RESULTUPDATE

GMRINFRASTRUCTURE
LowerPLFs,oneoffsarrestgrowth
IndiaEquityResearch|Power

GMR Infrastructure (GMR) posted loss of INR3.7bn (our estimate

INR460mnloss)inQ4FY12onbackoflowerPLFsinpowerplants(ongas
availability issues) and oneoffs in the EPC division. Adjusted for these,
losswasatINR1.2bn.Regulatoryissuesintheairportsegmentarebehind
us, though the spectre of lower economic growth hurting passenger
growth is a concern. We remain positive on the companys prospects,
driven by steady progress on underdevelopment projects and likely
improvement in cashflows from operational plants. Maintain 'BUY' with
revisedtargetpriceofINR38/share.

Paxgrowthstrong;gassupplyissueshurtPLFs
AirportscontinuedtopoststrongpaxgrowthFY12paxgrew20%inDIALand13%in
HIAL and Turkey, while YoY revenue growth in Q4FY12 for Male was 8%. Gas supply
issuescontinuedtoplaguepowerplantswithPLFsinChennai,VemagiriandKakinada
plants at 47%, 45% and 43%, respectively, during Q4FY12. Traffic growth in toll road
projectswas15%inFY12.

EDELWEISS4DRATINGS
AbsoluteRating

BUY

RatingRelativetoSector

Outperformer

RiskRatingRelativetoSector

High

SectorRelativetoMarket

Underweight

MARKETDATA(R:GMRI.BO,B:GMRIIN)
CMP

:INR20

TargetPrice

:INR38

52weekrange(INR)

:35/18

Shareinissue(mn)

:3,892.4

Mcap(INRbn/USDmn)

:76/1,379

Avg.DailyVol.BSE/NSE(000) :6,393.7
SHAREHOLDINGPATTERN (%)

Others
9%

Profitabilityhurtbyhostofoneoffs
EBITDAinDIALandHIALwaslowerbyINR174mnandINR166mn,respectively,dueto
nonrecognitionofNACILrevenues.DIALprofitswerefurtherhurtbyinterestexpense
of INR1.6bn on DF loans (which were earlier recognised as receivable). In Vemagiri,
therewasatariffrelatedadjustmentofINR520mnonaccountofprovisionforexcess
recoveryofcapacitycharges.TheKakinadaplantalsoposted~INR400mnofonetime
expense(provisionforbaddebtsetc.)whileEPCdivisiontookahitofINR480mndueto
managementfeepaidtoadifferentgroupcompany.

Outlookandvaluations:Insearchofstability;maintain'BUY'

AERA order on DIAL has eliminated the regulatory overhang; however, fuel issues in
power plants remain. Steady progress on underdevelopment projects along with
improvement in profitability of operational projects underpins our bullish stance on
GMR.Maintain'BUY'withrevisedSOTPofINR38/share(INR39earlier).

Financials(Consolidated)
YeartoMarch
Q4FY12 Q4FY11
Revenues
19,483 19,620
Totalexp.
15,995 15,213
EBITDA
3,488
4,407

Netprofit
EBITDAmargins(%)
NPM(%)

MFs,FIs&
Banks
8%

FIIs
12%
Promoters*
71%

*Promoterspledgedshares
(%ofshareinissue)

10.5

PRICEPERFORMANCE(%)
Stock

Nifty

EWPower
Index

1month

(25.3)

(5.7)

(9.4)

3months

(29.8)

(7.3)

(18.8)

12months

(42.5)

(9.5)

(22.8)

(INRmn)
%Change

Q3FY12

%Change

FY12

FY13E

FY14E

(0.7)

19,993

(2.6)

76,421

77,308 132,640

5.1

15,300

4.5

58,247

50,621

84,578

(20.8)

4,693

(25.7)

18,174

26,687

48,062

(2,350)

2,862

3,008

83.4

(360)

(1,244)

(678)

245.5

17.9

22.5

23.5

23.8

34.5

36.2

(6.4)

(3.5)

(1.8)

(3.1)

3.7

2.3

DilutedEPS(INR)

(0.6)

0.7

0.8

DilutedP/E(x)

NA

26.7

25.4

ROAE(%)

NA

3.0

3.0

EdelweissResearchisalsoavailableonwww.edelresearch.com,
BloombergEDEL<GO>,ThomsonFirstCall,ReutersandFactset.

