gmr infrastructure initiating coverage 080911breport.myiris.com/essbl/gmrinfra_20110908.pdf · gmr...

Emkay Global Financial Services Ltd 1

September 8, 2011

Reco

Buy

CMP

Rs30

Target Price

Rs38

EPS change FY11E/12E (%) NA

Target Price change (%) NA

Nifty 5,001

Sensex 16,677

Price Performance

(%) 1M 3M 6M 12M

Absolute (0) (9) (25) (49)

Rel. to Nifty 1 (2) (20) (44)

Source: Bloomberg

Relative Price Chart

20

28

36

44

52

60

Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11

Rs

-50

-38

-26

-14

-2

10%

GMR Infrastructure (LHS) Rel to Nifty (RHS)

Source: Bloomberg

Stock Details

Sector Construction

Bloomberg GMRI@IN

Equity Capital (Rs mn) 3892

Face Value(Rs) 1

No of shares o/s (mn) 3892

52 Week H/L 61/26

Market Cap (Rs bn/USD mn) 116/2508

Daily Avg Volume (No of sh) 3642533

Daily Avg Turnover (US$mn) 2.4

Shareholding Pattern (%)

Jun-11 Mar-11 Dec-10

Promoters 71.4 71.2 70.7

FII/NRI 12.6 12.8 13.2

Institutions 8.1 8.2 8.3

Private Corp 1.2 1.2 1.4

Public 6.8 6.7 6.4

Source: Capitaline

Jitesh Bhanot

[email protected]

+91 22 6624 2491

Ajit Motwani

[email protected]

+91 22 6612 1255

Amit Golchha

[email protected]

+91 22 6624 2408

In

itia

tin

g C

overa

ge

GMR Infrastructure

Long term play… but worth the wait

� Airports – Investment phase over – DIAL turnaround holds the

key. Airport vertical turning cash positive with Rs 2.8bn in

FY13E v/s cash loss of Rs 1.1bn in FY12E

� Power – 4.5x growth in installed capacity by FY14E to

3,600MW & ~54% contribution to EBITDA. Captive mining

offers strong fuel security for smoother operations

� Short term funding comfort – Strong parent B/S with Rs 50bn

& internal accruals (Rs104 bn) sufficient till FY14E. Future

needs to be met by listing of power and airport verticals

� Recommend BUY with a target SOTP of Rs38 (27% upside).

Key triggers: Tariff implementation, land monetization &

captive mining. Risks – Further dilution not ruled out

Airport vertical, ready for takeoff- DIAL turnaround holds the key

DIAL airport, which has been a major overhang on the airport vertical’s profitability due

to its sheer size, is now fully operational. Given the momentum in aviation sector

coupled with the regulatory backdrop, it is showing signs of turning around by FY16E.

The key factor in the DIAL turnaround is the implementation of the regulatory tariff,

which is expected to drive its aero revenues and provide revenue visibility. With GMR’s

other airports (Male, Turkey and Hyderabad) offering relatively better revenue stability,

the turnaround of DIAL from a loss making entity (Rs 2.4bn in FY11) is likely to sway the

fortunes of the airport vertical. We expect GMR’s airport vertical to report a PAT of Rs

2.1bn in FY16E. Apart from operational profits, monetisation of land parcels can prove

to be the icing on the cake with significant opportunity to realize upfront deposits.

Power - Funding to ensure execution – Realisation holds the key

GMR Infrastructure is expanding rapidly in the energy vertical with the installed capacity

set to rise from 823 MW to ~3,600 MW by FY13E and 8,471 MW by FY18E. Strong

captive mining assets along with adequate funding are likely to ensure smooth

execution. Its ability to tie up future capacity at lucrative rate will determine the success

of power vertical. Strong parent balance sheet with ~ Rs 50 bn of Cash & liquid

investments which can be utilised in funding equity portion along with Rs 36 bn of

operating cash flow over FY12-13E will be sufficient to fund projects till FY13E. While

the power vertical is still in investment phase, its commissioned projects are likely to

ensure contribution rising to ~54% overall EBITDA by FY14E.

SOTP of Rs 38 - Upside potential with emerging regulatory clarity

GMR is available at a discount to its SOTP fair value with the current valuations ignoring

the enormous long term potential of key operating assets like DIAL. The recent

corrective phase led by ambiguous regulatory mechanism and sub optimal availability of

fuel at gas based power plants offers an opportunity for investors to position such long

term plays in the infrastructure universe. Our SOTP based value of Rs 38 offers 27%

upside from the present price. Airport assets (incl real estate) form ~49%, Power ~23%

and Roads ~10% of fair value. Key risks to our positive ratings are the delays in

implementation of tariff mechanism, Non availability of gas based fuel & ability to source

long term PPAs at attractive rates.

Financial Snapshot (Standalone) (Rsmn)

YE- Net EBITDA EPS EPS RoE EV/

Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

FY10 45,665 13,643 29.9 1,581 0.4 -41.5 2.4 69.6 22.1 1.6

FY11A 57,738 15,555 26.9 -9,297 -2.4 NA -13.0 -12.6 20.9 1.2

FY12E 82,906 21,538 26.0 (631) -0.2 NA -0.8 -185.0 18.9 1.2

FY13E 117,609 36,557 31.1 4,437 1.1 NA 5.5 26.3 13.7 1.2

GMR Infrastructure Initiating Coverage

Emkay Research 8 September 2011 2

Company Description

GMR Infrastructure is a holding company and is among the largest developer

conglomerates in India with presence in verticals like aviation infrastructure, transportation,

energy, real estate and urban infrastructure. GMR commands a 54% stake in Delhi Airport,

63% stake in Hyderabad Airport, 40% stake in Sabiha Gokcen Airport (Turkey) and 77%

stake in Male Airport. In between Delhi & Hyderabad airport, GMR enjoys ~24.5% market

share of the overall Indian aviation passenger traffic. In the transportation vertical, GMR has

9 road projects entailing 730kms, out of which, 6 road projects comprising of 421 kms are

already operational and spread equally between toll and annuity based projects. GMR

aspires to gain significant scale in the power division. It has three operational power plants

with an overall capacity of 823 MW and has a huge pipeline of 7,648 MW in various stages

of development.

