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Initiating Coverage

Global Equity
Research - India

26 March 2010
Amit Srivastava

Sector: Infrastructure

Sanjeev Panda

Saurabh Mahajan

amit.srivastava@karvy.com sanjeev.panda@karvy.com saurabh.mahajan@karvy.com

GMR Infrastructure (Rs60)

BUY
Target Price: Rs78

Set to take-off

GMR Infrastructure Ltd is a large business conglomerate with presence across various verticals in the infrastructure
space, such as airports, power, road-highways and urban development. The company has an excellent track
record of execution across different segments, and is in a sweet spot with the pick-up in airport passenger
traffic and improving visibility for monetization of real estate at premium valuations. It has a strong pipeline of
new 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 both
Delhi and Hyderabad airports has shown a strong rebound over the last six months, which would benefit Delhi
International Airport Ltd. (DIAL) and Hyderabad International Airport Ltd. (HIAL), respectively. In view of the
approaching Commonwealth Games, improvement in the IT industry (prime driver of HIAL) and revival of the
economy, we expect PAX traffic to show a CAGR of 10% at Delhi airport and 15% at Hyderabad airport over the
next three years. With the Hyderabad airport operating at around 60% capacity utilization and the Delhi airport
scheduled to complete an incremental 34mn PAX capacity by March 2010; we believe a robust growth in PAX
traffic will provide operating leverage.
Roadmap for airport real estate monetization-a value creator: GMR Infra has development rights for large
parcels of real estate adjacent to the two airports (250 acres land for DIAL and 1,500 acres for HIAL). The recent
deal to monetize 45 acres of the total 250 acres at NPV of Rs330mn per acre has provided visibility for the
remaining land bank and added significant value. Accordingly, we have valued the DIAL real estate at Rs20 per
share-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 acquired
a 50% stake in InterGen NV, with operational capacity of 7,658 MW, and 100% stake in Island Power, having a
license to own and operate up to 800 MW. Post the completion of all these projects, GMR Infra, will have a
massive, diversified (domestic and international) power portfolio.
Value-unlocking of the energy business on the cards: GMR Infra had contemplated to raise funds for GMR
Energy in 2008; however, that is yet to materialize. Hence, going forward, we believe the company will take the
IPO 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 share
based on SOTP valuation method. We have valued the company on SOTP using DCF methodology for most of the
assets. 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 our
SOTP valuation, we have not factored in projects which are still in the planning stage. In our price target, 40% of
the total value is contributed by operational projects and the remaining 60% comes from projects which are at
various stages of development.
GMR Infra (Consolidated)

In Rs. Mn

FY09

Reuters/Bloomberg Code
Market Cap. (Rsbn)
Market cap. (US$bn)
Shares Outstanding (mn)
52-week High/Low (Rs)

GMRI.BO/GMRI.IN
220
4.8
3,667
92/34

Major Share Holders (%)


Promoter/Majority
FIIs
Banks/Fis/MFs
Public & others

74.6
9.5
8.1
7.8

Net Sales
EBIDTA
Adj. Net Profit
Adj. EPS
EPS Growth %
EBIDTAM%
NPM%
PER (X)
P/BV (x)
Price/sales (x)
EV/EBIDTA
ROCE (%)
ROE (%)

40,192
10,668
2,795
0.76
33
23.8
6.2
79
1.7
4.9
28.4
5.2
4.3

Source: Company and Karvy Estimates

FY10E FY11E
42,214
14,412
972
0.26
(65)
30.4
2.1
226
3.3
4.6
25.7
5.2
1.5

49,310
18,203
1,868
0.51
92
30.7
3.2
118
3.3
3.7
22.8
5.8
2.8

FY12E

FY13E

58,284
23,303
3,611
0.98
93
33.4
5.2
61
3.1
3.2
19.5
6.7
5.1

83,840
37,819
10,931
2.98
203
38.8
11.2
20
2.7
2.3
12.6
9.8
13.3

Investment positives
DIAL: Completion of Phase I at opportune and record time
The DIAL Phase I development is on schedule and expected to be
completed in record time of 37 months, by March 2010, which is
significantly lesser than the execution period for other international
airports. Post the completion of Phase I, the overall passenger capacity
would increase by 34mn to 60mn. The Delhi airport is the second-biggest
in India, accounting for around 21% of the all-India traffic (PAX of ~23mn
in FY09). During FY09, the passenger traffic saw de-growth due to the
global economic recession. The passenger traffic at Delhi airport has
witnessed a CAGR of 17% from FY05-09. We expect the passenger traffic
to be robust over the next three years and to show a CAGR of 10% driven
by the economic revival and the Commonwealth Games. We believe the
capacity addition coupled with pick-up in demand will increase the nonaero revenue. Using DCF, we have valued the core assets of DIAL at
Rs59bn, yielding Rs31bn (Rs8.7 per share) for GMR's 54% stake in DIAL.
Airport

Pax capacity (mn)

Months to complete

22
25
45
34

76
60
60
37

Changi Airport
T5: Heathrow
T3: Beijing
T3: IGI (Delhi)
Source: AAI, Company & KSBL Research

Pick-up in passenger traffic at HIAL will provide operating leverage


HIAL commenced commercial operations in March 2008, but was unable
to get the benefit of expanded capacity due to the slowdown in passenger
traffic. HIAL's passenger traffic grew at 15% during FY04-08. However, in
FY09, passenger traffic fell due to slowdown in the IT industry coupled
with sharp hike in air-fares because of UDF (user development fee). But
passenger 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 that
growth in passenger traffic will provide the operating leverage as capex
has been undertaken for 12mn passengers and the current passenger traffic
is only 6.3mn.
Passenger Traffic Trend at HIAL
1.90

(mn)

1.80
1.70
1.60
1.50
1.40
1.30
1.20
Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10

Source: AAI, Company & KSBL Research

Roadmap for monetization of prime real estate-a value creator


GMR's real estate valuation primarily comes from the 250 acres land
adjacent to the Indira Gandhi International Airport, New Delhi. The recent
deal to monetize 45 acres of the total 250 acres at NPV of Rs330 mn per
acre has provided visibility for the remaining land bank and added
significant value. Accordingly, we have valued the DIAL real estate at
Rs19.7 per share-250 acres of land at an NPV of Rs330 mn per acre. The
other land parcels comprising 1,500 acres near Rajiv Gandhi International
Airport, Hyderabad and the 2,000 acres at GMR Krishnagiri SEZ are valued
at Rs3.2 per share, resulting in a consolidated real estate value of Rs23
per share of the GMR Infra stock price.
Monetization of 45 acres at DIAL
Total (Rs mn)

GMR's share (Rs mn)

% share

14,715
6,732
11,137
32,584

7,946
3,635
3,252
14,833

54%
54%
29%

Net Upfront Deposit


Infrastructure Deposit
NPV of Lease Rentals
Total
Source: 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 in
InterGen NV, with operational capacity of 7,658 MW, and 100% stake in
Island Power, Singapore, having a license to own and operate up to 800
MW. It has acquired coal mining assets internationally-100% stake in PT
Barasentoso Lestari, Indonesia and 38.5% stake in Homeland Energy
Group (HEG)-to mitigate coal-availability issues and fluctuating coalprice risks. We believe that owning mining assets abroad is a huge positive
for the company, considering the visible shortage of coal in India.
Planned power generation capacity addition ( India & Nepal)
Financial Year

2009

2010

2011

2012

2013

2014

2015

2016
1,240

Gradual
capacity
addition
expected
in MW from
FY 2010
to 2016

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

Source: Company & KSBL Research

Unlocking of the energy business on the cards


GMR had contemplated to raise fund for its subsidiary, GMR Energy in
2008; however, this is yet to materialize. Hence, going forward, we believe
that the company will take the IPO route to raise funds which could unlock
value from the energy business for the parent company.
3

Ample opportunities in roadways


GMR has a portfolio of six BOT projects-three based on toll collection
and three based on annuity-worth Rs22.7bn. The company has recently
won two projects, one on toll and one on annuity. Looking at factors like
the government thrust on road development, strong political commitment,
and easing liquidity with expected revision in framework for projects, we
believe that road development projects are on a steep growth trajectory
and would offer immense opportunity for GMR. We have valued the total
value 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.
Revenue collection Rs mn/month (as on Dec09)
100
90
80
70

Annuity

89

Toll

67

60

51

49

50
40

35

30
14

20
10
0
Tambaram-Tin

Tuni - Ana

Pochanpalli

Ambala-Chand

Jadcherla

Ulundurpet

Source: Company, KSBL Research.

SOTP valuation provides upside of 29%


We have valued the company based on DCF valuation as most projects
are long term and have a fixed concession period with strong predictablity
of cash flows. Hence, the value of these projects would be best captured
by discounting the future cash flows. We have used a varied cost of equity
across projects to factor-in the differential business and execution risks.
For instance, the cost of equity has been assumed at 12% for airports and
15% for realty. For power, the cost of equity has been considered in the
range of 10-15% depending on factors, such as proportion of merchant
power and the stage of development. For roadways, the cost of equity is
assumed to be 11% for annuity-based and 13% for toll-based projects.
Accordingly, we have arrived at an intrinsic 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 our SOTP valuation, we have not factored in projects
which are still in the planning stage. In our price target, 40% of the total
value is contributed by operational projects and the remaining 60% comes
from projects which are at various stages of development.

