Stock Review: GMR INFRASTRUCTURE

After a long rough patch, GMR Infrastructure seems to be on the inflection point from where the company's profitability will show a U-turn as most of its projects — airports as well as roads — are becoming incrementally profitable. Because of this, the company was able to post a betterthan-expected results for the first quarter of FY12.

GMR Infra's loss reduced to . 67 crore against a loss of . 71 crore in the March quarter 2011. However, on y-o-y basis, profit has declined due to higher tax expenses on account of amortisation of deferred tax expenses. There was an exceptional loss of . 16 crore on closure of global operations. GMR Infra is present in the airport development, road construction and power businesses. For the airports division, the company reported a 105% y-o-y growth in revenue on the back of higher passenger traffic. This includes revenue form Male airport. Passenger traffic in Delhi, Hyderabad and Istanbul airports in this quarter grew y-o-y by 23%, 16% and 27% respectively. Higher interest and operating expenses led to a loss of . 165 crore compared to a. 25-crore loss in the same period last year. However, out of these four projects, Hyderabad and Male projects have already become profitable while the other two are expected to become profitable in another 18 months.

The company ran into trouble as the Airports Economic Regulatory Authority barred it from collecting airport development fee (ADF) at Delhi Airport last year. However, the management expects resolve the issue soon. In addition to this, ADF to be charged at Male airport from January 2012 will amount to nearly $25 million per year of revenue. In the roads division, GMR posted a loss of . 3 crore against a loss of . 10 crore in quarter ending June 2010 on account of higher traffic volumes and operational efficiency. Out of its existing six road projects, four are already profitable and two are expected to become profitable in the next 1-2 years. Revenues in the power division grew 18% to . 688 crore on higher plant load factor due to improved gas availability.

GMR is nearing capital deployment. From here on, every rupee added in the top line will reflect in its earnings as its depreciation and interest will almost freeze. Its ability to meet regulatory norms and execute projects in estimated time will decide the pace of earnings growth.