GMR Infrastructure - Profile

India business

International business

* % ownership might vary on project basis

GMR Infrastructure

(GMR)

Power

9 Road Projects5- Toll (446km)

4 -Annuity (284 km)

*

GEL -

Karnataka(220 MW)

100 %

Vemagiri -

AP(388.5 MW)

100 %

Road

Male Airport

~2.5mn pax77 %Maldives

SEZ & Real Estate

100 % 63 %51 %

GPCPL-

Chennai(200 MW)

Krishnagiri

SEZ3,300 acres

Tamil Nadu

Hyderabad Land - 1,000 acre Com. devlt.250 acre Aviation SEZ

250 acres of Logistics SEZ

Airports

Hyderabad Airport - GHIAL

~7.6mn pax

63 %54%

Delhi Airport - DIAL

~30 mn pax

Sabiha Gokcen ~11.8mn pax

40 %Turkey

250 acres of land development at DIAL

54 %Real Estate

International Airport

9 Power Projects

5- Thermal - 5,508 MW4 -Hydro - 2,140 MW

*

Indonesia (104MT)

South Africa (300MT)* International Coal

Mines

EPC arm~33bn orderbook split

between inhouse road & power projects

100%

GMR has emerged L1 in Ahmedabad – Kishangarh project

GMR has also entered into MOU for purchasing 30% stake in Golden mines in Indonesia



Rational snapshot


� Superior competitive positioning with strategic location of Airport assets

� Investment phase over – Focus to shift from execution to profitability

� Airports gaining independence - self sufficient to fund the next phase of growth

� Migration to regulatory framework in totality will be beneficial for GMR Infra

� GHIAL – Factored in single till – UDF charge important post FY13E

� DIAL – Holds key to overall airport vertical

� Fixation of ADF will pave the way for implementing regulatory tariff…

…Aero rev. growing 26% (FY11-14E) led by tariff implementation by FY13E…

….Thought after retail strategy (Non Aero) at DIAL to bolster returns…

…Turnaround of DIAL - set to drive overall vertical’s performance …

…. Profitability to follow suit led by guaranteed regulatory model…

� Significant operating leverage of airports to accentuate pace of improvement

� Rate of sustainable ROE to improve with timeline linked to regulatory policy

� Monetisation of real estate can significantly tilt the profitability equation

Commendable record of monetising the 1st tranche of 45 acre

Monetisation of remaining parcel (205 acre) to further ease funding equation

Road vertical: Good mix of annuity & toll road projects adds solidarity

� Addition of Ahmedabad – Kishangarh will catapult GMR to the big league

EPC vertical - key beneficiary of MALE airport & Abd-Kishangarh project win

Power - Funding to ensure execution, Realisation holds the key

� Gas availability is the biggest overhang on the power vertical

� EBITDA contribution to be equally good for the power vertical by FY14E

Mining - Investment enters fast lane in FY12E, negating fuel risk to coal based plants

Domestic focus top priority post the divestment of Intergen

Tied up funding for next 2 yrs, Future funding requirements to be met by IPO

� GMR Energy raised Rs 13.6bn through convertible pref. share(CCPS) in FY11

� GMR Airport raised Rs14.9bn through CCPS in FY11/12

Recent fund-raising to de-leverage balance sheet

Proven capabilities on execution front

Diversification across several emerging verticals

Near term catalysts for GMR Infrastructure

SWOT analysis of GMR Infrastructures



Investment Rationale


GMR’s airport vertical has leaped forward from investment phase towards the operational

phase. DIAL airport, the largest asset within GMR’s portfolio is now operational. Initial

stabilization phase at DIAL has been a major overhang on the vertical’s profitability due to

its sheer size. The underlying growth momentum of the Indian aviation sector coupled with

the regulatory backdrop promises a turnaround by FY16E. The key factor leading to DIAL’s

turnaround is the implementation of the regulatory tariff, which is expected to drive its aero

revenues and provide revenue visibility. We expect the fixation of ADF to be announced

over the next 2-3 months, setting in motion the other formalities for the implementation of

regulatory tariff. We estimate the DIAL airport to migrate towards tariff based recognition

from FY13E. The strong growth in aviation passenger traffic along with the hybrid till model

at DIAL, is likely to ensure steady pick up in non aero revenues as well. This ideal mix of

assured returns (through aero revenues) and high profit potential (from non aero revenues)

is likely to result in a turnaround of DIAL airport by FY16E. With GMR’s other airports (Male,

Turkey and Hyderabad) offering relatively better revenue stability, the turnaround of DIAL

from a loss making entity (Rs 2.4bn in FY11) is likely to sway the fortunes of its airport

vertical. We expect GMR’s airport vertical to report a PAT of Rs 2.1bn in FY16E. Apart from

operational profits, monetisation of land parcels can prove to be the icing on the cake,

offering significant interest free deposits to fund the next phase of overall growth.

Superior competitive positioning with strategic location of Airport assets

Airports under GMR’s portfolio have relatively strong and stable catchment areas as well as

high levels of transfer traffic secured through their hub positioning. The size and positioning

of DIAL enables it to enjoy geographically diversified flows of traffic. GMR infrastructure,

through DIAL & GHIAL airport, control ~26.2% market share of the Indian aviation sector. In

India, aviation passenger traffic has grown at a 15.9% CAGR from 59.2mn to 143.4mn over

FY05-11 demonstrating strong resilience and sharply recovering from the adverse impact of

the recent global financial crisis. With significant built up capacities in an infrastructure

deficit fast growing economy, GMR is poised to reap benefits in aviation vertical.

Investment phase over – Focus to shift from execution to profitability

Completion of T3 terminal at DIAL in July’11 marks the end of the investment phase for

GMR’s airport vertical. GMR’s airport vertical has no further capex requirement on existing

portfolio (DIAL, GHIAL & ISGIA) for the next 5 years, we expect the airport vertical to start

reaping the benefits of being a first mover in the airport segment. Male, which GMR Infra

has bagged recently, will continue to incur capex. While its 2 airports (Hyderabad and Male)

are already cash PAT positive, DIAL airport had been a drag on the airport vertical with the

vertical incurring a cash loss of Rs 511 mn in FY11. However, with the commissioning of

the T3 terminal and traction in aviation passengers, we believe benefits will start accruing

for DIAL. Near term cash burn will start yielding results for the vertical with the overall

airport segment is expected to become cash positive in FY13E and contribute Rs 7.9 bn of

positive cash by FY15.

No constraints to growth with adequate installed capacity

Expected Project cost Actual/Exp. Pax

Phase completion (Rs bn) Runways (Px Million/annum)

Delhi Aiport

Phase 1A Jul-08 2 22.80

Phase 1B Jul-11 127 2 29.57

Phase 2 Mar-22 77.5 3 70.38

Hyderabad Airport

Phase 1 Mar-08 29.2 1 7.0

Phase 2 Mar-16 12.1 1 13.0

Phase 3 Mar-24 18.8 2 23.4

Source: Company, Emkay Global

Completion of T3 at DIAL marks

the end of investment phase.

Management focus to shift towards

profitability

Airport vertical holds promise in

the long term with strategic assets

like DIAL expected to witness

turnaround after implementation of

tariff mechanism



Airports gaining independence - self sufficient to fund the next phase

All airports within GMR’s portfolio are expected to be self sufficient for funding the next

phase of development. The most recent addition i.e. the 4th airport, Male Airport is already

an operational asset. GMR, along with consortium partners i.e. Malaysia Airports, have

already invested ~ USD 30 mn. The remaining portion is expected through the internal

generation of Male Airport. The internal generation of Male is expected to receive further

boost from the commencement of additional charges of $25 per departing passenger from

Jan’ 2012, which will fetch ~$27 mn of incremental annual cash generation to support the

overall equity commitment. Male is expected to have an overall equity capex of USD 127mn

(Phase I) likely to be expended by FY14E.

