GMR Infrastructure and GVK Power and Infrastructure tumbled on Tuesday after reports that the Supreme Court had ordered the developers to stop charging airport development fees (ADF) from passengers.

GMR saw a drop of 3.16 per cent in its stock and ended the day at Rs 38.30 a share. GVK fell by 4.5 per cent to Rs 25.05. Both stocks began their downward descent after 11 am, which is when reports of the order by the Supreme Court started coming in.

rally possible

“These stocks were anyway weak and the trends in the sector have also not been positive. The stocks may fall further by 8-10 per cent, leading to selling pressure. The rising interest rate scenario will also negatively impact the financial capabilities of these companies, leading to an adverse effect on their stocks,” said Mr R.L. Narayanan, Vice-President-Equity & Institutional Sales, Bonanza Portfolio.

Analysts, however, see a buying opportunity in the short-term for these stocks. “Assuming the issues takes a year to reverse, it would amount to a cash flow strain of Rs 600 crore for DIAL (Delhi International Airport Ltd) and Rs 500 crore for MIAL (Mumbai International Airport). For GMR and GVK, this could imply a potential valuation drop of Re 1 a share and Rs 1.6 a share respectively.

“We believe a steep correction in the stock prices, of more than the per-share valuation drop indicated above, could provide attractive buying opportunities,” said a report from Spark Capital.

NGO petition

According to reports, the apex court had passed the order based on a petition filed by an NGO, Consumer Online Foundation, which said the ADF was not approved by Airports Economic Regulatory Authority (AERA).

As on March 2009, the ADF to be collected from the Delhi and Mumbai airports was pegged at Rs 1,800 crore and Rs 2,000 crore, respectively.

The Delhi airport is run by GMR, while the Mumbai airport is operated by GVK.

In August 2009, the Delhi High court had quashed the additional ADF levy. In July 2010, a consultation paper prepared by KPMG and Engineers India concluded with two scenarios on extension of ADF by 15 months or 26 months, without proposing any changes in the rates of ADF. This was followed by the Supreme Court ruling banning the ADF levy on Tuesday.

In a statement put out on Tuesday evening, DIAL claimed that the Supreme Court has allowed it to continue charging the ADF. “Although the Hon.

Supreme Court has allowed the Appeal of the Petitioners who had challenged the judgment of Delhi High Court upholding the levy of ADF, the Hon. Supreme Court has allowed DIAL to continue to charge ADF as per the approval granted to DIAL by the Airport Economic Regulatory Authority (AERA),” said a statement from DIAL.

However, a Mumbai International Airport Ltd spokesperson said they would discontinue with the ADF levy, according to the Supreme Court order.

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