Shankar.K
+912240407412
shankar.k@edelcap.com

ParvezAkhtarQazi
+912240635405
parvez.qazi@edelcap.com

June4,2012
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Power

Otherhighlights

KishangarhAhmedabad road project has achieved financial closure with a debt

component of INR54bn. This is a plain vanilla debt and there are no
debentures/preferentialsharesaswehadenvisagedearlier.Thishasledtoamarginal
increaseintheprojectsnegativevaluetoINR9.2/share(INR8.9earlier).

Change in depreciation policy in the roads segment (from proportionate vehicular

trafficfromproportionaterevenuebasis)hadledtowritebackofINR525mn.

Table1:SOTPValuation
Division
Airports
Roads
Power
HomelandEnergy
Indonesiancoalmine
Cashandliquidinvestments
TotalSOTPvaluation

GMRValuation(INRmn)
103,022
(27,880)
13,559
1,414
4,713
52,680
147,507

Value/share(INR)
26.5
(7.2)
3.5
0.4
1.2
13.5
37.9

Source:Edelweissresearch

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GMRInfrastructure

Financialsnapshot

YeartoMarch
Netrevenues
Costofgoodssold
Fuelcost
Grossprofit
Salaries,wages,otherpayments
Otherexpenses
Totalexpenditure
EBITDA
Otherincome
PBDIT
Depreciation
Interest
Profitbeforetax
Tax
Extraordinaryitems
Minorityinterest
Shareinprofitfromassociates
Reportednetprofit
Adjustednetprofit
No.ofshares(mn)
DilutedEPS(INR)

As%ofnetrevenues
COGS
Grossprofit
Otherexpenses
Totalexpenses
EBITDA
Adjustednetprofit
Taxrate

Q4FY12
19,483
9,832
9,832
9,650
1,755
6,162
15,995
3,488
(421)
3,067
2,234
6,268
(5,434)
422
2,418
(2,195)

(3,662)
(1,244)
3,892
(0.3)

50.5
49.5
31.6
82.1
17.9
(6.4)
NA

Q4FY11
19,620
12,002
12,002
7,618
1,355
3,211
15,213
4,407
611
5,018
2,612
2,945
(539)
764
9,389
(707)
(84)
(10,067)
(678)
3,892
(0.2)

61.2
38.8
16.4
77.5
22.5
(3.5)
NA

%Change
(0.7)
(18.1)
(18.1)
26.7
29.5
91.9
5.1
(20.8)
NA
(38.9)
(14.5)
112.8
NA
(44.7)
NA
NA
NA
NA
NA
NA

Q3FY12
19,993
11,965
11,965
8,028
1,592
3,335
15,300
4,693
752
5,445
2,678
4,239
(1,472)
445
720
(837)

(1,080)
(360)
3,892
(0.1)

59.8
40.2
16.7
76.5
23.5
(1.8)
NA

%Change
(2.6)
(17.8)
(17.8)
20.2
10.2
84.8
4.5
(25.7)
NA
(43.7)
(16.6)
47.9
NA
(5.2)
NA
NA
NA
NA
NA
NA

FY12
76,421
37,681
37,681
38,739
6,878
20,565
58,247
18,174
2,434
20,608
10,345
16,531
(6,268)
2,107
1,471
(4,555)

(3,820)
(2,350)
3,892
(0.6)

49.3
50.7
26.9
76.2
23.8
(3.1)
NA

(INRmn)
FY13E
77,308
12,657
12,657
64,651
14,327
37,964
50,621
26,687
287
26,975
10,417
9,806
6,752
1,593

1,880
(416)
2,862
2,862
3,892
0.7

FY14E
132,640
39,915
39,915
92,725
20,559
44,663
84,578
48,062
287
48,350
14,912
23,991
9,446
2,470

3,919
(50)
3,008
3,008
3,892
0.8

16.4
83.6
49.1
65.5
34.5
3.7
23.6

30.1
69.9
33.7
63.8
36.2
2.3
26.1

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Power

CompanyDescription
GMRistheflagshipcompanyoftheGMRGrouppromotedbyMr.G.M.Rao.Thegroupwas
initiallyactive intheagribusinessandbankingsectorthroughacontrollingstakeinVysya
Bank,thelargestprivatesectorbankinIndia,beforebankingsectorreformsandsubsequent
sale to ING. GMR follows the developer model for infrastructure projects across different
verticalspower, roads, airports, and urban infrastructure. The promoter group is closely
involvedwiththemanagementwitheachofthedifferentverticalsinthecompany.