Delhi’s T3 terminal is the 8th

largest airport in the world and has created adequate capacity

to sustain the growth momentum for a decade. Hyderabad airport can sustain the present

momentum for another 5 years. Hyderabad will hit the installed capacity by FY16E and we

believe, Hyderabad can sustain growth momentum till 14.4mn pax/pa. This is because

Airport infrastructure in general can sustain operations till 120% of their installed capacity.

DIAL- well placed to cater to growth for next decade

Delhi Airport

22.8 25.529.6

34.739.2

43.447.926 26

60 60 60 60 60

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2009 2010 2011 2012 2013 2014 2015

Mn p

assengers

Pax handled Pax handling capacity


SGIA- Concession does not provide for further expansion GHIAL – Can sustain growth for the next five years

4.4 7.712.2

15.417.9

20.623.7

25 25 25 25 25 25 25

-

5.0

10.0

15.0

20.0

25.0

30.0

2009 2010 2011 2012 2013 2014 2015

Mn p

assengers


Istanbul SGIA Airport

Hyderabad Airport

7.0 6.2 6.57.5

8.59.7

11.0

12 12 12 12 12 12 12

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2009 2010 2011 2012 2013 2014 2015

Mn p

assengers


Source: DIAL, Emkay Global Source: GHIAL, Emkay Global

Migration to regulatory framework in totality will be beneficial for GMR Infra

The existing regulatory framework at MALE & Sabiha Gokcen are fairly stable, with growing

footfalls and better utilization of available resources leading to sustained and predictable

profitability in the long term. However, the evolving policy mechanism at DIAL & GHIAL

makes it difficult to estimate revenues and profits accurately in the near term. We expect

status quo on the tariff front at Hyderabad airport till FY13E as the petition for single till is

being challenged in the Appellate tribunal. Thereafter, we have assumed single till model to

prevail. We believe clarity will emerge by FY12E on DIAL and it will migrate to tariff based

revenue recognition by FY13E. In the prevailing situation, the implementation of tariff

mechanism for DIAL will be positive and for Hyderabad, it will be marginally negative.

All airports in GMR’s portfolio are

self sufficient to fund the next

phase of expansion

Implementation of regulatory

framework positive for GMR - DIAL

expected to reap the benefit &

downside from single till at

Hyderabad already considered in

our base case



GHIAL – Factored in single till – UDF charge important post FY13E

The regulator has proposed a single till mechanism for computing tariff at all airports barring

Delhi & Mumbai. Under this mechanism the entire benefits from Non Aero segments is

utilised for subsidising the Aero revenue per pax. Such a mechanism ensures the returns

for airport operator remains capped. GHIAL has challenged the proposal of imposing single

till model in appellate tribunal, however remaining on the conservative side, we have

assumed a single till for GHIAL. In the interim, the regulator has proposed a UDF to meet

the revenue shortfall till FY13E. Presently GHIAL is charging a UDF of Rs 1,700 per

international departing pax and Rs 430 per domestic departing pax which is expected to

continue till FY13E. Thereafter, we expect UDF to decline from Rs 1700 to Rs 1000 per

departing international pax and from Rs 430 to Rs 300 per domestic departing pax for the

next 11 years, beyond which, this line item will cease to exist. A favourable verdict at the

appellate tribunal can trigger upsides to its profitability.

DIAL – Holds key to overall airport vertical

DIAL’s turnaround holds the key to the profitability of the overall airport segment. We

believe the fixation of ADF will pave the way for the implementation of tariff policy, which is

expected to be positive for DIAL. DIAL operates on a Hybrid till, which ensures that overall

profitability is well supported by Aero and Non Aero segments. Hefty growth in revenues

and significant operating leverage is likely to ensure its turnaround by FY16E.

Fixation of ADF will pave the way for implementing regulatory tariff…

Fixation of ADF, which is expected in Q2FY12E, will be the 1st process in the overall tariff

determination framework, which is expected by Q2FY12E. We believe post the ADF

approval, GMR will require 6 months to move to a regulated mechanism. GMR has already

undergone project audit for determining the overall cost and is awaiting the final order for

grant of additional ADF (Airport Development Fees). Fixation of ADF will pave the way for

computing the regulatory asset base (RAB). The RAB inturn, will be utilised as the net block

on which the developer will be entitled a fair rate of return. We believe the tariff order to

commence from FY13E. AERA officials earlier this year highlighted that Mumbai and Delhi

Airports will continue to be governed by the regulations of OMDA and adoption of single till

framework for other airports will have no effect on the computation of tariff for these 2

airports.

…Aero rev. growing 26% (FY11-14E) led by tariff implementation by FY13E…

The implementation of tariff policy is likely to be the biggest kicker for the Aeronautical

revenues, which are expected to grow at a CAGR of 26% over FY11 to FY14E from Rs

6.0bn to Rs 12bn. Implementation of tariff policy would mean Aero revenue per passenger

would increase from Rs 204 to ~Rs 407 by FY16E. DIAL operates on a hybrid till, where

Aero revenues are regulated by OMDA. Under the regulations, Non Aero revenues to the

extent of 30% will be utilized towards subsidizing Aero revenues. Remaining 70% of the

Non Aero revenues will not be regulated and the upsides after deducting 46% AAI share will

flow to the stake holders of DIAL. Aeronautical revenues would play a key role in

immediately turning around the DIAL airport. However, the Non Aero revenue will determine

a sustainable ROE.

DIAL, due to its sheer size, holds

the key to the airport vertical. With

Hybrid till, it can capture the

upsides from Non Aero operations

ADF fixation, expected by

Q2FY12E, to pave the way for

migration to tariff policy

Tariff implementation to boost aero

revenue per passenger at DIAL

frin Rs 204 to Rs 407 by FY16E



Flow showing calculation of yield per passenger

Fair rate of

Return

Aggregate revenue

requirement

/

Volume

Aeronautical Yield

per passenger

Capex

Regulatory Asset

Base

Return on RAB

Depreciation

Service Quality

+

Op

era

tion

Main

tain

en

ce

Exp

en

ditu

re

+

Ta

xa

tion -

Revenue services

other than Aero

services

=

Source : AERA

….Thought after retail strategy (Non Aero) at DIAL to bolster returns…

With Aero revenue per pax set to peak by FY17E (post migration to tariff based

mechanism), Non Aero revenue will take the mantle of driving future growth for DIAL. Non

Aero revenues are driven by footfalls (no. of passengers) and spending per passenger.

With the emerging middle class and rising buying power in the hands of Indian passengers,

we feel the average revenue per spend will increase sharply over the coming decade,

bolstering the revenues of Non Aero segment. Comparatively larger retail space than any

other airport in India, luxury focused concessionaire and JV models are expected to drive

DIAL’s Non Aero revenue at a CAGR of 19% over FY11 -FY14E from Rs 5.6bn to Rs 9.5bn.

With such rampant growth, the Non Aero revenue per pax will reach USD 4.9 by FY14E.

