GMR Infrastructure Good Long Term Stock No panic

GMR Infrastructure posted a drop in its PAT for the second quarter ended 30^th September 2008 on account of MTM forex losses. The stock has been hammered down relentlessly, yet, the long term growth story remains intact.

For Q2FY09, on a YoY, net sales was up 114.21% from Rs. 395.31 crore to Rs. 846.81 crore. EBITDA rose 58.72% from Rs. 155.71 crore to Rs. 247.14 crore. PAT (before notional forex losses) increased by 135.53% from Rs. 44.80 crore to Rs. 105.52 crore while PAT (after notional forex losses) declined by 6.05% from Rs. 49.58 crore to Rs. 46.58 crore.

The MTM forex loss was to the tune of Rs. 58.94 crore for the quarter, accounted mostly by two of the company’s subsidiaries - Vemagiri Power Generation Limited (VPGL) and GMR Hyderabad International Airport Limited (GHIAL), on the foreign currency project loans borrowed by them. The company has assured that these losses are notional and should the situation arise, these two subsidiaries have adequate dollar revenues to provide natural hedge for the currency fluctuations that may arise with respect to interest and principal payments/repayments. But for this forex loss, which is not an isolated phenomenon with GMR, the company had a very good growth story, a rise of over 100% in PAT despite the circumstances is commendable.

The company used the current global crisis in its favour and managed to renegotiate its acquisition cost of Intergen NV, thus reducing the cost by US$162 million. The Hyderabad Airport has started collecting User Development Fee (UDF) from domestic passengers from last week of August ’08 after getting the necessary approvals from Ministry of Civil Aviation. With this, Hyderabad Airport has also started realising all its revenue streams. The company soft launched its 308 room hotel at Hyderabad Airport. GMR also commissioned the cargo terminal at the Sabiha Gokcen International Airport (SGIA), Turkey, which it is re-building and will have a new passenger terminal by October 2009.

GMR continues to remain a very strong company. It is facing a selling pressure on the bourses, which is in concurrence with the ongoing slaughter by investors on realty and infra companies. At the current rates, GMR is an excellent long term buy. Stay invested, there is no need to panic, it’s long term growth story remains intact.
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