SOTP Valuation
Airports
DIALCore
DIAL Real estate
HIALCore
HIAL Real estate
SGIA
TOTAL AIRPORTS

(Rsmn)
Asset Value

GMR's stake

Value of Stake

Rs/share

59,088

54%

45,355

63%

8,320
112,764

40%

31,908
72,272
28,574
10,800
3,328
146,881

8.7
19.7
7.8
2.9
0.9
40

POWER
GMR Energy Limited
GMR Power Corporation Pvt. Ltd
Vemagiri Power Generation Ltd
GMR Kamalanga Energy Limited
Vemagiri (Expansion)
Emco Energy
GMR Energy,Chattisgarh
Coastal Andhra Pradesh
Badrinath, Alaknanda
Total Power
INTERGEN

MW
220
200
389
1,400
768
600
1,370
2,000
300
9087
6,254

Equity Value
7574
9534
8174
15,657
18,985
2,286
2,705
11,233
55
76,202
32226

GMR's stake
100%
51%
100%
80%
100%
100%
100%
100%
100%
12.11
50%

Value of Stake
7,574
4,862
8,174
12,526
18,985
2,286
2,705
11,233
55
68,399
16,113

Rs/share
2.07
1.33
2.23
3.42
5.18
0.62
0.74
3.06
0.02
19
4.4

Valuation- Mining Assets


PT Barasentosa Lestari, Indonesia
Homeland Energy Group Ltd
Mining asset value/share (Rs )
Total Power & Mining

MR Mn Tons
104
621

Equity Value
3,111
28,131

Stake (%)
100%
39%

Value of Stake
3,111
10,831

Rs/share
0.8
3.0
3.8
27

Project Name
Route Length (km)
Tambaram-Tindivanam (Tamil Nadu)
93
Tuni - Anakapalli (Andhra Pradesh)
59
Adloor-Gunla-Pochanpalli (Andhra Pradesh)
103
Ambala-Chandigarh (Punjab)
35
Faruknagar-Thondapalli-Jadcherla (Andhra Pradesh) 58
Tindivanam-Ulundurpet (Tamil Nadu)
73
Total roadways
421
Others
PRICE TARGET

Project Value
2,041
2,711
2,543
(15)
6,165
10,521

Stake (%)
74%
74%
100%
100%
100%
100%

Value of stake
1,510.4
2,006.1
2,543.1
(15.2)
6,164.5
10,521.4
22,730.4

Rs/share
0.4
0.5
0.7
(0.0)
1.7
2.9
6.2
0.5
78

Source: Company, KSBL Research.

Background and Business Model


GMR Infrastructure is a large business conglomerate with a strong presence
across various verticals in the infrastructure space, both within and outside
India. It has an excellent track record of execution across different segments
like road-highways, airports, power and urban development. Its zeal
remains to forge into large opportunities in the infrastructure space. The
company's proven execution record along with strong balance sheet will
give further impetus to growth, in our view.
GMR Infrastructure Limited (GIL)
ENERGY

100%
51.0%

100 %

ROADS

AIRPORT

GMR Energy Limited (GEL) 235 MW

74 %

GMR Tambaram-Tindivanam Expressways


Private Limited (GTTEPL) - 93 KMs

63 %

GMR Power Corporation Private Limited


(GPCL) 200 MW

74 %

GMR Tuni-Anakapalli Expressways Private


Limited (GTAEPL) - 59 KMs

54 %

100 %

GMR Pochanpalli Expressways Private


Limited (GPEPL) - 103 KMs

40 %

100 %

Chennai Outer
Ring (GCOREPL)
30 KMs

GMR Hyderabad International Airport


Limited (GHIAL)

54%

Delhi Aerotropolis (DAPL)

63%

GMR Energy Trading Limited

Hyderabad Aerotropolis (GHAPL)

Delhi International Airport


Private Limited (DIAL)

Vemagiri Power Generation Limited


(VPGL) 388.5- MW + 768 MW

51 %

OTHERS

63%

Hyderabad Aviation SEZ (GHASL)

Sabiha Gokcen International Airport (SGIA),


Istanbul, Turkey

100%

100 %

GMR Chattisgarh Energy 1200 MW

100 %

100 %

Emco Energy 600 MW

100 %

GMR Bajoli Holi Hydro Power


180 MW

100 %

GMR Londa Hydro Power


160 MW

100 %

GMR Upper Karnali Hydropower


Ltd 300 MW

100 %

Himatal Hydropower Company


250 MW

89 %

GMR Krishnagiri SEZ Limited

GMR Jadcherla Expressways Pvt Limited


(GJEPL)- 58 KMs

100 %

GMR Ambala-Chandigarh Expressways


Private Limited (GACEPL) -35 KMs

100 %

GMR Ulundurpet Expressways Private


Limited (GUEPL) - 73 KMs

100 %

GMR Aviations Private Limited (GAPL)

100%

Hyderbad - Vijaywada (GHVEPL)


181 kms

GMR Mining and Energy Pvt Limited

100 %

GMR B
( adrinath) Hydro Power
Generation Pvt Limited (GBHP) 300 MW

100 %

GMR Kamalanga Energy Limited


1050 MW

FY15
Energy
Bajoli Holi
Upper Karnali

FY14
Energy
Coastal Power
Plants

Mar 2009
Airports

Energy

Highways

Intl.

(2)

(3)

(5)

(1)

38 mn PAX

823 MW

348 kms

5 mn

Hyderabad

Gas 1

Delhi Ph IA

Liquid
fuel 2

Annuity3
Toll2

FY10
Airport
Delhi T3
Turkey

Turkey

FY13
Energy
Chhattisgarh

Upper Marsyangdi

Alaknanda
Talong

Highways
Hyderabad-Vijayawada

730 MW

Chennai-Outer ring road

2,460 MW

FY12
Energy
Kamalanga

Mar 2015

Vemagiri Expansion
EMCO

Highways

1,200 MW
210 kms

Airports
(2)

Energy
(13)

Highways
(8)

Intl.
(2)

72 mn PAX

7,631 MW

631 kms

25 mn PAX
800 MW

Hyderabad
Delhi

Coal 4
Gas 3
Liquid fuel 1
Hydro 5

Annuity4
Toll 4

Turkey
Island Power

2,418 MW

Ulundurpet -

Tindivanam

54 mn PAX
73 kms

Source: Company Presentation, KSBL Research.

Airports: Blend of growth and opportunity


India's fast-growing economy has seen an unprecedented increase in
passenger and cargo traffic over the last decade. This has stretched the
current capacity and prompted the government to take on an ambitious
program to modernize existing airports and building new greenfield
ones. The government is considering proposals for five new airports
and the development of 35 non-metro airports. We believe the company's
expertise in the airport segment would provide the synergy to win new
projects. GMR currently has a portfolio of three airport assets, two of
which 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 brownfield
projects. We have valued GMR's airports' core business at Rs64 bn,
based on FCFE valuation method, given the steady and recurring cash
flow during the concession period. GMR's airports' core assets contribute
22.5% of our SOTP. If we include the value of real estate developments,
the airport assets accounts for 51% of our SOTP.
Airport Portfolio
Stake
Delhi Airport
54%
Hyderabad Airport
63%
Sabiha Gokcen Airport 40%

Capex (Rs bn)

Project status

Passenger
traffic (mn)

Development rights

89.8
29.2
29.3

Expected April'2010
Phase I operational
Operational

22.9
6.20
4.83

250 acre land


1500 acres land
N/A

Valuation details (Rsmn)


Airports
DIAL
Core
Real estate
GHIAL
Core
Real estate
SGHIA
TOTAL AIRPORTS

Asset
Value

GMR's
stake

Value of
Stake

Value/
share

Project
cost

Equity
contributi

59,093

54%

31,910
72,272

8.7
19.7

89,754

45,355

63%

9,437
113,885

40%

28,574
10,800
3,775
135,429

7.8
2.9
1.0
37

COE

Method

12,500

12%
15%

DCF

29,200

3,780

DCF

29,315

2,990

12%
15%
12%

DCF

Source: Company, KSBL Research.

Delhi International Airport (Pvt) Limited: Time to dial-in


DIAL, a consortium comprising GMR Infrastructure,AAI (Airports Authority
of India), Fraport AG and Eraman Malaysia, has been awarded the project
to modernize, develop and operate the Delhi international airport. This
involves managing a capacity of 100 million for a concession period of 60
years. The Delhi airport is one of the busiest in India, with a passenger
capacity of 23 mn in FY09, equivalent to around 21% of total passenger
traffic in the country. New Delhi is a hub for economic activity around the
northern regions of India and is a popular transit point and destination
for tourist traffic. We believe this will maintain the momentum in passenger
traffic over the longer-term period.

Core Airport
Infrastructure

Land Bank

Source: Company, KSBL Research.