DIAL’s Non Aero revenue of USD 4.2 per pax in FY11 is at par with its Chinese peer

(Beijing international airport - USD 4.4 per pax). Considering the emerging trend at fast

growing airports in China, which have been able to double the Non Aero revenue per pax

over the last four years post the development of their airport infrastructure, the potential for

the Non Aero revenues appears immense for Indian airports. In our opinion, Non aero

revenues provide significant opportunity for scaling up, as value per passenger can be

enhanced by incorporating additional facilities at the airport. Non Aero has been a booming

segment across the globe and DIAL’s Non Aero revenues are significantly lower compared

to the global averages.

…Turnaround of DIAL - set to drive overall vertical’s performance …

DIAL, the biggest project in GMR’s portfolio post commercialization has been stabilizing and

has impacted the overall performance of the airport vertical. Post the execution,

management bandwidth is now shifting their focus on improving the operational profitability.

DIAL is expected to turn green over the next 5 years and will benefit from tariff

implementation tentatively expected by FY13E. We expect the adoption of tariff policy to be

positive for DIAL and revenue in such a scenario will jump by 24% from Rs 14.2bn in

FY12E to Rs 17.6bn in FY13E (As per our base case). Any delay in implementation of the

tariff policy is likely to result in a slower revenue growth at 17.1% from Rs 14.2bn to Rs

16.6bn in FY13E.

DIAL falls under a Hybrid Till mechanism assuring a guaranteed return on the Aero side

and upsides from the Non Aero side. Aero realisation per pax is expected to increase by

11% CAGR over FY11-14E led by tariff implementation. Non Aero segment, being

independent from the regulatory framework will continue to operate on free pricing basis

and will be determined by the increasing passenger spend and footfalls. DIAL has

witnessed robust trend in passenger growth at 16% CAGR over FY03-FY11 and is

expected to continue a double digit growth at a 14% CAGR over FY11-14E. Hence, Non

Aero is expected to be the key determinant driving the long term profitability of DIAL

considering the Aero upsides will always remain capped by the regulator.

Non aero revenues to contribute in

improving the sustainable ROE of

the airport vertical in the long run

Implementation of tariff policy to

drive turnaround at DIAL over the

next 5 years



…. Profitability to follow suit led by guaranteed regulatory model…

Due to the regulatory mechanism in place, we believe the question is not “whether”, it is

only “when” the airport segment will turn green. We expect the complete impact of tariff

policy to be visible after ~4 years for DIAL and overall Airport segment to turn green in

FY15E. Profitability for an airport operator is largely a function of revenues (Aero & Non

Aero) and cost (staff costs & administrative expenses). As most of the cost in an airport

facility is fixed in nature, there is a significant leverage coming from the incremental

passenger traffic at airports. However, the operating leverage can be exploited by airports

operating under Dual Till or Hybrid Till. Under the Dual till, the entire profitability for the Non

Aero revenues will be enjoyed by the Airport operators. The moot question is only when the

airport operations return to a sustainable profit zone and we believe, it should happen over

the next 4 years.

Financial performance (DIAL)

Particulars Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 CAGR (FY11-14E)

Revenues (incl RE) 11.5 12.4 15.0 19.1 23.0 23%

Aero (Incl Cargo) 6.0 6.0 7.1 9.2 12.0 26%

Non Aero (excl. real estate) 5.1 5.6 7.1 8.4 9.5 19%

Real Estate rentals 0.5 0.8 0.8 1.5 1.5 25%

EBITDA 2.7 1.5 2.2 4.2 6.0 60%

EBITDA Margin 23.3 11.8 14.9 21.8 26.2 30%

PAT 0.4 (4.5) (7.8) (5.5) (3.6) -7%

PAT ( GMR Share ) 0.3 (2.4) (4.2) (3.0) (2.0) -7%

CFO 4.0 0.4 6.5 8.4 12.6 222%

Drivers

Passengers (mn) 25.5 29.6 34.7 39.2 43.4 14%

Capex -41.2 -11.6 0.0 0.0 0.0

Land parcel monetized 45 45 45 75 75 19%


Significant operating leverage of airports to accentuate pace of improvement

Airport sector globally has been enjoying high EBITDA margins and benefits from the

economies of scale. We expect the airport vertical’s EBITDA margins to shoot from the

present ~21% to 28% by FY14E with significant traction in revenues and relatively stable

nature of operating costs. Aero & Non Aero revenues are also subject to assumptions with

regards to implementation of tariff order, which may lead to alterations in the EBITDA

margins at the airport vertical. As traffic volume increases & tariff implementation takes

effect at DIAL, we expect significant improvement in overall EBITDA.

EBITDA to grow at a faster pace with increasing margin Margins to expand for airport vertical

Airport

2.7 1.5 2.2 4.2 6.02.2 3.04.2

4.53.9

1.42.6

3.13.6

(5.0)

-

5.0

10.0

15.0

20.0

2010 2011 2012 2013 2014

EB

ITD

A (

Rs b

n)

DIAL incl. real estate GHIAL ISGIA Male Airport Others

CAGR 36%

(FY11-14E)

21.5

24.8

27.7 28.3

20.0

24.0

28.0

32.0

2011 2012 2013 2014

EB

ITD

A M

arg

ins

Source: Company, Emkay Global Source: Company, Emkay Global

Profitability assured due to

regulatory mechanism and hybrid

till to ensure better ROE’s

With significant build up in

capacities and the fixed nature of

expenses at airports, operating

leverage to accelerate EBITDA



Rate of sustainable ROE to improve with timeline linked to regulatory policy

With the evolving regulatory framework, there is a lot of ambiguity with regards to the

calculation of returns for airports. In the interim, Hyderabad has been allowed to charge

UDF till FY13E based on 18% cost of equity. Thus, we remain optimistic that even if the

airport has to adopts a single till mechanism, regulator should ensure 18% cost of equity for

computing regulated returns. For Delhi Airport, the regulator (AERA) is still contemplating

the fair rate of return, which will be allowed to airport developers. The regulator, we believe,

will ensure ~16% cost of equity or a ~12% WACC for the computation of regulatory returns.

Also, the ability to generate further returns under the hybrid or dual till model at Delhi airport

will mean the core ROE’s over the life of the concession will settle at ~21%.

Since part of the airport project is funded by land monetisation deposits in addition to

conventional debt & equity components, calculation of WACC for airport developers has its

own set of challenges - the principle issue being - Whether such land deposit be considered

as quasi equity or quasi debt for calculating the fair rate of returns. However, irrespective of

the outcome, the fair rate of return should not deviate significantly from our estimates due to

low weightage of such line item in overall project cost. Hyderabad airport has not monetised

any land parcel for funding the project and land monetization deposits at Delhi airport are a

meagre ~12% of overall project cost.