InvestmentTheme
Furtherupsidesfromcommercialdevelopmentlinkedtoairports
If GMR manages to sell remaining 205 acres of land at a price greater than the value at
which it has sold 45 acres presently, it could result in further upsides for the company.
Similarly, monetization of Hyderabad airport land and SEZ land at higher than expected
valuationscouldresultinapositivesurprise.

Powerprojectexpansionpipelineatnascentstage
The company has about 3,290 MW of generation units in various stages of development,
whichinclude~2,800MWofthermalgenerationand1,190MWofhydropowerunits.The
company plans to have a reasonable blend of merchant and PPA sale for its expansion
projects.Timelyfinancialclosureforthehydroprojectsandexecutionwithoutcostoverrun
ofprojectscouldresultinincreasedearningsforthecompany.

Increaseinpassengertrafficinairportsandtollbasedroads
Ifthepassengertrafficpicksupinairportsandthetollbasedroadprojects,theoperating
leverageisexpectedtobehigherwhichwouldexpandvaluations.

Tractioninprojects
Huge cash reserves and likely listing of power entity separately means that there is a
likelihood of more projects being added to the portfolio like the recent Male airport and
Vemagiriexpansionprojects.Ifthesametrendofvalueaccretioncontinues,thentherecan
befurtherupsidetovaluations.

KeyRisks
Fallingpassengertrafficcriticalforairportsvaluations
Passengertraffichadbeendownduetoslowdown ineconomicactivitiesleadingtolower
earnings at both Delhi and Hyderabad airports. This has been a drain on the valuation of
airports.

Failuretomonetiseairportlandatattractivevaluationsontime
GMR has beensuccessful in monetizing 45 acres out of 250 acres of land at Delhi airport.
However,ifitdoesnotsucceedinmonetizingthebalancetrancheatsimilarorhigherlevels,
itcoulddragvaluationsdownwards.

Furtherequitydilution,unrelateddiversification
Thecompanyhasbeenraisingequitymoneyfrequentlyintherecentpastforenhancingits
projectportfolio.OneoftheacquisitionwasstakeinIntergenwhichwasnotvalueaccretive.
Ifasimilartrendcontinuesgoingforwardthenthesamecouldimpactvaluations.

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GMRInfrastructure

FinancialStatements

Incomestatement
YeartoMarch
Incomefromoperations
Directcosts
Employeecosts
OtherExpenses
Totaloperatingexpenses
EBITDA
Depreciation&Amortization
EBIT
Otherincome
Interestexpenses
Profitbeforetax
Provisionfortax
Coreprofit
Extraordinaryincome/(loss)
ProfitAfterTax
Minorityinterest
Shareinprofitofassociates
Profitafterminorityinterest
Basicsharesoutstanding(mn)
BasicEPS(INR)
Dilutedequityshares(mn)
DilutedEPS(INR)

Commonsizemetricsas%ofnetrevenues
YeartoMarch
Operatingexpenses
Depreciation
Interestexpenditure
EBITDAmargins
Netprofitmargins

Growthratios(%)
YeartoMarch
Revenues
EBITDA
PBT
Netprofit
EPS

FY10
45,665
25,766
2,932
3,325
32,022
13,643
6,122
7,521
2,913
8,503
1,931
(322)
2,253

2,253
454
(216)
1,584
3,667
0.4
3,667
0.4

FY10
70.1
13.4
18.6
29.9
4.9

FY10
13.6
27.9
(0.4)
(18.7)
12.6

FY11
57,738
34,074
3,386
4,724
42,183
15,555
8,609
6,946
3,113
12,301
(2,242)
239
(2,481)
(7,986)
(10,467)
(1,205)
(35)
(9,296)
3,892
(0.3)
3,892
(0.3)

