[T.S.R:16723] GMR Infra -Sell (Citi)

Company background:

GMR is engaged in development of various infrastructure projects in airport, power, roads, real estate and other infrastructure sectors through several special purpose vehicles. The promoters hold 70.61% of the shares with the rest held by institutions (21.83%), corporate bodies (1.29%) and others (6.27%).

Business Structure / Outlook: GMR has commissioned airports at Delhi, Hyderabad, and Istanbul. These airports along with newly won Male airport will have a total eventual capacity of 160 million pax. The company has 3 operational thermal power plans with 809 MW and 7 other projects of 3900 MW under development.

 Risks: We rate GMR shares Medium Risk. The rating differs from the High Risk rating suggested by our quantitative risk-rating system, which tracks 260-day historical share price volatility. This is primarily because GMR has an asset base that has strong, recurring with stable cash flows. It also has assets in various stages of development, which would contribute to revenues and profits once they come on stream, providing good visibility.  

Key downside risks are: 1) competition from rival greenfield airport plans, or from other project developers; 2) UDF pricing risks; 3) regulatory risks; 4) traffic growth risks; 5) softening of real estate prices; 6) delay in achieving financial closure; 7) rising interest rates; and 8) project execution risks.  

Upside risks to our target price include: 1) recovery in property prices; and 2) easy flow of credit.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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