Key features
Shareholders of DIAL

Stake

GMR Infrastructure Ltd


GMR Energy Ltd (100% subs)
Fraport AG
Malaysia Airports Holding
Airports Authority of India

44.0%
10.0%
10.0%
10.0%
26.0%

Pay 45.99% of revenue to AAI: According to the revenue-sharing


arrangement, DIAL will pay 45.99% of the revenue to AAI, besides an
upfront 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 extendable
by another 30 years at the option of the airport.
First right of refusal for any airport within 150 km: During the concession
period, GMR will have the first right of refusal to develop any new airport
within an area of 150 km as long as its bid is within 10% range of the
highest bidder.
Assured return of 11.6% on aeronautical revenue: DIAL is assured of an
11.6% post-tax return on net-invested capital from FY11. The regulated
aero revenues would be calculated as follows: 11.6% return on regulated
asset base (90% of fixed assets less upfront fee less ADF) + depreciation
(90% recovered) + operation & maintenance expenses (90%) + taxes on
aero income (90%) - 30% of non-aero revenues. The regulated aerorevenues 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% discount
rate. The aero charges (for five years) would then be set by AERA (Airport
Economic Regulatory Authority), such that DIAL is able to recover the
NPV of targeted revenues for the five-year block under consideration. We
believe this will provide stability to the company's cash flow.

Land-lease agreement: The Delhi airport is spread over 5,123 acres of


land. 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 lease
period of the airport.
Project completion plan: The DIAL Phase I development is on schedule
and expected to be completed in record time of 37 months, by April 2010,
which is significantly lower than the execution period for other
international airports. Post the completion of Phase I, the overall passenger
capacity will increase by 34 mn to 60 mn. The plan is to eventually expand
the capacity to 100 mn passengers in a phased manner.
Project Details
Phases
1A
1B
2
3
4
5

Completion

PAX capacity
(mn)

Cargo Cap.
(tones)

PTB Area
(Sq. m)

31-Mar-08
1-Jul-08
31-Mar-10
31-Mar-17
31-Mar-22
31-Mar-27
31-Mar-37

26
26
60
60
76
86
100

539,000
539,000
638,000
900,000
1,400,000
2,100,000
3,600,000

110,973
150,973
515,075
515,075
976,017
1,268,277
1,679,844

Source: Company, KSBL Research.

Financing of Phase I: The total project cost for the Phase-I expansion is
expected to be Rs89.7 bn. The project is being funded through Rs49bn
debt, Rs24.5bn equity (including deposits of Rs12.5 bn made by promoters
to be converted into equity), Rs18.27bn Airport Development Fee (ADF),
Rs7 bn deposits from realty, and the balance through internal accruals.
Funding
Capex Funding
Debt
Equity+ Shareholders Adv
Internal Accruals
Deposit from Real Estate deals
ADF

Rs mn
49,863
12,500+12,000
294
8,827
18,270

Source: Company, KSBL Research.

Phase I completion at opportune time


The Delhi Airport is the second-largest airport in India, accounting for
around 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 to
show a CAGR of 10% over the next three years driven by the economic
revival and the upcoming Commonwealth Games.
Traffic at DIAL
30%
25%
20%
15%
10%
5%
0%
-5%

FY06

-10%

FY07
PAX

FY08

FY09

Air Traffic Movements

FY10E

FY11E

FY12E

Cargo Traffic movement

Source: Company, KSBL Research.

Growth driver-regulated as well as market-linked: DIAL will earn broadly


three types of revenue streams: aeronautical, aero-related and nonaeronautical revenues. Aero revenues are a composition of landing revenue,
passenger service fee, aircraft parking charge and X-ray charge, all of which
are regulated by the AAI. The aero-related and non-aero revenues comprise
revenues mainly from ground handling, fuel farm, duty-free, food &
beverages, advertising, and car parking and rentals, which are linked to
rental and customer spends. Since the aeronautical revenues are capped
by a fixed formula, we believe, going ahead, the contribution of non-aero
revenue will increase in the revenue mix and drive growth.

Regulated

Aeronautical

Aero-related

Non-aeronautical

Aircraft Landing Charges:


Passenger Service Fees (PSF)
Aircraft Parking Charges
X-Ray Charges

Ground Handling
Aviation Fuel Farm
Office Space
Ware House
In-Flight Kitchen

Airport Village Rent


Cargo Rent
In Flight Kitchen Rent
Fuel Farm Rent
Ground Handling
Hangers/ MRO Rent

Assumption sheet
DIAL

FY09

Growth% (per annum)

Passenger Traffic (mn)


Air Traffic Movement (no.)

22.80
245,610

Cargo Tonnage (ton)


Duty free- Per intl passenger spend
Advertising (Rs/sq./month)

426300
$10.00
38719

10% till FY13


8% in Passenger ATM & 4%
in Cargo ATM till FY13
8% till FY13
15% till FY13
8% till FY13

Source: Company, KSBL Research.

10

Revenue breakup (Rsmn)


Particulars
Total Aero Revenue
Total Aero related revenue
Total Non Aero related revenue
Gross Revenues
Less: AAIs share (46%)
Net Revenues to DIAL
Aero (%)
Non Aero (%)

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

4,096
2,912
3,772
10,780
4,959
5,821
38
62

7,000
2,882
6,729
16,611
7,641
8,970
42
58

9,100
3,074
7,806
19,980
9,191
10,789
46
54

11,830
3,973
8,722
24,525
11,281
13,243
48
52

14,788
4,456
9,634
28,877
13,284
15,594
51
49

18,484
4,999
10,598
34,081
15,677
18,404
54
46

Source: Company, KSBL Research.

Financial trends-DIAL valued at Rs59 bn: We believe that DIAL's revenue


will show a 31% CAGR during FY11-15 and the revenue mix for aero and
non-aero will be 54:46 in FY15. Due to operating leverage, the EBIDTA
margin is expected to improve from 20% in FY08 to 41% in FY15. By
discounting our FCFE estimates explicitly over FY10-66 at 12.0%, we have
valued 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
(Inc.)/Dec. in WC
Less: Capex
Less: Interest
Less: Tax
Add: Debt
Less: Repayment
Add: ADF, Upfront dep or Adv.
FCFE

2,803
2,557
29,525
1,139
10,087
29,697
9,365

5,087
103
4,121
863

6,630
64
4,032
1,904
630

9,279
99
3,853
1,904
3,423

11,343
85
3,675
243
1,904
5,436

1,120,326
2,305
77,521
19,535
325,130
44,152
77,521
729,204

Present value of (FY10-14)


Present value of (FY15-66)
DIAL's value
GMR'S stake
Rs/share
Risk free rate
Beta
Risk Premium
Cost of Equity

16,529
42,559
59,088
31,908
8.7
8%
1
4%
12%

Source: Company, KSBL Research.

11

Financial trend (Rsmn)


P&L
Total Revenue
AAI Revenue Share
Net Revenues
Operating costs
EBITDA
EBITDA Margin
Interest cost
Depreciation
PBT
Tax
PAT
Minority Interest
PAT after minority interest

BALANCE-SHEET
Equity Capital
Reserves
Net worth
Loans
Upfront Deposit on Real Estate
ADF Capitalized
Infra deposit on Real Estate
Total
Gross Assets(Including CWIP)
Less: Accumalated Depreciation
Net Fixed Assets
Other Investments
Cash
Sundry Debtors
Loans & Advances
Less: Current Liabilities & Provisions
Net Current Assets
Total

31-Mar-09

31-Mar-10

31-Mar-11

31-Mar-12

31-Mar-13

31-Mar-14

31-Mar-15

9,476
4,406
5,070
4,453
617
12%
539
525
(342)
107
(235)
(117)
(118)

10,777
4,957
5,820
3,017
2,803
48%
1,139
1,302
361
361
166
195

16,608
7,640
8,968
3,881
5,087
57%
4,121
1,302
(336)
(336)
(155)
(182)

19,978
9,190
10,788
4,158
6,630
61%
4,032
4,488
(1,890)
(1,890)
(869)
(1,021)

24,525
11,281
13,243
3,964
9,279
70%
3,853
4,488
938
938
431
506

28,877
13,284
15,594
4,251
11,343
73%
3,675
4,488
3,180
243
2,937
1,351
1,586

34,081
15,677
18,404
4,565
13,838
75%
3,429
4,488
5,922
1,421
4,501
2,070
2,431

31-Mar-09

31-Mar-10

31-Mar-11

31-Mar-12

31-Mar-13

31-Mar-14

31-Mar-15

24,500
928
25,428
39,776

24,500
1,289
25,789
49,863
8,827
18,270
2,600
105,349
95,754
1,966
93,788
553
10,477
898
1,470
1,839
529
105,349

24,500
953
25,453
49,863
8,827
18,270
2,600
105,013
95,754
3,269
92,485
553
11,340
1,383
1,470
2,221
633
105,013

24,500
(937)
23,563
47,959
8,827
18,270
2,600
101,219
95,754
7,757
87,997
553
11,970
1,664
1,470
2,437
697
101,219

24,500
1
24,501
46,056
8,827
18,270
2,600
100,254
95,754
12,244
83,510
553
15,393
2,043
1,470
2,717
796
100,254

24,500
2,938
27,438
44,152
8,827
18,270
2,600
101,287
95,754
16,732
79,022
553
20,830
2,405
1,470
2,995
880
101,287

24,500
7,439
31,939
40,061
8,827
18,270
2,600
101,697
95,754
21,220
74,534
553
25,625
2,839
1,470
3,327
982
101,697

