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Vidya Bala

Strong revenue contribution from the newly-added airports and increased plant load factor in the power division accelerated the topline growth of GMR Infrastructure for the quarter ended June 2008. The net profit was, however, dented by notional forex losses and increase in depreciation. Here are the key takeaways from the results:

The airport segment witnessed operational losses due to the inclusion of the Istanbul airport – a recent project, in the current quarter financials. While the Delhi International Airport (DIAL) witnessed healthy growth in revenues, operating profits witnessed an 11 per cent decline. This comes on the back of increased provisioning for pay revisions for employees of the Airports Authority of India.

The controversy over property development at DIAL received some clarity with the go ahead given for development of hospitality projects over 45 acres of land. GMR has, however, received a revised lease rental period of three years as against six years earlier. GMR may face similar risks from less favourable modifications in contracts over the development of the remaining property surrounding the airport. That the issue , however, being sorted out amicably is a big positive as delay in development could hurt cash flows for the airport.

Favourable ratio of non-aero revenues and healthy growth in traffic are also key positives for this airport.

The Hyderabad airport witnessed an operational loss of Rs 25.5 crore, excluding notional forex losses. The management has attributed this performance to non-realisation of user development fee for domestic passengers, pending approval of the same. The coming quarters may witness a similar trend given the opposition faced for levy of this fee; muted growth in passenger traffic (1.22 per cent on Y-o-Y basis) also remains a concern.

The power division witnessed a 53 per cent surge in revenues aided by high plant load factor in GMR Power Corporation. There however, remains two key concerns in this division. One, the power purchase agreement for the power plant in Mangalore has expired and has not been renewed on the grounds of high energy costs cited by the Karnataka Power Transmission. This plant would not contribute to revenue from the coming quarter until plans of relocating it to Andhra Pradesh fructify. Two, the gas-based Vemagiri power plant has incurred operational losses due to non-availability of gas.

While these two assets act as a drag on the power portfolio, the company’s plans to acquire global power company InterGen provides fresh hope to this division. Share of revenues from this acquisition may come into the books after the expected completion of the transaction in the third quarter of FY09.

Traffic growth amidst increasing fuel costs and consequent rise in air bills would remain the key issue to watch out for in the coming quarters. More annuity road projects that are likely to become operational by the end of FY 2009 may however start providing some support to revenues.

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