451Net Worth
64,711 65,709 67,577 71,187 82,118LT Loans 106,602 166,190 197,308
226,666 245,537
ST Loans 13,636 27,054 32,120 36,899 39,971Total Loans 120,238
193,244 229,428 263,565 285,508Minority Interest 18,061 18,484
16,808 15,390 16,834
Deferred Tax liabilities 192 192 192 192 192Foreign currency
translation 69 69 69 69 69Total Liabilities 203,271 277,698 314,073
350,403 384,720
Gross Block 114,326 184,731 228,255 271,779 308,651Less:
Depreciation 17,810 23,674 30,135 39,786 51,311Capital Work in
Progress 67,909 74,700 82,170 90,387 99,426
Net Block 164,426 235,757 280,290 322,380 356,766Investments
13,109 14,420 14,708 15,002 15,302Inventories 1,319 1,606 1,797
2,021 2,659
Sundry Debtors 6,609 6,995 8,741 10,302 14,391Cash and Bank
Balances 24,665 27,854 19,746 13,941 14,171Loans and Advances
12,612 11,681 14,597 17,204 24,033
Total Current Assets 45,383 48,314 45,059 43,646 55,432Total
Current Liabilities 19,647 20,793 25,984 30,625 42,780Net Current
Assets 25,736 27,521 19,075 13,021 12,651
Total Assets 203,271 277,698 314,073 350,403 384,720
Profit & loss statement(Rs mn) FY09 FY10E FY11E FY12E
FY13ENet revenue 40,192 42,214 49,310 58,284 83,840Growth (%) 75 5
17 18 44Total Expenditure 29,524 27,802 31,108 34,981 46,021EBITDA
10,668 14,412 18,203 23,303 37,819Growth (%) 78% 35% 26% 28%
62%EBITDA (%) 23.8 30.4 30.7 33.4 38.8Depreciation 3,898 5,865
6,461 9,651 11,525EBIT 6,770 8,548 11,742 13,652 26,295EBIT (%)
15.1 18.0 19.8 19.6 27.0Interest and Finance Charges 3,682 7,118
11,399 11,165 12,606Other Income 214 222 277 389 384Profit Before
Tax 3,301 1,652 620 2,876 14,072Taxes 530 258 428 683 1,698PAT
before Minority Interests 2,771 1,395 191 2,193 12,374Minority
Interests (23) 423 (1,676) (1,417) 1,443Adj PAT 2,795 972 1,868
3,611 10,931Growth (%) 33% -65% 92% 93% 203%
RatiosFY09 FY10E FY11E FY12E FY13E
Adj EPS (Rs) 0.8 0.3 0.5 1.0 3.0Cash EPS (Rs.) 1.8 1.9 2.3 3.6
6.1
PER (x) 78.7 226.5 117.8 60.9 20.1P/BV (Rs) 1.7 3.3 3.3 3.1
2.7Debt Equity (x) 1.9 2.9 3.4 3.7 3.5
Net Debt Equity 1.5 2.5 3.1 3.5 3.3Interest Coverage 2.9 2.0 1.6
2.1 3.0RoCE (%) 5.2 5.2 5.8 6.7 9.8
RoNW (%) 4.3 1.5 2.8 5.1 13.3EV / EBIDTA (x) 28.4 25.7 22.8 19.5
12.6EV / Sales (x) 6.8 7.8 7.0 6.5 4.9
Mkt Cap / EBITDA 20.6 15.3 12.1 9.4 5.8Mkt Cap / Sales 4.9 4.6
3.7 3.2 2.3Asset Turnover (x) 2.6 3.9 3.9 3.9 3.2
Effective Interest Rate (%) 3.7 4.5 5.4 4.5 4.6Inventory Day's
21.1 21.1 21.1 21.1 21.1Debtor Day's 53.9 53.9 53.9 53.9 53.9
Other CA Day's 104.3 90.0 90.0 90.0 90.0Current Liabilities
Day's 160.2 160.2 160.2 160.2 160.2
Cash flow(Rs mn) FY09 FY10E FY11E FY12E FY13EEBIT 6,770 8,548
11,742 13,652 26,295(Inc.)/Dec in working capital (5,474) 1,404 338
249 600Cash flow from operations 1,295 9,952 12,079 13,901
26,895Other income (450) 222 277 389 384Depreciation 3,898 5,865
6,461 9,651 11,525Interest paid (-) (3,417) (7,118) (11,399)
(11,165) (12,606)Tax paid (-) (998) (258) (428) (683)
(1,698)Dividends paid (-) - - - - -Net cash from operations 328
8,664 6,990 12,093 24,499Capital expenditure (-) (30,388) (77,196)
(50,994) (51,741) (45,911)Net cash after capex (30,059) (68,533)
(44,004) (39,648) (21,412)Inc./(dec.) in borrowings 38,663 73,007
36,184 34,137 21,942Inc./(Dec.) in investments 139 (1,311) (288)
(294) (300)Issue of common stock inconsolidated entities 6,981 - -
- -Equity issue/(buyback) - 26 - - -Cash from financial activities
45,783 71,722 35,896 33,843 21,642Opening cash 8,942 24,665 27,855
19,746 13,941Closing cash 24,665 27,855 19,746 13,941 14,171Change
in cash 15,724 3,189 (8,108) (5,805) 230
32
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33
Research Desk (Tel: 91-22-22895000)Hemindra Hazari Head of
Research [email protected]
Institutional Sales (Tel: 91-22-22895000)N Subramaniam Head of
Institutional Sales [email protected]
Stock Ratings Absolute Returns Stock Ratings Absolute ReturnsBuy
: > 25% Market Performer : 0 - 15%Out Performer : 16 - 25% Under
Performer : < 0%Sell :