65,204
66,229
664
65,565
553
1,112
1,753
1,470
5,293
(2,028)
65,204

12

Hyderabad International Airport (HIAL)


GMR HIAL (or GHIAL), a consortium of GMR Infrastructure, Malaysian
Airports Holding Berhad, AAI and Government of Andhra Pradesh,
developed a greenfield airport at Hyderabad, which commenced
commercial operations in March 2008. The project involved developing
the airport to manage a capacity of 40 million passengers (current capacity
12 mn) for a concession period of 60 years. GHIAL has the same revenue
stream as DIAL: aeronautical, aero-related and non-aeronautical.
However, GHIAL has to share only 4% of the gross revenue with AAI
from the 11th year. On the other hand, DIAL has to share 46% of the
revenue from the first year of Phase-I completion. Moreover, the company
has development rights of 1,500-acre land adjacent to the airport.
Key features
Shareholders of DIAL

Stake

GMR Infrastructure Ltd


Government of AP
Malaysia Airports Holding
Airports Authority of India

63.0%
13.0%
11.0%
13.0%

Deferred revenue share of 4%: In accordance to the revenue-sharing


arrangement, HIAL will pay 4% of the revenue to AAI. However, the
revenue sharing has been deferred for the first 10 years of operations,
and the accrued amount is payable in the subsequent 10 years in 20
equal half-yearly installments.
No competing airport within 150 km: The existing airport was shut down
after the commissioning of the new airport. No airport will be allowed to
function within 150 km of GHIAL for 25 years from the commissioning of
the airport.
Concession period: The concession period is 30 years from the airport
opening date and the same is extendable by another 30 years at the option
of the airport.
Land-lease agreement: GHIAL received 1,500 acres of land on lease for
commercial development.
Project overview
Concession period
Phases of development
Land under development
Ultimate pax capacity
Concession fee
Commercial operation
Master Planners

30 + 30 years
I, II, III & IV
5,500 acres
40 mm (Current capacity of 12mm)
4% of revenue (deferred payment basis from
11th year)
23 rd March 2008
Consortium comprising of Cowi of Norway, Avai
Plan of Denmark & Stup of Mumbai

Source: Company, KSBL Research.

13

Pick-up in passenger traffic at HIAL will provide operating leverage:


HIAL commenced commercial operations in March 2008, but was unable
to get the benefit of the expanded capacity due to slowdown in passenger
traffic. HIAL's passenger traffic witnessed a 15% CAGR during FY04-08.
However, during FY09, the passenger traffic fell due to slowdown in the
IT industry coupled with sharp hike in air-fares because of UDF. But the
passenger traffic has shown strong recovery over the past six months,
and we expect it to grow at 15% over the next three years. We believe
growth in passenger traffic will provide the operating leverage as capex
has been undertaken for 12 mn passengers and the current capacity is
6.3 mn.
Traffic trend at HIAL
50%
40%
30%
20%
10%
0%
-10%

FY06

-20%

FY07

FY08

PAX

FY09

FY10E

Air Traffic Movements

FY11E

FY12E

Cargo Traffic movement

Source: Company, KSBL Research.

Assumption sheet
HIAL

FY09

Growth % (per annum)

Passenger Traffic (mn)


Air Traffic Movement (no)

6.2
82639

Cargo Tonnage (ton)


Duty free - Per intl passenger spend
Advertising (Rs/sq./month)

54245
$6
15000

15% till FY13


8% in Passenger ATM & 4%
in Cargo ATM till FY13
26% till FY12
15% till FY12
8% till FY12

Source: Company, KSBL Research.

HIAL Revenue breakup (Rsmn)


Particulars

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

Total Aero Revenue


Total Aero related revenue
Total Non Aero related revenue
Gross Revenues (A+B+C)
Less: AAIs share (4%)
Net Revenues to GHIAL
Aero
Non Aero

2,619
1,015
1,394
5,028
201.1
4,827
52
48

3,100
1,271
1,710
6,081
243.2
5,838
51
49

3,660
1,551
2,097
7,308
292.3
7,016
50
50

4,269
1,882
2,309
8,460
338.4
8,122
50
50

4,676
2,209
2,578
9,462
378.5
9,084
49
51

5,123
2,593
2,815
10,531
421.2
10,109
49
51

Source: Company, KSBL Research.

14

Financial trends-HIAL valued at Rs45bn: We believe that revenue will


show a CAGR of 17% in FY10-13E and EBIDTA margin would improve
from 36% in FY09 to 66% in FY13E. HIAL is expected to report a loss until
FY11 due to higher depreciation and interest in the initial stages post the
completion. We have valued HIAL's core operation at Rs45bn by
discounting our FCFE estimates explicitly over FY10-68 at 12.0%; this
yields Rs28.5bn (Rs7.8 per share) for GMR's 63% equity stake in HIAL.
Valuation (Rsmn)
Cash flows to equity

FY10

FY11

FY12

FY13

FY14

FY15-68

EBIDTA
(Inc.)/Dec. in WC
Less: Capex
Less: Interest
Less: Tax
Add: Debt
Less: Repayment
FCFE

2,291
(172)
529
2,152
1,126
(1,343)

3,146
(68)
2,011
1,488
(285)

4,158
(88)
1,853
1,488
905

5,587
(147)
1,694
1,488
2,551

6,387
(211)
1,536
1,488
3,574

1,771,927
23,989
46,000
34,597
550,514
30,668
47,570
1,099,925

Present value of (FY10-14)


Present value of (FY15-68)
GHIAL's value
GMR'S stake
Risk free rate
Beta
Risk Premium
Cost of Equity
Rs./share

3,211
42,310
45,521
28,678
8%
1.0
4%
12%
7.8

Source: Company, KSBL Research.

15

Financial Trend (Rsmn)


P&L
Total Revenue
AAI's Revenue share
Net Revenue
Operating costs
EBITDA
EBITDA Margin
Interest cost
Depreciation
PBT
Tax
PAT
Minority interest
PAT after Minority Interest

Balance-Sheet (Rsmn)

31-Mar-09

31-Mar-10

31-Mar-11

31-Mar-12

31-Mar-13

31-Mar-14

31-Mar-15

3,982
163
3,819
2,388
1,431
36%
1,592
1,122
(1,181)
19
(1,200)
(444)
(756)

5,028
201
4,827
2,536
2,291
46%
2,152
1,460
(1,321)
(1,321)
(489)
(832)

6,081
243
5,838
2,692
3,146
52%
2,011
1,460
(325)
(325)
(120)
(205)

7,308
292
7,016
2,858
4,158
57%
1,853
1,460
845
845
313
532

8,460
338
8,122
2,535
5,587
66%
1,694
1,460
2,433
2,433
900
1,533

9,462
378
9,084
2,697
6,387
67%
1,536
1,460
3,390
3,390
1,254
2,136

10,531
421
10,109
2,870
7,239
69%
1,782
1,460
3,998
680
3,318
1,228
2,090

31-Mar-09

31-Mar-10

31-Mar-11

31-Mar-12

31-Mar-13

31-Mar-14

31-Mar-15

3,780
(711)
3,069
22,853
25,923

3,780
(1,120)
2,660
21,366
24,026

3,780
(359)
3,421
19,878
23,299

3,780
1,989
5,769
18,390
24,159

3,780
5,295
9,075
16,902
25,978

3,780
8,529
12,309
22,748
35,057

29,200
2,657
26,543
132
(422)
419
419
2,277
3,115
3,445
(330)
25,922

29,200
4,117
25,083
132
(792)
507
507
2,277
3,290
3,688
(398)
24,025

29,200
5,577
23,623
132
29
609
609
2,277
3,495
3,980
(486)
23,298

29,200
7,037
22,163
132
2,496
705
705
2,277
3,687
4,319
(632)
24,159

29,200
8,497
20,703
132
5,986
788
788
2,277
3,854
4,697
(844)
25,977

40,200
9,957
30,243
132
5,769
877
877
2,277
4,032
5,119
(1,087)
35,057

Equity
3,780
Reserves
610
Net worth
4,390
Total Loans
23,979
Total Liabilities
28,369
Application of Funds
Gross Assets
28,671
Less: Accumalated Depreciation 1,197
Net Fixed Assets
27,475
Investment in subsidiaries
132
Cash
921
Inventories
120
Sundry Debtors
688
Loans & Advances
2,277
Total current asset
3,085
Less: Current Liabilities & Provisions 3,244
Net Current Assets
(158)
Total Assets
28,369

16

Sabiha Gokcen (Istanbul) Airport


Shareholders of DIAL

Stake

GMR Infrastructure Ltd


LIMAK
Malaysia Airports Holding

40.0%
40.0%
20.0%

GMR Infrastructure won the competitive bid to operate Istanbul Sabiha


Gokcen International Airport (SGIA), the second airport in Istanbul, in a
consortium with Malaysia Airports Holdings Berhad (20%) and Limak (40%).
The project entails a capex of EUR450mn to build a 25-mn passenger capacity
terminal in addition to a concession fee of EUR1.93bn payable over the
concession period. With the inauguration of the new terminal on October
31, 2009, the capacity of the airport has increased to 25 million passengers.

Source: Company, KSBL Research.

