GMR Infrastructure Equity Research

Date of Research – 14 January 2016

Price – Rs. 13.85

About the Company

Incorporated on May 10, 1996 as a public limited company called Varalakshmi Vasavi Power Projects Limited in the State of Andhra Pradesh, GMR Infrastructure Limited (“GMR Infra” or the “Company”) is a global infrastructure company with interests in airports, energy, highways and urban infrastructure sectors. It has successfully employed the public-private partnership model to build a portfolio of high quality assets.

The Company has 16 power generation assets of which 5 are operational and 11 are under various stages of implementation and 9 road assets, of which 5 are operational and 4 are under construction. In the airports sector, it has developed and commissioned the Greenfield International Airport at Hyderabad.

The Company, besides operating the existing Delhi International Airport, has also built a brand new integrated terminal T3 which was commissioned in time for the Commonwealth Games in October 2010. It has also upgraded and is operating the Istanbul Sabiha Gokcen International Airport.

Key Financial Figures

Consolidated(Rs. Cr)
ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Total Income from Operations9,974.8610,653.2211,087.6813,357.66 10,999.28 
Expenses7,497.698,087.818,533.049,113.02 7,547.27  
Earnings Before Other Income, Interest, Tax and Depreciation (Operating Profit)2,477.172,565.412,554.644,244.64 3,452.01  
Depreciation1,039.781,454.991,812.532,266.16 1,543.46
Finance Costs2,099.002,971.883,571.864,057.69 3,911.48  
Other income277.19315.87327.46434.85 632.58  
Exceptional items(777.27)(1,820.25)304.12149.79 (1,481.63) 
PBT392.85274.66(2,806.41)(1,794.15) 111.28  
Tax257.44166.25152.81224.21 737.03  
PAT (before Minority Interest and share of Associates)135.41108.41(2,959.22)(1,998.94) (419.14)
Profit/ (loss) attributable to Minority Interest47.2998.40(238.91)156.54 87.04
Share of profit / (loss) of Associates12.985.52 68.40  
Consolidated Profit / (Loss) for the year88.1210.01(2,733.29)(2,161.00) (574.58) 

Profitability Analysis

ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Operating Profit Margin Ratio24.8324.0823.0431.78 31.38 
Net Profit Margin Ratio1.361.02(26.69)(14.96) (3.81) 

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business inefficiencies.

Key Balance Sheet Figures

Sources of Funds / Liabilities(Rs. Cr)
ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016
Share Capital389.24389.241,525.911,572.80603.59 
Preference shares issued by subsidiary1,980.131,971.101,155.60984.25984.25 
Money received against warrants141.75– 
Share application money pending allotment889.66– 
Reserves & Surplus7,148.546,888.946,095.184,305.774,356.74 
Net worth (shareholders funds)9,517.919,249.288,776.697,894.235,944.58 
Minority Interest1,791.721,720.002,008.641,765.501,644.03 
Long term borrowings25,366.7031,633.1633,599.2838,690.3837,413.35 
Current liabilities16,826.9418,083.5218,185.8416,174.9819,769.12 
Other long term liabilities and provisions2,675.603,007.072,477.162,123.462,290.57 
Trade payables11.6768.5720.9721.0329.14 
Deferred Tax Liabilities37.6655.3973.2773.3681.00 
Total Liabilities56,228.2063,816.9965,141.8566,742.9467,171.79


Application of Funds / Assets(Rs. Cr)
ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016
Fixed Assets42,023.6746,513.5449,373.1051,430.1951,809.17 
Noncurrent Investments149.36104.16104.22210.86132.94 
Current assets8,999.547,323.639,204.198,700.119,460.85 
Long term advances and other noncurrent assets4,786.099,644.146,244.016,285.585,654.73 
Deferred Tax Assets135.8958.1144.5719.0470.93 
Trade receivables133.65173.41171.7697.1643.17 
Total assets56,228.2063,816.9965,141.8566,742.9467,171.79 

Efficiency Analysis

ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016
ROE / RONW(6.34)0.950.11(34.62)(33.63) 

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

Valuation Analysis

ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Total Income from Operations (Rs. Cr.)9,974.8610,653.2211,087.6813,357.66 10,999.28 
Growth (%)17.72 %6.80 %4.08 %20.47 % (17.66 %) 
PAT (Rs. Cr.)135.41108.41(2,959.22)(1,998.94) (419.14) 
Growth (%)112.79 %(19.94 %)(2,829.66 %)– – 
Earnings Per Share – Basic (Rs. )0.230.03(6.46)(3.82) (0.57) 
Earning Per Share – Diluted (Rs. )0.230.03(6.46)(3.82) (0.91) 
Price to Earnings93.701,140.00– – 

Dividend History

The Company has maintained an average dividend yield of 0.00 % over the last 5 financial years.

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook. GMR Infra’s average current ratio over the last 5 financial years has been 0.57 times which indicates that the Company may fail to pay for its short term obligations.

Long Term Debt to Equity Ratio

Companies operating with high debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations.

GMR Infra’s average long term debt to equity ratio over the last 5 financial years has been 2.74 times which indicates that the Company operates with high level of debt and is not placed well to withstand economic slowdowns.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations.

GMR Infra’s average interest coverage ratio over the last 5 financial years has been 1.76 times which indicates that the Company can meet its debt obligations with some difficulty, leaving very little for the shareholders.

Ownership pattern

In its latest stock exchange filing dated 31 March 2017, GMR INFRA reported a promoter holding of 61.66 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.
At the same time, institutional holding in the Company stood at 25.51% (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.