Beruflich Dokumente
Kultur Dokumente
Global Equity
Research - India
26 March 2010
Amit Srivastava
Sector: Infrastructure
Sanjeev Panda
Saurabh Mahajan
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
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
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
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
(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
% share
14,715
6,732
11,137
32,584
7,946
3,635
3,252
14,833
54%
54%
29%
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
Annuity
89
Toll
67
60
51
49
50
40
35
30
14
20
10
0
Tambaram-Tin
Tuni - Ana
Pochanpalli
Ambala-Chand
Jadcherla
Ulundurpet
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
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
100%
51.0%
100 %
ROADS
AIRPORT
74 %
63 %
74 %
54 %
100 %
40 %
100 %
Chennai Outer
Ring (GCOREPL)
30 KMs
54%
63%
51 %
OTHERS
63%
100%
100 %
100 %
100 %
100 %
100 %
100 %
100 %
89 %
100 %
100 %
100 %
100%
100 %
GMR B
( adrinath) Hydro Power
Generation Pvt Limited (GBHP) 300 MW
100 %
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
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
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
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
Core Airport
Infrastructure
Land Bank
Key features
Shareholders of DIAL
Stake
44.0%
10.0%
10.0%
10.0%
26.0%
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
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
FY06
-10%
FY07
PAX
FY08
FY09
FY10E
FY11E
FY12E
Regulated
Aeronautical
Aero-related
Non-aeronautical
Ground Handling
Aviation Fuel Farm
Office Space
Ware House
In-Flight Kitchen
Assumption sheet
DIAL
FY09
22.80
245,610
426300
$10.00
38719
10
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
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
16,529
42,559
59,088
31,908
8.7
8%
1
4%
12%
11
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
Stake
63.0%
13.0%
11.0%
13.0%
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
13
FY06
-20%
FY07
FY08
PAX
FY09
FY10E
FY11E
FY12E
Assumption sheet
HIAL
FY09
6.2
82639
54245
$6
15000
FY 10
FY 11
FY 12
FY 13
FY 14
FY 15
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
14
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
3,211
42,310
45,521
28,678
8%
1.0
4%
12%
7.8
15
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
Stake
40.0%
40.0%
20.0%
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
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
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
% share
14,715
6,732
11,137
32,584
7,946
3,635
3,252
14,833
54%
54%
29%
18
Rs mn
330
67,574
15%
57,438
72,272
20
1,500
11
16,500
60%
9,900
2.7
2,000
2
4,000
2,000
2,000
0.5
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
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
20
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
21
Location
MW
CoD
Fuel
Fuel Linkage
Mangalore, Karnataka
Chennai, TN
Rajahmundry, AP
Netherlands
220
200
389
6,254
2001
1999
2008
NA
Naphtha
LSHS
Natural Gas
Mix of all
Projects
Location
MW
Exp. COD
Fuel
Fuel Linkage
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
22
23
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
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
MW
Exp. COD
Development
15
FY11
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
2,000
300
FY15
FY16
Talong
160
FY16
Bajoli Holi
Upper Karnali
Upper Marsyangdi
180
900
600
FY16
FY15
FY16
25
25
275
321
operational
under development
under development
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
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
27
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
Rs mn
6,254
53
330096
186550
143546
50%
71773
55660
16113
4.4
45.5
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
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
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
39
40
35
30
25
30
31
FY10E
FY11E
33
24
22
20
15
10
FY08
FY09
FY12E
FY13E
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
31
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
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
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
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
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
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
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
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
hemindra.hazari@karvy.com
Head of Research
Stock Ratings
Buy
Out Performer
Sell
n.subramaniam@karvy.com
:
:
:
Absolute Returns
> 25%
16 - 25%
<(25%)
Stock Ratings
Market Performer
Under Performer
:
:
Absolute Returns
0 - 15%
< 0%
Disclaimer
The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information contained herein is based on our analysis and up on sources that we
consider reliable. We, however, do not vouch for the accuracy or the completeness thereof.This material is for personal information and we are not responsible for any loss incurred
based upon it.
The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment
objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please
note that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document.
The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentioned companies from time to time. Every employee of Karvy and
its associated companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment
recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy.
All employees are further restricted to place orders only through Karvy Stock Broking Ltd.
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