Revenue driver: The consortium will earn broadly from passenger service
fees (EUR12/international PAX and EUR3/domestic PAX), ground-handling
revenue, duty-free retail and rentals. It is not entitled to landing and parking
charges at this airport. SGIA has witnessed very high traffic growth in the
past few years on rising tourist flows to Turkey and some shift in air traffic
from Istanbul's larger Ataturk airport. We expect passenger traffic to show
a CAGR of 21% during FY10-15E, which would scale up revenues.
SGIA Revenue breakup (Rsmn)

Airport Capacity
PAX Capacity
Cargo Capacity
PTB Area (sq.m)

Previous

Current

5 mn
25,600

25 mn
145,000 tons
198,000

Total Aero Revenue


Total Non Aero related revenue
Gross Revenues
Concession fee
Net Revenues to GHIAL
Aero
Non Aero

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

2,329
1,599
3,928
3,928
59
41

2,971
2,463
5,434
5,018
416
55
45

4,087
3,315
7,402
5,018
2,384
55
45

5,362 6,604
4,348 5,187
9,710 11,791
5,018 5,018
4,692 6,773
55
56
45
44

7,115
6,267
13,381
6,273
7,109
53
47

Source: Company, KSBL Research.

Financial trends-consortium valued at Rs8.3bn: We believe that revenue


will grow at a CAGR of 35% in FY10-13E. SGIA would report net loss till
FY12 due to higher depreciation and interest in the initial stages post
completion. We have valued SGIA's core operation at Rs 8.32bn by
discounting our FCFE estimates explicitly over FY10-29 at discounting
rate of 12.0%; this yields Rs3.32bn (Rs1/share) value for GMR's 40% equity
stake.
17

Monetization of real estate: A value creator


GMR Infra's real estate valuation primarily comes from the 250 acres
land adjacent to the Delhi International Airport, on the back of the recent
monetization efforts of DIAL consortium. The real estate portion at the
Delhi Airport contributes Rs 19.8 per share of GMR Infra. The other land
parcels comprising of 1,500 acres at Hyderabad International Airport and
Krishna Giri SEZ (2,000 acres acquired) are valued at Rs 3.2 per share of
GMR Infra, making the consolidated value of the real estate portion to be
Rs 23 per share.
The monetization strategy for the 45 acres of land at Delhi International
Airport has been through a bidding process for 19 asset areas which have
been carved out of this land parcel. The successful bidders are hospitality
players like Accor, Inter Globe Hotels, Juniper (partners in Asian Hotels),
Aria Hotels (partners in Asian Hotels), Lemon Tree, Bird Group, DB
Hospitality, Blue Coast Hotels, Pride Hotels, Sweta Estates and Bharti
Realty. The DIAL consortium will provide the land on a 57 year lease and
will book the following three income streams from the successful bidders1) Refundable upfront deposit - 3 times the average annual lease rentals
for the 57 years lease
2) Non-Refundable Infrastructure deposit - for providing the basic
Infrastructure
3) NPV (Net Present Value) of the lease rentals
45 Acre

Source: Company, KSBL Research.

The company plans to monetize the remaining 205 acres at the Delhi
airport in a similar manner. We have been conservative and assumed the
same rate of net realization along with a 15% discount to value the
remaining land at Delhi airport.
Monetization of 45 acres at DIAL
Net Upfront Deposit
Infrastructure Deposit
NPV of Lease Rentals
Total

Total (Rs mn)

GMR's share (Rs mn)

% share

14,715
6,732
11,137
32,584

7,946
3,635
3,252
14,833

54%
54%
29%

Source: Company, KSBL Research.

18

Valuation of remaining 205 acres

Rs mn

Net Realization per acre for GMR (from 45 acres)


Gross Value of 205 acres at same rate
Less: Discount
Net Realizable value for GMR Infra
GMR's share of real estate value
Value per share of GMR Infra (Rs)

330
67,574
15%
57,438
72,272
20

Source: Company, KSBL Research.

At the Hyderabad International Airport, GHIAL has 1,500 acres of land


marked for real estate development. Of this, the consortium is planning
to develop 200 acres by building educational institutions and hospitality
ventures to unlock the value for the remaining 1,300 acres. At Krishnagiri
SEZ, the company has so far acquired 2,000 acres out of the planned
3,300 acres at an average cost of Rs 1 mn / acre. However, given the long
gestation period and no concrete plans yet, we have only taken the market
value 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)
Value per acre (Rs mn)
Valuation (Rs mn)
Share of GMR Infra
Net Realizable value for GMR Infra (Rs mn)
Value per share of GMR Infra (Rs)
Land acquired at Krishna Giri SEZ
Vale per acre
Valuation
Les: Acquisition cost
Net Value of Krishna Giri SEZ Land
Value per share of GMR Infra (Rs)

1,500
11
16,500
60%
9,900
2.7
2,000
2
4,000
2,000
2,000
0.5

Source: Company, KSBL Research.

Assumptions
1) For the 45 acres monetized until now, the annual lease rentals have
been taken at Rs17 mn per acre with an increase of 5.5% per annum
for the 57-year lease period.
2) We have assumed the WACC of real estate projects of the company as
the discount rate, which is 12.5%.
3) The net upfront deposit has been calculated as three times the average
annual lease rentals for the 57-year lease minus the present value of
the refund payment of the upfront deposit in the last three years of
lease.
4) Net realization per acre for the remaining 205 acres has been taken at
the same value and then discounted at 15% in order to incorporate
the uncertainty and market risk.
19

Roadways: Ample opportunities


Currently, GMR has a balanced road portfolio of six operational BOT
projects, three based on toll collection and three on annuity, aggregating
Rs22.7 bn. GMR has recently won two more road projects, one of which
is Hyderabad-Vijayawada (toll-based) and the other is at Chennai Outer
Ring (annuity-based). These two assets are currently under development
and are expected to achieve CoD during April-August 2012. It translates
into a length of nearly 421 km operational and 210 km under construction.
GMR deals with not only improvement of roads but also construction of
highways that stretch across the country. The company's revenue from
this segment accrues on both annuity and toll basis. The first two road
projects were both annuity-based that commenced operations in OctoberDecember 2004. The next four projects got operational during November
2008 - July 2009.
Looking at factors like the government thrust on road development, strong
political commitment, and easing liquidity with expected revision in
framework for projects, we believe that road development projects are on
a steep growth trajectory and would offer immense opportunity for GMR.

Highways: Balanced Portfolio of Annuity & Toll Assets


Under Construction

Operational Projects
GTAEPL

GTTEPL

GPEPL

GACEPL

GJEPL

GUEPL

GHVEPL

Location

Tuni
Anakapalli

Tambaram Tindivanam

Pochanpalli

Ambala Chandigarh

Faruknagar Jadcherla

Tindivanam
- Ulundurpet

Hyderabad
Vijaywada

Chennai
Outer Ring
Road

Road Length

59 kms

93 kms

103 kms

35 kms

58 kms

73 kms

181 kms

29 kms

Project Cost
(Rs. mn)

3,040

3,900

6,900

4,985

4,713

7,950

22,000 *

11,000 *

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 lanes

6 lanes &
2 Service
Lanes

CoD

Oct 2004

Oct 2004

Mar 2009

Nov 2008

Feb 2009

Jul 2009

Apr 2012*

Aug 2012*

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*

Concession Type

Annuity

Annuity

Annuity

Toll

Toll

Toll

Toll

Annuity

Project Name

GCORRPL

* Estimated

Source: Company, KSBL Research.

20

Road projects to add nearly Rs22 bn to SOTP valuation


Using FCFE valuation methodology, we considered a combined value of
Rs22.7 bn for the six road projects. The three annuity roads contribute
Rs6 bn and the three toll roads constitute Rs16.6 bn, resulting in Rs6.2
per share. We have not included the valuation of the projects which are
under construction.
Road portfolio (Rsmn)
Project Name
Tambaram-Tindivanam
Tuni - Anakapalli
Adloor-Gunla-Pochanpalli
Ambala-Chandigarh
Faruknagar-Thondapalli-Jadcherla
Tindivanam-Ulundurpet
Total

Equity Inv

Value
(Rs mn)

Stake

Value of
GMR's stake

Rs/share

788
788
1,380
1,400
1,178
1,990
7,524

2,041
2,777
2,543
(15)
6,165
10,521

74%
61%
100%
100%
100%
100%

1,510
1,694
2,543
(15)
6,165
10,521
22,419

0.4
0.5
0.7
(0.0)
1.7
2.9
6.1

Source: Company, KSBL Research.