FY11
73.1
14.9
21.3
26.9
(4.3)

FY11
26.4
14.0
NA
NA
NA

FY12
76,421
37,681
6,878
13,687
58,247
18,174
10,345
7,829
2,434
16,531
(6,268)
2,107
(8,375)
1,471
(6,905)
(4,555)

(2,350)
3,892
(0.6)
3,892
(0.6)

FY12
76.2
13.5
21.6
23.8
(11.0)

FY12
32.4
16.8
NA
NA
NA

FY13E
77,308
12,657
14,327
23,637
50,621
26,687
10,417
16,270
287
9,806
6,752
1,593
5,159

5,159
1,880
(416)
2,862
3,892
0.7
3,892
0.7

FY13E
65.5
13.5
12.7
34.5
6.7

FY13E
1.2
46.8
NA
NA
NA

(INRmn)
FY14E
132,640
39,915
20,559
24,105
84,578
48,062
14,912
33,150
287
23,991
9,446
2,470
6,977

6,977
3,919
(50)
3,008
3,892
0.8
3,892
0.8

FY14E
63.8
11.2
18.1
36.2
5.3

FY14E
71.6
80.1
0.4
35.2
5.1

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Power
Balancesheet
Ason31stMarch
Equitycapital
Reserves&surplus
Shareholdersfunds
Minorityinterest(BS)
Securedloans
Unsecuredloans
Borrowings
Others
Sourcesoffunds
Grossblock
Depreciation
Netblock
Capitalworkinprogress
Totalfixedassets
Investments
Inventories
Sundrydebtors
Cashandequivalents
Loansandadvances
Totalcurrentassets
Sundrycreditorsandothers
Provisions
Totalcurrentliabilities&provisions
Netcurrentassets
NetDeferredtax
Others
Usesoffunds
Bookvaluepershare(INR)

Freecashflow
YeartoMarch
Netprofit
Depreciation
Deferredtax
Others
Grosscashflow
Less:ChangesinWC
Operatingcashflow
Less:Capex
Freecashflow

Cashflowmetrics
YeartoMarch
Operatingcashflow
Investingcashflow
Financingcashflow
Netcashflow
Capex
Dividendspaid

FY10
3,667
65,003
68,671
17,902
162,294
46,080
208,374
(5)
294,940
148,896
23,416
125,481
103,829
229,309
46,411
1,159
8,649
16,826
14,773
41,408
15,775
3,878
19,653
21,755
805
(3,339)
294,940
18.7

FY10
1,584
6,122

(1,800)
5,907
(907)
6,814
68,725
(61,911)

FY10
6,814
(100,593)
85,939
(7,839)
(68,725)
(5)

FY11
3,892
91,003
94,895
19,981
189,107
53,189
242,296
(74)
357,098
243,702
31,503
212,200
94,898
307,098
29,741
1,846
13,199
33,732
26,144
74,921
51,617
2,281
53,898
21,023
1,514
(2,279)
357,098
24.4

FY11
(9,296)
8,609

3,424
2,737
(17,638)
20,374
73,254
(52,879)

FY11
20,374
(64,390)
60,922
16,906
(73,254)
(87)

FY12
3,892
91,287
95,179
17,917
287,134
73,156
360,290

473,386
315,511
41,848
273,663
157,999
431,662
7,216
2,595
18,374
46,952
54,125
122,045
85,207
3,313
88,520
33,526
1,359
(377)
473,386
24.5

FY12
(2,350)
10,345

(7,497)
499
(718)
1,217
126,202
(124,985)

FY12
1,217
(101,242)
100,025

(126,202)

FY13E
3,892
94,149
98,041
19,798
408,523
73,156
481,679

599,517
381,266
52,265
329,001
223,754
552,754
7,216
871
18,587
46,952
54,754
121,165
79,249
3,351
82,600
38,564
1,359
(377)
599,517
25.2

FY13E
2,862
10,417

1,880
15,159
5,039
10,121
131,510
(121,389)