Stage at which Delhi & Hyderabad airport are placed on regulatory front

Current situation

Issue Delhi Hyderabad Company stance Regulator stance Status

Till

Hybrid till as per

OMDA

Dual till but no

specification in

OMDA

Hybrid till at Delhi dual

till at Hyderabad be

maintained

AERA has preferred

single till for Hyderabad

airport; Hybrid till to

continue at Delhi

Company has appealed

against the AERA order for

single till at Hyderabad, Delhi

airport awaiting finalisation of

ADF to file for tariff petition

Levy of Development Fees (DF)

Interim order

allows to charge

ADF for 3 years

subject to a ceiling

of Rs18 bn

Allowed to

charge UDF as

part of regulated

charges

DIAL asking for

another Rs16.5 bn of

DF

Decision to allow even

existing DF subject to

approval

Cost audit completed by EIL &

KPMG, ADF disapproved in

the interim & will commence

once the procedural approvals

are obtained

ROE will gradually improve to the

levels of cost of equity assured by

regulator, further improvement

depends on Non Aero segment

(incl Land monetization)



Monetisation of real estate can significantly tilt the profitability equation

Commendable record of monetising the 1st tranche of 45 acre

Land monetization has the potential of transforming the returns from the vertical and we are

confident of the same, given GMR’s successful track record. GMR had earlier monetised a

45 acre land parcel in 2010 at a time when the world was emerging from the aftermath of

global financial crises, Despite that, it garnered ~Rs 14.7bn as upfront deposits and Rs

800mn of annual rentals with an escalation of 5.5%p.a., which is a commendable

achievement. Infrastructure, in and around Delhi airport, is witnessing a significant facelift

and with the commencement of Metro services till the airport, the next phase of

monetisation is only expected to be at a premium compared to the earlier transaction.

250 acre of land parcel development at Delhi 45 acre of DIAL land parcel already monetised

Source: Company, Emkay Global Source: Company, Emkay Global

Monetisation of remaining parcel (205 acre) to further ease funding equation

DIAL further has ~205 acre of land parcel, the monetisation of which, can turn the tables

changing the fortunes for DIAL in a short span of time. Such monetisation will drive cash

flows (Initial deposits) & operating profitability (rental) to the next level. We have modelled a

moderate 5.5% p.a. appreciation in realisation value. We expect another 105 acre to be

monetised by FY15E (30acre - FY13E, 75acre - FY15E). This monetisation can result in

~Rs42.6bn of upfront deposits, which can be either utilised in de-leveraging the airport

operations or for further expansion of airport infrastructure. Valuation of Delhi land parcel

forms ~26% of the overall GMR Infrastructure value or Rs 9.2 per share in our base case.

We have valued the land parcel considering an escalation of 5.5% p.a. to the value realised

by GMR Infra in the 1st phase. Key factors impacting the valuation of real estate is the cost

of equity & fluctuations in realisation per acre. However, the land parcel in a situation were

the growth in realisation slows to 3.5% p.a. & cost of equity increases to 17% will decline by

12% to Rs 8.1 per share

Sensitivity of our valuation to CoE & change in realisation per acre to our base case

Increase in realisation p.a. Cost of Equity

3.5% 4.5% 5.5% 6.5% 7.5%

13.0% 10.1 10.2 10.4 10.6 10.8

14.0% 9.5 9.6 9.7 9.9 10.1

15.0% 9.0 9.1 9.2 9.3 9.5

16.0% 8.5 8.6 8.7 8.8 8.9

17.0% 8.1 8.1 8.2 8.3 8.4

Monetizing the 1st tranche (45

acre) in a grim market situation –

Truly commendable

Monetisation to tilt the equation in

favour of GMR Airports



Thus, we believe that real estate operations potentially hold more value as compared to the

core airport operations. Although at Hyderabad, GMR has been awarded 1,500 acres of

land for development, which includes the development of 250 acre of aviation SEZ, 250

acre of development of logistics SEZ & 1,000 acre of development of Airport City. We have

given a meagre Rs 15mn/ acre to the 1,000 acre of Airport city and not considered any land

value of the remaining 500 acre of SEZ development.

Road vertical: Good mix of annuity & toll road projects adds solidarity

GMR has emerged as one of the leading developers in the road BOT segment with pre-

qualification to bid for projects with overall ticket size of Rs 70bn per project at NHAI under

the RFAQ mechanism. GMR has ~421 kms of operational road portfolio (3 annuity & 3 toll).

GMR has an impressive portfolio of 3 other road projects (309km), which are at the

development stage. 2 of the under development projects are toll projects (280km) and the

3rd is an annuity project (29km). Revenues from road segment are expected to grow ~3

fold from Rs 3.9bn to Rs 11.9 bn by FY14E, due several big ticket projects set to become

operational over the next couple of years. We expect the EBITDA margin to shrink from

82% to 74% by FY14E due to Hyderabad-Vijaywada project, which operates on a 32.6%

revenue share, impacting the overall margin picture. However, the EBITDA is expected to

grow ~2.6fold from Rs 3.5bn to Rs 9.05bn by FY14E (excluding Ahmedabad – Kishangarh).

Profile of road projects with GMR

Toll based projects Stake Total project cost Expected CoD Kms Status

Ambala Chandigarh Exp. (GACEPL) 100.0% 4,993 Nov-08 35 Operational

Jadcherla Exp. (GJEPL) 100.0% 5,155 Feb-09 58 Operational

Ulunderpet Exp. (GUEPL) 100.0% 8,817 Jul-09 73 Operational

Hyderabad Vijaywada Exp. (GHVEPL) 74.0% 21,934 Jul-12 181 Under development

Hungud Hospet Exp.(GHHEPL) 51.0% 17,011 Mar-13 99 Under development

Ahmedabad - Kishangarh 100.0% 65,000 Apr-15 555 L1

Total Fair Value - a 1,22,910 1001

Annuity based projects

Tuni Anakapalli Exp. (GTAEPL) 61.0% 2,950 Dec-04 59 Operational

Tambaram Tindivanam Exp. (GTTEPL) 61.0% 3,620 Oct-04 93 Operational

Pochanpalli Exp. (GPEPL) 100.0% 7,043 Mar-09 103 Operational

Chennai Outer Ring Road (GCORRPL) 90.0% 11,668 Jun-12 29 Under development

Total Fair Value - b 25,281 284

Total Value of Road Portfolio - (a+b) 1,48,191 1285


Addition of Ahmedabad – Kishangarh will catapult GMR to the big league

GMR has emerged as L1 for the largest single project ever awarded by NHAI i.e.

Kishangarh- Ahmedabad. The project entails 6 laning of 555 kms in the state of Gujarat and

Rajasthan. This is the single-biggest highway project awarded so far in India, both in terms

of value and length and covers ~40% of the length between Mumbai and Delhi on the

golden quadrilateral. NHAI pegged the overall cost of the project at Rs 53.87 bn. We also

expect the equity IRRs for such a project to settle in the range of 13-15%. With the recent

win, GMR is expected to increase the portfolio size by 76% from 731 kms to 1,286 kms.

With 43% of road kms under

development likely to commence

toll collection by FY14E, road

segment revenues to receive

significant boost

GMR has emerged as L1 for the

biggest project ever awarded by

NHAI - both in terms of value and

length



EPC vertical - key beneficiary of MALE airport & Abd-Kishangarh project win

GMR has emerged as L1 for the largest single project ever awarded by NHAI i.e.