21

Power segment: Strengthening domestic foothold but the


world 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 add
more than 8,000 MW of generation capacity in India, of which ~4,000
MW are in advanced stages of development. On the international front,
during October 2008, GMR acquired a 50% stake in InterGen NV, a
Netherlands-based power-generating company with operational capacity
of 7,658 MW (excluding capacity under construction, 428 MW). Also, GMR
acquired a 100% stake in Island Power from InterGen in May 2009; it is
Singapore's only privately-owned IPP (independent power producer),
with a license to own and operate up to 800 MW of power-generating
capacity in Singapore.
Meanwhile, the company has extended its hands to acquire coal mining
assets internationally, a step to mitigate coal-availability issues and
fluctuating coal-price risks. GMR has acquired a 100% stake in PT
Barasentoso Lestari, Indonesia, and a 38.5% stake in Homeland Energy
Group (HEG). HEG, through its subsidiaries, holds a 75% stake in Kendal
& Eloff mines in South Africa. We believe owning mining assets abroad is
a big positive for the company, considering the visible shortage of coal in
India. According to our report titled 'Coal will be the key to India's power
ambitions', released on September 18, 2009, we expect coal demand in
India to widely outstrip supply in the coming years. Moreover, we expect
coal imports to rise in the next few years due to the supply shortfall of
domestic coal and the potential increase in coal blending at the upcoming
thermal power stations.
Operational Capacities
Projects

Location

MW

CoD

Fuel

Fuel Linkage

GMR Energy Limited


GMR Power Corporation Pvt. Ltd
Vemagiri Power Generation Ltd
InterGen (net equity capacity)

Mangalore, Karnataka
Chennai, TN
Rajahmundry, AP
Netherlands

220
200
389
6,254

2001
1999
2008
NA

Naphtha
LSHS
Natural Gas
Mix of all

Gas from KG Basin


Open source
Gas from KG Basin
NA

Projects

Location

MW

Exp. COD

Fuel

Fuel Linkage

GMR Kamalanga Energy Limited


Vemagiri (Expansion)
Emco Energy
GMR energy,Chattisgarh
Kakinada, Andhra Pradesh
Badrinath
Talong
Bajoli Holi
Upper Karnali
Upper Marsyangdi

Dhenkanal,Orissa
Rajahmundry, AP
Varora, Maharastra
Raipur, Chattisgarh
Andhra Pradesh
Uttaranchal
Arunachal Pradesh
Himachal Pradesh
Nepal
Nepal

1,400
768
600
1,370
2,000
300
160
180
900
600

FY13
FY12
FY13
FY14
FY15
FY16
FY16
FY16
FY15
FY16

Coal
Natural Gas
Coal
Coal
Imported Coal
Hydro
Hydro
Hydro
Hydro
Hydro

Captive Mines
Gas from KG Basin
Coal Linkage
Coal Linkages Expected
Coal from Indonesia
NA
NA
NA
NA
NA

Project under implementation

Source: Company, KSBL Research.

22

Existing power capacities in India


GMR has three operational power plants with a total generation capacity
of 823 MW. These three plants are: (1) low sulphur heavy stock (LSHS)
based 200 MW plant in Chennai, Tamil Nadu; (2) naptha-based 220 MW
plant in Mangalore, Karnataka; and (3) natural gas-based 388.5 MW plant
in Vemagiri, Andhra Pradesh.

GMR Power Corporation Pvt Ltd (Chennai plant)


GMR's oldest plant (200 MW) is in Chennai, operating since 1999 on low
sulphur heavy stock (LSHS). GMR Infra holds a 51% stake in GMR Power
Corporation 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 its
entire power at a regulated price with Tamil Nadu State Electricity Board
under 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 to
the east coast, near Kakinada, Andhra Pradesh, in Q4FY10, and to convert
the plant from the current naptha-based to gas-based. Also, the existing
capacity of the plant is likely to improve from 220 MW to 235 MW. The
relocation of the plant near Kakinada (closer to the Krishna-Godavari
basin) and the change in fuel base to natural gas is a strategic move by
the company, considering the gas availability in the Krishna-Godavari
(KG) basin. The gas supply is expected once the plant is relocated. The
seven-year PPA got over in 2008, and the plant is currently operating on
merchant basis. Due to the relocation exercise, PLF is likely to remain
low in FY10; however, we estimate PLF to touch 50% in FY11 and 75%
from FY11. This relocation would not only improve its efficiency but also
hedge fuel supply and price fluctuation risks, given the adequate
availability of natural gas in the new location.

Vemagiri Power Generation Ltd (Andhra Pradesh plant)


The third and latest (operational since 2008) operational power plant is
located in Vemagiri, Andhra Pradesh. This plant is natural gas-based, with
a capacity of 388.5 MW. In FY09, the PLF of this plant was quite low due
to gas unavailability. However, it has improved significantly in recent
times with gas supply coming in from the KG basin. We expect the PLF to
improve significantly and cross ~80% from FY10 onwards. This plant is
proposed to have a mix of PPA and merchant, wherein 20% of the capacity
could be sold on a merchant basis. However, the company is still expecting
approval for the merchant mix of 20%; therefore, currently, we have
assumed PPA of 100%. GMR is planning to expand capacity in the same
location by adding another 768 MW, which is likely to be operational
in FY12.

23

Global existing power capacities

InterGen, Netherlands
GMR Infrastructure, as part of its business strategy to have a presence in
the global energy market, has acquired a 50% stake in InterGen, a leading
global power generation company, headquartered in the Netherlands.
GMR acquired the 50% stake from AIG Highstar in October 2008. The
remaining 50% of InterGen is held by Ontario Teachers' Pension Plan
(OTPP), a large professional pension plan in Canada. GMR acquired the
50% stake in InterGen at ~Rs60,000 mn, sourced by long-term debt of
Rs41,850 mn and short-term bridge loan (to be refinanced in October
2010) 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 operational
capacity (including 428 MW under construction in the Netherlands). Of
the 8,088 MW, its net equity capacity is 6,254 MW. This acquisition has
catapulted GMR into the league of one of the largest private power
generators in India. About 70% of InterGen's capacities are sold on a
long-term basis and the remaining on merchant basis. InterGen has a
total debt of US$4.1 billion on its balance sheet.
InterGen-existing and up coming capacities
Name

Location

COD

MW

Stake (%)

Net Cap. MW

Quezon Power
Callide C Power Project
Millmerran Power
Rijnmond
Spalding Energy facility
Rocksavage Power Station
Coryton Plant
Energa Campeche
Bajio power project
Energa Chihuahua
La Rosita Power Project
MaasStroom Energie
Total

Mauban, Philippines
Queensland, Australia
Millmerran, Australia
Rijnmond, Netherlands
Lincolnshire, UK
Runcorn, UK
Essex, UK
Campeche, Mexico
San Luis de la Paz, Mexico
Chihuahua, Mexico
Mexicali, Mexico
Rotterdam, Netherlands

2000
2001
2003
2004
2004
1998
2002
2003
2002
2003
2003
2010E

460
920
850
820
860
748
779
252
600
271
1100
428
8088

45.9%
25%
29.30%
100.0%
100.0%
100.0%
100.0%
100.0%
51.0%
100%
100%
100%

211
230
249
820
860
748
779
252
306
271
1100
428
6254

Coal
Coal
Coal
Natural
Natural
Natural
Natural
Natural
Natural
Natural
Natural
Natural

Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas

Source: Company, KSBL Research.

Island Power, Singapore


The GMR Group acquired a 100% stake in Island Power from InterGen in
May 2009. Island Power is a Singapore-based, power-generation entity
with a license to own and operate up to 800 MW of electricity-generating
capacity in Singapore. It is Singapore's only privately-owned IPP.
Island Power has selected a site on Jurong Island (Singapore's oil, gas
and petrochemicals hub) for the development of an 800-MW natural gasfired combined cycle facility. The construction of the power plant is
expected to be completed by 2013.
24

Upcoming projects
Currently, GMR is adding significant capacities, which are under different
stages of construction. In India and Nepal, GMR is planning to add 8,307
MW by FY16. Of these upcoming projects, 5,370 MW (~65% of total) are
thermal, 2,140 MW (~26%) hydro, and 783 MW (9%) gas-based projects.
The gas-based capacity addition includes 15 MW expansion during
relocation of the existing 220-MW Mangalore plant to Kakinada. Effectively,
over the next seven years, GMR is likely to catapult its total generation
capacity by more than 10x, to 9,116 MW compared to the current 809
MW. Of the planned capacity addition of 8,307 MW, projects worth 4,150
MW are under different stages of construction, while the remaining
(mostly hydro projects) are in planning stages currently.
Planned power generation capacity addition ( India & Nepal)
Financial Year

2009

2010

2011

2012

2013

2014

2015

2016
1,240

Gradual
capacity
addition
expected
in MW from
FY 2010
to 2016

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

Project under construction


Projects

MW

Exp. COD

Development

Expansion & relocation of


Mangalore plant
GMR Kamalanga Energy

15

FY11

All contracts awarded including BoP, Construction as per schedule

1,400

FY13

Vemagiri (Expansion)

768

FY12

Emco Energy

600

FY13

GMR energy,Chattisgarh

1,370

FY14

Achieved financial closure for ~Rs. 45 bn, EPC contract awarded to SEPCO,
China and Construction activities commenced
Land and water available, EPC contract awarded, BTG contract finalised,
STG contract finalised
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.
Land acquired, EPC contract for BTG awarded to Doosan, Korea,
Recommended for Coal Linkage by CEA

Kakinada, Andhra Pradesh


Badrinath (alaknanda) project

2,000
300

FY15
FY16

Talong

160

FY16

Bajoli Holi
Upper Karnali
Upper Marsyangdi

180
900
600

FY16
FY15
FY16

Project under planning


Under planning stage, land aquired, financial closure expected
CEA concurrence received for DPR, Environmental Clearance
received,Forest Clearance & Private Land Acquisition in progress
Memorandum of Agreement (MoA) signed with the Government of
Arunachal Pradesh
DPR & EIA studies completed for BajoliHoli
Approval obtained from Govt of Nepal
Approval obtained from Govt of Nepal

Source: Company, KSBL Research.