FY13E
10,121
(131,222)
121,102

(131,510)

(INRmn)
FY14E
3,892
97,157
101,049
23,717
480,865
73,156
554,021

678,785
424,455
67,176
357,278
266,943
624,221
7,216
2,748
25,258
46,952
67,415
142,373
90,257
5,750
96,007
46,366
1,359
(377)
678,785
26.0

(INRmn)
FY14E
3,008
14,912

3,918
21,839
7,802
14,037
86,378
(72,342)

FY14E
14,037
(86,091)
72,054

(86,378)

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GMRInfrastructure

Profitability&efficiencyratios
YeartoMarch
ROAE(%)
ROACE(%)
Debtorsdays
Currentratio
Debt/EBITDA
Fixedassetturnover(x)
Averageworkingcapitalturnover
Averagecapitalemployedturnover(x)
Debt/Equity
Adjusteddebt/equity

Operatingratios
YeartoMarch
Totalassetturnover
Fixedassetturnover
Equityturnover

Dupontanalysis
YeartoMarch
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)

Valuationparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)

FY10
2.3
3.4
61
2.1
15.3
0.4
8.5
0.2
3.0
3.0

FY11
NA
2.4
69
1.4
15.6
0.3
(14.8)
0.2
2.6
2.6

FY10
0.2
0.2
0.7

FY11
0.2
0.2
0.7

FY10
3.5
0.2
3.7
2.3

FY14E
0.2
0.2
1.3

FY13E
3.7
0.1
5.5
3.0

FY12
(0.6)
NA
1.7
NA
0.8
5.2
22.0

FY14E
3.0
5.2
60
1.5
11.5
0.4
(29.6)
0.2
5.5
5.5

FY13E
0.1
0.2
0.8

FY12
(5.0)
0.2
4.3
NA

FY11
(0.3)
NA
1.9
NA
0.8
4.8
17.7

FY13E
3.0
3.1
87
1.5
18.0
0.3
(7.1)
0.1
4.9
4.9

FY12
0.2
0.2
0.8

FY11
(2.3)
0.2
3.9
NA

FY10
0.4
(43.7)
2.1
45.5
1.0
5.1
17.2

FY12
NA
2.0
75
1.4
19.8
0.3
(5.8)
0.2
3.8
3.8

FY14E
2.3
0.2
6.4
3.0

FY13E
0.7
NA
3.4
26.7
0.8
6.8
19.6

FY14E
0.8
5.1
4.6
25.4
0.8
4.5
12.5

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RATING&INTERPRETATION

Company
AdaniEnterprises

Absolute

Relative

Relative

reco

reco

risk

BUY

SP

Company
AdaniPortsandSpecialEconomic

Absolute

Relative

Relative

reco

reco

Risk

BUY

SO

Zone
AdaniPower

REDUCE

SU

CESC

BUY

SP

GVKPowerandInfra

HOLD

SO

Marg

BUY

None

None

NTPC

GMRInfrastructure
JSWEnergy

HOLD

SU

PTCIndia

BUY

None

None

TataPowerCo

BUY

SO

BUY

SU

HOLD

SU

LancoInfratech

BUY

SU

NavabharatVentures

BUY

None

None

PowerGridCorpofIndia

BUY

SO

RelianceInfrastructure

BUY

SU

ABSOLUTERATING
Ratings

Expected absolute returns over 12 months

Buy

More than 15%

Hold

Between 15% and - 5%

Reduce

Less than -5%

RELATIVERETURNSRATING
Ratings

Criteria

Sector Outperformer (SO)

Stock return > 1.25 x Sector return

Sector Performer (SP)

Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU)

Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe
within the sector

RELATIVERISKRATING
Ratings

Criteria

Low (L)

Bottom 1/3rd percentile in the sector

Medium (M)

Middle 1/3rd percentile in the sector

High (H)

Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTORRATING
Ratings

Criteria

Overweight (OW)

Sector return > 1.25 x Nifty return

Equalweight (EW)

Sector return > 0.75 x Nifty return

Underweight (UW)

Sector return < 0.75 x Nifty return

Sector return < 1.25 x Nifty return

EdelweissSecuritiesLimited

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