Kishangarh- Ahmedabad and is expected to translate into order inflow for the construction

vertical (EPC) for GMR infrastructure. Present order backlog is set to witness rampant

growth from existing Rs 32bn to Rs 72bn assuming an inflow of Rs 40bn EPC component

from Ahmedabad – Kishangarh project. We have also not considered the potential addition

from Male airport which can provide further upsides to the outstanding backlog. With

existing order backlog already at 6.2x FY11 EPC revenues and a robust pipeline, GMR has

significant visibility for revenue growth in the EPC vertical.

EPC revenues expected to leap ahead with good orderbook backlog growth

4,0

99

5,1

56

10,4

00

20,4

00

25.8

101.7 96.2

-

5,000

10,000

15,000

20,000

25,000

FY 10 FY 11 FY 12 FY 13

Rs M

n

0.0

20.0

40.0

60.0

80.0

100.0

120.0

(%)

Construction Revenues Grow th


EPC vertical to benefit from

addition of Ahmedabad-

Kishangarh and Male Airport



Power - Funding to ensure execution, Realisation holds the key

GMR Infrastructure is expanding rapidly in the energy vertical with the installed capacity set

to rise from 823 MW to ~3,600 MW by FY13E and gradually to 8,471 MW by FY18E.

~4,138 MW is currently under implementation, which is expected to be operational by

FY15E. While the energy vertical has the potential to become a future value creator, its

ability to tie up future capacity at lucrative rate remains the key determinant. As a result, we

expect the airport, EPC and road verticals to drive value over the next 2 years. The power

vertical is still in investment phase with a slew of projects lined up for commissioning over

the next couple of years.

Profile for generation capacity

Plant Capacity

(MW) Stake

Stake adjusted capacity

Fuel Type Status Project

cost (Rs mn)

Total equity req. (Rs Mn)

CoD/ Exp. CoD

Offtake Arrangements

GEL, Tamil Nadu 200 50 100 LSHS Operational 1998 Regulated

Barge Mounted, Karnataka GPCPL) 235 100 235 Natuaral Gas Operational 2001 Merchant

Vermagiri Phase I, AP (VPGL) 388 100 388 Natuaral Gas Operational FY10 Regulated/ Merchant

Vemagiri Phase II, AP (VPGL) 768 100 768 Natuaral Gas Financial Closure 32,500 7,800 Q4FY12E Merchant

Kamlanga Dhenkamal Orissa 1400 80 1,120 Captive coal mine Financial Closure 64,600 12,920 FY13 Regulated/ Merchant

Emco Energy 600 100 600 Coal linkage Financial Closure 34,800 8,700 FY13 Regulated/ Merchant

GMR energy Raipur Chattisgarh 1370 100 1,370 Coal linkage/ imported

Financial Closure 82,900 20,725 FY15 Regulated/ Merchant

Shahdol (SJK) 1370 70 959 Coal linkage/ imported

Expected shortly 82,900 14,508 FY15 Regulated/ Merchant

Alaknanda Hydro Uttarakhand 300 100 300 Hydro DPR approved FY16E Regulated/ Merchant

Bajoli Holi Himachal Pradesh 180 100 180 Hydro DPR Submitted FY16-17 Regulated/ Merchant

Talong Hydro Arunanchal Pradesh 160 88 141 Hydro DPR stage FY15-16 Regulated/ Merchant

Karnali, Nepal 900 51 459 Hydro DPR stage FY16-17 Regulated/ Merchant

Marsyangdi, Nepal 600 80 480 Hydro DPR stage FY16-17 Regulated/ Merchant

8471 7,100 297,700 64,653

Long term PPAs to the tune of ~1,200MW add a lot of comfort to the vertical’s cash

generating ability. Moreover, the intention to further convert open capacity into long term

PPA as and when the projects near commissioning, will further boost the long term visibility.

Gas availability is the biggest overhang on the power vertical

Overhang on the power vertical is due to short term mismatch of gas availability for

Vemagiri expansion phase II (768MW), with the commissioning expected in near term i.e.

Q4FY12E. Although in the long term, the plant will receive preference in getting fresh

allocation from EGOM as the plant is in advanced stages of commissioning. In the short

term, the hope solely rests on the ramp up at KG-D6 well. GMR is also actively seeking

options for any alternative fuel arrangement. However, in our assumptions, we are building

a delayed start i.e Q4FY13E to remain on the conservative side. And we have considered

operations at a suboptimal 70% PLF throughout the life of the plant.

EBITDA contribution to be equally good for the power vertical by FY14E

We expect GMR’s power vertical to support the overall operating performance, despite

muted merchant realisations and lower operating PLF assumptions for untied capacity. We

have assumed a merchant realisation of Rs 4.0 per/kwh till FY14E and corrected the

merchant realisation by 15% in FY15E to Rs 3.4 per Kwh. Thereafter, we have built in 3%

hike for every alternate year. Even with conservative merchant realisation and lower

operating matrix, the EBITDA of the power segment is expected to grow at 115% CAGR

from Rs 3.7bn in FY11 to Rs 37bn in FY14E.

Installed capacity for the power

vertical to grow ~4.5x over the

next 2 years by FY13E

Ambiguity on gas availability

priced in our estimates

Significant addition to installed

capacity & prospect in captive

mining for Kamlanga plant driving

the performance of power vertical



Mining - Investment enters fast lane in FY12E, negating fuel risk to coal

based plants

GMR Infra is counting on its coal mines in Indonesia, which are expected to commence

production by Q3FY12E (initial capacity of 1mtpa gradually ramping upto 5 mtpa by

FY15E). GMR Infra has already committed USD 180 mn and the mining is set to expand at

a meaningful pace. In the first phase of development, GMR is focusing on the development

of 5,500 hectares, out of 25,000 hectares of land approved for mining. Indonesian coal is of

slightly superior quality compared to its Indian counterpart with a calorific value of 4,400kcal

& 35% moisture. GMR’s Indonesian mines are expected to play a key role in ensuring fuel

security for its under development generation portfolio. The Indonesian mining capacity will

gradually ramp up to 5mtpa by FY15E. GMR has also acquired additional 30% stake in

another operational mine (Golden Energy Mine), which is expected to provide further

3MTPA to GMR.

The initial phase of Indonesian mines has 5,500 hectare under its possession with 104MT

of coal reserves. Although GMR’s upcoming capacities in its power portfolio have an

approved linkage of ~10MT, in case of Coal India failing to meet the obligation, GMR can

always fall back on their Indonesian mines to support their generation capacities.

GMR, in addition to the Indonesian coal mines, also own 55.84% stake in Homeland

Energy, which has an operational 1.2 mtpa opencast Kendal mine in South Africa. Lack of

infrastructure to export coal outside South Africa is impacting the realisation and profitability

of Kendal mines. Homeland is also developing another opencast coal mine Eloff with 275

mn tons of coal reserve and an annual capacity of 5MTPA by FY15E. The mine is expected

to commence production in FY14E. GMR is also developing along with its consortium

partners, the Rampia mines which are located in Orissa. The output from Rampia mine will

be utilised in meeting the fuel requirements at Kamlanga. GMR has entered into a definitive

agreement to acquire 30% stake in Golden Energy mines Tbk, a Sinar Mas group company

in Indonesia for a consideration of ~USD 500mn. The mine is currently producing in the

region of 2-3MTPA and is expected to increase the mining capacity to 10MTPA by FY15E,

improving the fuel security for its generation capacity.