25

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, PT
Barasentosa Lestari, with proven reserves. PT Barasentosa Lestari holds a
30-year mining authorization over two separate coal blocks in South
Sumatra, Indonesia, issued by the Government of Indonesia. The deal
size was ~Rs4,000 mn (US$80 million) for minable coal reserves of 104
mn tonnes, indicating a valuation of ~US$0.77 per tonne. We expect mining
operations to begin from FY11 at this mine with capacity of ~2 million
tonnes per annum (MTPA) which will gradually reach 6 MTPA by FY14.
We believe that GMR will import the extracted coal from this mine to
India for its coastal power project. We believe that the company's move
has strengthened its plan to scale up the power business by ensuring
coal supply. Moreover, this acquisition would help to hedge against coalprice fluctuation risks. We believe that owning mining assets
internationally is a big positive for the company, considering the expected
shortage 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 Canadabased, Homeland Energy Group Ltd. (HEG), a listed company which
owns coal properties in South Africa through its subsidiary, the Homeland
Mining and Energy (HMESA). GMR Energy acquired 75.7 mn shares, or
~33.5%, of HEG Canada in exchange for 10% voting and equity interest
held by GMR in HMESA. GMR had bought the 10% stake in HMESA in
April 2008 for Rs1,500 mn (US$30 mn). Earlier, GMR was holding a 5% in
HEG; 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 South
Africa. HEG owns a controlling interest in the already operational Kendal
mines, fully explored Eloff mines and other exploration sites, with total
mineable reserves of around 300 million tonnes. The Eloff mines, which
has significant coal reserves that are under the pre-feasibility stage, have
been fully explored. In addition, HEG also holds a 39% stake in Homeland
Uranium, Inc., a Canadian uranium exploration and development company
focused on projects in Niger and the US, and around 12% stake in Altona
Resources with coal assets in Australia.
Coal Reserves of HEG (Million Tons)
Kendal, South Africa
Eloff, South Africa
4 other mines in SA

25
275
321

operational
under development
under development

Source: 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 operational
open-cast coal mine producing 1.2 MTPA), 275 mn tonnes of coal reserves
in Eloff mines, SA (an open-cast mine under development with expected
production of 4 MTPA in 2012), and 321 mn tonnes of coal resources in
four other coal mines in SA.
26

We believe that GMR will not import its share of coal to India due to
operational constraints. Hence, either it will trade the coal in South Africa
or look out for a South African counterpart to work on a barter system to
exchange coal. In either case, it is a natural hedge for the company,
considering its huge requirement of coal in future to feed the upcoming
thermal plants in India.
Likely to unlock value from power segment through IPO
GMR had contemplated to raise funds for its subsidiary, GMR Energy in
2008; however, that is yet to materialize. Hence, going forward, we believe
the company will take the IPO route to raise funds which could unlock
value from the energy business for the parent company.
Inorganic growth not ruled out
Given GMR's ambitious growth plans and strong balance sheet, inorganic
growth cannot be ruled out, in our view. Historically, too, the company
has been aggressive in acquiring mining assets and power generation
capacities in the international market. Even domestically, GMR Infra has
already acquired full stake in EMCO Energy, which is setting up a 600
MW coal-based power plant. We believe that strong cash flow generation
from the existing power plants coupled with strong balance sheet will
support its inorganic growth opportunity.
Valuation: Power business
We have valued GMR's power segment project-wise. While existing
domestic power projects are valued on DCF basis, upcoming projects
(under construction only) are valued on EV/MW basis due to lack of
operational track record. Based on the DCF method, we arrive at a value
of Rs6 per share for its three existing power plants.
Valuation - Domestic Power Business

GMR Energy Limited


GMR Power Corporation Pvt. Ltd
Vemagiri Power Generation Ltd
Value/ share (Rs)

Capacities
(MW)

CoD

Valuation
Method

Beta

Discount
rate %

Equity
Value(Rsmn)

GMR's
stake %

Value per
share (Rs)

220
200
389

2001
1999
2008

DCF
DCF
DCF

1.1
0.9
1.0

13.9%
14.6%
10.5%

7574
9534
8174

100%
51%
100%

2
1
2
6

Source: Company, KSBL Research.

27

Valuation - Projects under construction/planning

GMR Kamalanga Energy Limited


Vemagiri (Expansion)
Emco Energy
GMR energy,Chattisgarh
Coastal Andhra Pradesh
Badrinath, Alaknanda
Talong
Bajoli Holi
Upper Karnali
Upper Marsyangdi
EV (Rs mn)
Net debt (Rs mn)
Equity Value (Rs mn)
Value / Share (Rs)

Capacity
(MW)

Exp.CoD

Valuation

Multiple

Discounted
multiple

Stake
(%)

EV
(Rs mn)

1,400
768
600
1,370
2,000
300
160
180
900
600

FY13
FY12
FY13
FY14
FY15
FY16
FY16
FY16
FY15
FY16

EV/MW
EV/MW
EV/MW
EV/MW
EV/MW
EV/MW
EV/MW
EV/MW
EV/MW
EV/MW

50
60
50
50
50
70

42
51
39
35
32
35
0
0
0
0

80%
100%
100%
100%
100%
100%
100%
100%
100%
80%

47,134
38,785
23,166
48,527
64,993
10,639
0
0
0
0
233,244
182,324
50,920
14

Source: Company, KSBL Research.

Currently, although 8,257 MW projects are under construction and


planning, for valuation purposes, we have considered only those projects
that have achieved significant progress in the planning stage and all the
projects under construction. Projects totaling more than 4,100 MW capacity
are under construction, including Dhenkanal project (1,400 MW), Vemagiri
expansion (768 MW), Emco Energy (600 MW), and Raipur project (1,370
MW). Furthermore, considering the relative development, we have
included 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 thermal
power plant and ~Rs60-70 mn per MW for a gas-based plant. Hence, we
have considered those respective multiples as the base multiple to value
upcoming power plants. Moreover, we have assigned a discount of 10%
to our base valuation multiples (EV/MW) for every subsequent year, to
capture the execution risk over time. Factoring the debt to be raised for
these projects, we arrive at an equity value of Rs14 per share for all
upcoming projects.
InterGen (Valuation)
Capacity (MW)
EV/MW
EV
Debt of InterGen
Mkt Value of InterGen
GMR's stake
Mkt Value of InterGen-GMR stake
Debt raised by GMR for InterGen
Equity Value of GMR's holding in InterGen
Per share value (Rs)
USD ( exchange rate in Rs)

Rs mn
6,254
53
330096
186550
143546
50%
71773
55660
16113
4.4
45.5

Source: Company, KSBL Research.

28

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 debt
raised by GMR to acquire a 50% stake in InterGen, we arrive at a value of
Rs4.4 per share for GMR's stake in InterGen. However, we have not
factored Island Power (800-MW plant in Singapore) currently in our model
due to insignificant progress in that project.
Global Peer Group
Company
Exelon Corporation
Entergy Corporation
Southern Company
FPL Group
USA - Median
Electricite de France S.A.
E.ON AG
RWE AG
Enel SpA
Europe - Median
Total Median

Country

Installed
Capacity (MW)

Mcap/MW
(US$ Mn per MW)

EV/MW (US$
Mn per MW)

P/BV (X)
CY09

US
US
US
US

33,000
30,000
42,000
39,000

France
Germany
Germany
Italy

159,313
74,000
45,196
94,300

0.91
0.52
0.63
0.51
0.58
0.65
1.08
1.09
0.61
0.86
0.70

1.23
0.87
1.12
0.96
1.04
1.16
1.87
1.33
1.76
1.55
1.16

2.4
1.8
1.7
1.5
1.8
2.7
1.4
2.7
1.3
2.1

EV/EBITDA (X)
CY08 CY09
5.5
7.5
8.8
8.1
7.8
8.1
10.7
5.0
7.4
7.8

6.3
7.5
9.3
8.3
7.9
6.7
6.7
5.0
6.7
6.7

Source: Bloomberg, Reuters, Company Reports & Karvy Research


Note:
(a) Tenaga Nasional BHD has a Financial Year ended August. Therefore, instead of CY08 & CY09 the data is of August 2009 & August 2010
respectively.
(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: Coal assets


GMR Energy has economic interest in Indonesia-based greenfield coalmining company, PT Barasentosa Lestari (100%) and 38.5% in Canadabased Homeland Energy Group Ltd. (HEG), a listed company which owns
coal properties in South Africa through its subsidiary, HMESA. We value
these coal assets of GMR at US$1 per tonne of reserves, in line with the
valuation of similar deals done by Indian companies in the recent past to
acquire coal mining assets in Indonesia and the African regions.
Accordingly, we arrive at a value of Rs4 per share for GMR's mining
assets.
Valuation- Minning Assets

PT Barasentosa Lestari, Indonesia


Homeland Energy Group Ltd
Mining asset value/share (Rs )

Mineable
reserves
Mn Tons

Mining
Value
($/ton)

EV
(Rs mn)

Equity
Value
(Rs mn)*

104
621

1
1

4,711
28,131

3,111
28,131

Stake (%)

Equity
Value
(GMR's share)

Equity
Value per
share (Rs)

100
38.5

3,111
10,831

1
3
4

Source: Company, KSBL Research.