Given its mining plans in the domestic and international arena, GMR Infrastructure is likely

to emerge as an integrated power player with highest fuel security in terms of thermal coal

adequacy. GMR Infrastructure by FY15E will require 22 MTPA of coal for running its

thermal coal based capacity and the company has acquired a linkage from Coal India of

10MTPA. GMR from the present Indonesian and South African mine is expecting a total

output of 14MTPA and additional 3 MTPA is expected from the recent pact to acquire 30%

stake in PT Golden Energy mines. Such a captive capacity of 17MTPA alongwith the

10MTPA linkage with Coal India will be sufficient to meet the overall capacity of 22MTPA.

Adequate backup from

international coal mining

operations to tremendously

increases fuel security



Domestic focus top priority post the divestment of Intergen

GMR Infra’s exit from InterGen is a big positive given the freeing up of management

bandwidth to concentrate on domestic energy vertical and incremental financial leverage,

which GMR undertook to support their investments in low yielding assets. GMR Infra

acquired 50% stake in InterGen in a largely debt funded acquisition worth USD 1.135 bn.

Although InterGen had a strong energy portfolio spanning across 11 projects or 5,826 MW,

its profitability always posed significant challenges due to its highly leveraged position.

Again, GMR Infra’s returns from InterGen over the holding period turned out to be lower

than the costs of servicing the acquisition-related debt, which was putting additional burden

on the parent’s cash flows. Further, with IFRS convergence, GMR Infra’s financials would

have been impacted by the debt raised to fund the acquisition. As such, although the

divestment of stake in InterGen was made at a loss, we expect the exit to be beneficial in

the long run and free up resources, which will help in funding domestic projects.

Tied up funding for next 2 yrs, Future funding requirements to be met by IPO

GMR has no further obligations to commit equity in any of the airport projects. It will have to

deploy funds only in power, mining and road vertical. GMR is expected to invest another Rs

35bn to support 4,138 MW of projects under development and another Rs 7.42bn for the 3

under development road projects. The first phase of investment for Indonesia coal mines is

already committed and any further requirement will be met through internal accruals of the

coal mine.

Despite the ambitious capex plans, the recent fund raising by way of QIP and issuance of

convertible instruments in the energy and aviation holding company are sufficient to meet

GMR’s funding requirements for the next 2 years. We believe that even their future funding

requirements can be met by listing their power and airport verticals.

GMR Energy raised Rs 13.6bn through convertible pref. share(CCPS) in FY11

GMR’s current holding of cash & cash equivalents will be adequate to meet their investment

requirements till FY14E i.e the ongoing power project under construction aggregating

~4,138 MW, 3 ongoing road projects and Indonesian coal mines. Funding plans post

FY14E are expected to be met by proposed value unlocking in the energy segment through

the IPO route of GMR Energy (Holding company of the energy vertical).

GMR’s energy vertical has raised ~Rs 13.65 bn in FY11. We expect it to meet its future

requirement as well as provide an exit to private equity investors through an IPO of Rs

30bn. Strong cash reserve of Rs 30bn with the parent company alongwith cash accruals

from the operational asset base are sufficient to meet GMR’s future equity commitments.

Money raised at GMR Energy

Date Type Rs bn Investors

Apr-10 Compulsorily convertible preference shares 9.0 Temasek holdings,

Jun-10 Compulsorily convertible preference shares 4.6 IDFC PE, Ascent Capital, Argounaut Ventures Capital Advisors

Total - Energy vertical 13.6


Further equity dilution at GMR Infra or SPV level cannot be ruled out in the event of any

delay in raising money through IPO beyond FY14E and/or any increase in equity

commitments through new projects.

Near term funding in place for the

next 2 years and long term funding

requirement to be met by IPO



GMR Airport raised Rs14.9bn through CCPS in FY11/12

GMR has raised money twice in the past six months through the PE route in the airport

vertical. GMR airport vertical has raised ~ $331 mn through the compulsorily convertible

preference share route. As a part of the deal, the airport holding arm will convert the issued

CCPS into equity shares at the time of planned listing of GMR Airport. We believe the

airport arm is expected to target a listing in FY14-15E. The exact valuation at which such

CCPS will be converted into equity is not known. Further, we believe it will translate into

~10% dilution at GMR Airport.

Airport segment is self sufficient to fund the existing portfolio of assets with no requirement

of fresh equity contribution to the vertical. Even then, GMR has raised ~$331 mn or Rs 14.9

bn and will be considering an IPO for giving the PE investors an exit in FY14-15E. The

proceeds raised are expected to be utilised for general corporate purpose and to fund future

growth opportunities in the vertical.

Money raised at GMR Airport

Date Type Rs bn Investors

Mar-11 Compulsorily convertible Preference shares 9.0 Macquire & SBI Infrastructure

Jul-11 Compulsorily convertible Preference shares 5.9 Standard Chartered PE, Old Lane partners, JM Financials & Build India capital

Total - Airport vertical 14.9


Recent fund-raising to de-leverage balance sheet

GMR Infra raised ~Rs 14 bn in Apr’10 through a QIP issue. In the last 9 months, GMR

Energy and Airports Hold Co have together raised ~Rs28.5 bn through private equity. As a

result, the balance sheet is well funded to develop projects till FY14E. Since these funds

were expected to be invested in various planned projects over a period of time only, GMR

Infra partially used these funds to retire debt in the interim. While the reduced debt levels

and increase in equity base have resulted in lower balance sheet leverage, we expect this

improvement to be transient and the re-leveraging of balance sheet is imminent given the

substantial capex plans. We expect the overall net Debt/Equity at 3.3x by FY13E with

immense built up of installed capacities.



Proven capabilities on execution front

GMR Infra operates largely as a developer with the actual construction being outsourced to

various third party sub-contractors. GMR Infra has proved its execution capabilities under

such a model with the delivery of flagship airport (Delhi) before the commonwealth games.

12 operational projects i.e 3 airports, 6 road projects and 3 power projects without

significant time overruns are all indicative of GMR’s project execution capabilities. With

growing impetus on the in-house EPC arm, we expect the company to maintain a healthy

mix of in-house and third party subcontracting in the future. Some of the major

accomplishments and milestones of GMR infrastructure are highlighted in the table

attached below.