* USD is taken as Rs 45.3

29

Financial Analysis
Revenues to show 21% CAGR
Net sales are likely to show a CAGR of 21% during FY10-13, to Rs58.2 bn
and Rs83.8 bn in FY12E and FY13E, respectively. We expect the airports
segment to start contributing significantly to revenue from Q1FY11,
considering robust growth in PAX traffic and completion of the DIAL
Phase-I development by end-FY10. The contribution from power projects
is likely to start rising from FY13 onwards as most of the capacity expansion
would start contributing to revenue.
Revenue break up (% of total)
50

44

43

39

40

37

37

30

46
38

36
21

21

17

20

43

42

21
16

10
FY09

FY10E
Power Projects

FY11E
FY12E
Road and other Projects Airports

FY13E

Source: Company, KSBL Research.

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 HIAL
airports.
EBIDTA Margin trend(%)
45

39

40
35
30
25

30

31

FY10E

FY11E

33

24

22

20
15
10
FY08

FY09

FY12E

FY13E

Source: Company, KSBL Research.

Profits to be under pressure due to higher depreciation and interest


We expect profitability to be under pressure during FY10E-11E due to
higher depreciation and interest post-commercialization of DIAL and
HIAL. Thereafter, in our view, reported profit is likely to show a CAGR of
148% in FY12E-13E, largely driven by operating leverage of high-margin
assets such as HIAL and DIAL.
30

Investment concern:
Passenger traffic risk at airports: Any slowdown in passenger traffic will
hurt financial performance of the airports. We have assumed passenger
traffic to grow at a CAGR of 10% over next three years at Delhi airport
and 15% at Hyderabad Airport.
Traffic risk at toll based BOT projects: Vehicle traffic is the source of
revenue for toll-based projects so any slowdown or change in our vehicle
estimates would have an adverse impact on the overall profitability of
the projects.
Project execution risk: The company is adding significant power generation
capacity which will determine future profitability and valuation of power
segment. Any delay or failure in execution of these expected projects could
lead to cost and time overrun, affecting adversly power segment's
financials and valuation.
Financial closure risk: Several of the company's projects are in the initial
planning stages and due for financial closure. Delay or failure in financial
closure could cause increase in interest rates and subsequently increase
in the cost of the project.
Equity dilution risk: As on Dec. 2009, the company had net debt/equity
of 1.62x and we expect by the end-March 10 the company would have
net debt/equity ratio of 2.5x which would further increase to 3.3x by endMarch 13 due to series of projects in pipeline. We believe that the company
would have to dilute its equity to improve leverage in the book leading
to dilution in return ratio.
Equity dilution
Year

Method of dilution

Price**

Amount (Rsmn)

Equity capital

Aug'2006
Dec.'2007
June'09*

IPO
QIP
QIP

21
120
57

7,950
39,600
148

3,310
3,641
3,667

* Issue to IDFC Fund


** Adjusted price for split of FV from Rs 10 to Rs 1

31

Profit & loss statement


(Rs mn)
Net revenue
Growth (%)
Total Expenditure
EBITDA
Growth (%)
EBITDA (%)
Depreciation
EBIT
EBIT (%)
Interest and Finance Charges
Other Income
Profit Before Tax
Taxes
PAT before Minority Interests
Minority Interests
Adj PAT
Growth (%)

Balance sheet
FY09
40,192
75
29,524
10,668
78%
23.8
3,898
6,770
15.1
3,682
214
3,301
530
2,771
(23)
2,795
33%

FY10E
42,214
5
27,802
14,412
35%
30.4
5,865
8,548
18.0
7,118
222
1,652
258
1,395
423
972
-65%

FY11E
49,310
17
31,108
18,203
26%
30.7
6,461
11,742
19.8
11,399
277
620
428
191
(1,676)
1,868
92%

FY12E
58,284
18
34,981
23,303
28%
33.4
9,651
13,652
19.6
11,165
389
2,876
683
2,193
(1,417)
3,611
93%

FY13E
83,840
44
46,021
37,819
62%
38.8
11,525
26,295
27.0
12,606
384
14,072
1,698
12,374
1,443
10,931
203%

(Rs mn)
Equity Share Capital

FY09
3,641

FY10E
3,667

FY11E
3,667

FY12E
3,667

FY13E
3,667

Reserves and Surplus


Net Worth
LT Loans

61,070
64,711
106,602

62,042
65,709
166,190

63,909
67,577
197,308

67,520
71,187
226,666

78,451
82,118
245,537

ST Loans
Total Loans
Minority Interest

13,636
120,238
18,061

27,054
193,244
18,484

32,120
229,428
16,808

36,899
263,565
15,390

39,971
285,508
16,834

Deferred Tax liabilities


192
Foreign currency translation
69
Total Liabilities
203,271

192
69
277,698

192
69
314,073

192
69
350,403

192
69
384,720

Gross Block
Less: Depreciation
Capital Work in Progress

114,326
17,810
67,909

184,731
23,674
74,700

228,255
30,135
82,170

271,779
39,786
90,387

308,651
51,311
99,426

Net Block
Investments
Inventories

164,426
13,109
1,319

235,757
14,420
1,606

280,290
14,708
1,797

322,380
15,002
2,021

356,766
15,302
2,659

Sundry Debtors
Cash and Bank Balances
Loans and Advances

6,609
24,665
12,612

6,995
27,854
11,681

8,741
19,746
14,597

10,302
13,941
17,204

14,391
14,171
24,033

Total Current Assets


Total Current Liabilities
Net Current Assets

45,383
19,647
25,736

48,314
20,793
27,521

45,059
25,984
19,075

43,646
30,625
13,021

55,432
42,780
12,651

203,271

277,698

314,073

350,403

384,720

Total Assets

Cash flow

Ratios
FY09

FY10E

FY11E

FY12E

FY13E

Adj EPS (Rs)


Cash EPS (Rs.)

0.8
1.8

0.3
1.9

0.5
2.3

1.0
3.6

3.0
6.1

PER (x)
P/BV (Rs)
Debt Equity (x)

78.7
1.7
1.9

226.5
3.3
2.9

117.8
3.3
3.4

60.9
3.1
3.7

20.1
2.7
3.5

Net Debt Equity


Interest Coverage
RoCE (%)

1.5
2.9
5.2

2.5
2.0
5.2

3.1
1.6
5.8

3.5
2.1
6.7

3.3
3.0
9.8

RoNW (%)
EV / EBIDTA (x)
EV / Sales (x)

4.3
28.4
6.8

1.5
25.7
7.8

2.8
22.8
7.0

5.1
19.5
6.5

13.3
12.6
4.9

Mkt Cap / EBITDA


Mkt Cap / Sales
Asset Turnover (x)

20.6
4.9
2.6

15.3
4.6
3.9

12.1
3.7
3.9

9.4
3.2
3.9

5.8
2.3
3.2

Effective Interest Rate (%)


Inventory Day's
Debtor Day's

3.7
21.1
53.9

4.5
21.1
53.9

5.4
21.1
53.9

4.5
21.1
53.9

4.6
21.1
53.9

104.3
160.2

90.0
160.2

90.0
160.2

90.0
160.2

90.0
160.2

Other CA Day's
Current Liabilities Day's

(Rs mn)
FY09
EBIT
6,770
(Inc.)/Dec in working capital (5,474)
Cash flow from operations
1,295
Other income
(450)
Depreciation
3,898
Interest paid (-)
(3,417)
Tax paid (-)
(998)
Dividends paid (-)
Net cash from operations
328
Capital expenditure (-)
(30,388)
Net cash after capex
(30,059)
Inc./(dec.) in borrowings
38,663
Inc./(Dec.) in investments
139
Issue of common stock in
consolidated entities
6,981
Equity issue/(buyback)
Cash from financial activities
45,783
Opening cash
8,942
Closing cash
24,665
Change in cash
15,724

FY10E
8,548
1,404
9,952
222
5,865
(7,118)
(258)
8,664
(77,196)
(68,533)
73,007
(1,311)

FY11E
11,742
338
12,079
277
6,461
(11,399)
(428)
6,990
(50,994)
(44,004)
36,184
(288)

FY12E
13,652
249
13,901
389
9,651
(11,165)
(683)
12,093
(51,741)
(39,648)
34,137
(294)

FY13E
26,295
600
26,895
384
11,525
(12,606)
(1,698)
24,499
(45,911)
(21,412)
21,942
(300)

26
71,722
24,665
27,855
3,189

35,896
27,855
19,746
(8,108)

33,843
19,746
13,941
(5,805)

21,642
13,941
14,171
230

32

Research Desk (Tel: 91-22-22895000)


Hemindra Hazari

hemindra.hazari@karvy.com

Head of Research

Institutional Sales (Tel: 91-22-22895000)


N Subramaniam

Stock Ratings
Buy
Out Performer
Sell

n.subramaniam@karvy.com

Head of Institutional Sales

:
:
:

Absolute Returns
> 25%
16 - 25%
<(25%)

Stock Ratings
Market Performer
Under Performer

:
:

Absolute Returns
0 - 15%
< 0%

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33