Major milestones for GMR Infrastructure

Airports Energy Urban Infrastructure & Highways

2011-12 Acquired 30% stake in Golden Energy - Indonesian Mine

Emerged as L1 for Ahmedabad - Kishangarh (555 km) 4 to 6 laning project

2010-11 Won the bid to develop Male Airport Signed MOU for development of 25MW solar plant in Gujarat

Completed financial closure for Hyderabad - Vijaywada,

Achieved financial closure for MRO operations

Financial Closure for Vemagiri - II & Chattisgarh – 1,370 MW

Chennai ORR, Hungund-Hospet project

New terminal T3 became operational on July 3, 2010

Won bid to develop & operate 320 kms of transmission project at Rajasthan

MOU with MP for development of 1,980 MW coal based power plant

2009-10 New terminal 1D commissioned in Delhi Airport

Acquired EMCO & SJK Powergen coal based power plant

Won Chennai ORR,

Achieved financial closure for Kamlanga & EMCO

Won Hungund - Hospet road project

Expansion work started at Vemagiri powerplant 768MW

Won Hyderabad - Vijaywada

2008-09 Acquired 100% stake in PT Barsentosa Lestari - Indonesia Coal mine

CoD of AdloorYellareddy - Gundlapochanpalli

Acquired 33.3% stake in Homeland Energy Thondapalli - Jadcherla

Acquired 50% stake for USD 1.1bn in IntergenNV

Ambala Chandigarh

2007-08 Commenced operations at Hyderabad Airport

MOU for 160MW Talong Krishnagiri SEZ project, TN

Won a bid to develop and operate Sabiha Gokcen Airport in Turkey

MOU for 1200MW plant in Chattisgarh Two Hyderabad Airport SEZ

2006-07 Awarded 180 MW Bajoli Holi

Awarded 250 MW Upper Marsyangdi

Awarded 300MW Upper Karnali

2006-07 CoD of 388.5MW Vemagiri Plant

MOU for 1050 MW Kamalanga Power plant in Orrissa

2005-06 Won a bid to develop Delhi Airport Awarded 300 MW Alaknanda Power Plant

CoD of Tambaram - Tindivanam 2004-05

CoD of Tuni Anarkapalli

2003-04 Awarded Hyderabad Airport

2001-02 CoD of 220MW power plant in Mangalore

1998-99 CoD of 200MW Chennai power plant



Diversification across several emerging verticals

GMR Infra has ventured into several urban infrastructure projects like SEZ, Solar projects &

Transmission and distribution segment. GMR is already developing a multi product SEZ

spread over 3,300 acres at Krishnagiri in Tamil Nadu. About 70% of the land has already

been procured. Within the power vertical, GMR Infrastructure is developing 25 MW solar

project in Gujarat, which is expected to commence operations in Q4FY12E and has further

won 2 bids from Rajasthan Rajya Vidyut Nigam for setting up 386 circuit kms of

transmission line on BOT with a concession period of 25 years.

Near term catalysts for GMR Infrastructure

� Approval of ADF, which has been stopped by a Delhi High court order

� Announcement of land monetization at DIAL

� Positive outcome from the Appellate tribunal on the Hyderabad airport.

� Continued growth momentum in the aviation sector

� Stronger growth in realisation on the Non Aero side

� Commencement of mining operations in Indonesia and developing Eloff mines in

South Africa

� Strong traction in the EPC vertical with order backlog benefiting from addition of

Ahmedabad- Kishangarh and Male Airport projects

� Higher visibility on gas availability over the next 6 months

� Favourable merchant realisation

� Better than expected operating performance of power plants

SWOT analysis of GMR Infrastructures

Strengths

First mover advantage in high growth Indian aviation sector, scalable projects in its portfolio,

Impressive project-execution record of completing projects ahead of schedule, wide

management bandwidth, Balance sheet strength to qualify for larger infrastructure projects

across verticals.

Weaknesses

Complex holding structure of the entity, frequent alterations in the policy framework in

different verticals hampers strategic outlook, Airport vertical awaiting clarity on regulatory

mechanism, Imposition of MAT on SEZ’s in the budget 2011 has impacted viability of SEZ.

Opportunities

Sweet spot to exploit opportunities in Indian infrastructure space, as 12th Five year plan to

target USD 1 trillion in infrastructure spending. GMR's first-mover advantage in the

infrastructure developer space adds significant technical edge to the company.

Threats

Regulatory framework still evolving for the Indian aviation sector, Delays in implementation

of framework will delay the profitability for GMR’s aviation vertical,



Risk

Regulatory ambiguity is still the biggest overhang

Lack of regulatory framework for implementation of tariff order at DIAL and GHIAL along

with the ambiguity on the calculation of RAB with regards to land value is deterring

turnaround of operating performance at DIAL. We also believe the overall prospects of land

bank monetization will depend on the computation of RAB. We expect the regulator to

finalize the matters over the next 6 months and the tariff policy will be implemented by

FY13E at DIAL. The matter is sub-judice at GHIAL and till further clarity emerges on the

verdict from the appellate tribunal, we have assumed status quo for the GHIAL.

Fortune tied to the airline industry

Airlines need airports and airports need customers. There is a symbiotic relationship

between airports and airlines and therefore, airports often share the fortunes and woes of

their home flag carriers. Airlines currently operate on very thin margins and are therefore,

extremely mindful of minimizing the fees they pay to airports. In our view, airports are

somewhat at the mercy of the demands of the regulator and the airline industry, which can

often result in non-ideal outcomes for airport operators.

Oil price fears

Rising oil prices are an obvious concern to the air transportation industry. We believe rising

oil prices can lead to reduced airport traffic if the rise is material and sustainable and the

speed of the increase is severe. This is due to the fact that fuel prices can change

operational behaviours in the airline industry. The airlines typically have a high degree of

fixed costs. Hence, to reduce fixed cost there is a temptation to grow capacity often

impacting profitability and hurting yields. Higher fuel prices raise the proportion of marginal

costs, leading airlines to be more disciplined on capacity and therefore, reduce growth.

Fuel security in the near term

Considering the bleak outlook for ramping up of gas production at KG-D6 gas block, the fuel

security for the gas based power plants is a big overhang on the power vertical. We believe

the existing capacity will continue to operate at suboptimal levels till the alternative sources

of gas are developed or there is significant ramp up in the KG-D6 gas availability.

Lack of domestic growth opportunity for the airport segment

Airport privatisation has taken a back step and the government has not been able to

develop more number of opportunities under the PPP route which has meant the

companies which are considering opportunities have to venture outside India. We believe

GMR is well funded to tap further opportunities of growth following the recent equity infusion

in the GMR Airport holding company.

Inability to internally fund the long term capex requirements

In the short term, GMR is adequately funded to meet its capital requirement for the next two

years. We believe with humungous pipeline of projects, which are under development,

GMR will continue to seek additional funding which is expected to be raised by monetisation

of investments in the energy and infrastructure vertical. We believe, with strong portfolio

under both the power and aviation vertical, the company is in a strong position to explore

such an opportunity.



Financials

Strong project pipeline under devel. set to drive 43% rev. CAGR (FY11-14E)

GMR has been in capex mode for the past few years and continues to invest heavily in

developing power and road capacities. We expect the Power and Airports vertical to drive

revenues from Rs 64 bn to Rs 187 bn, registering a CAGR of 43%. The business model of

Power & Airport vertical complement each other extremely well as cash flows in the airport

vertical are back ended while that in the power vertical start immediately after

commissioning. The revenue traction is expected from commissioning of additional 2,768

MW of power generation capacity, commencement of Indonesian & South African coal

mine, implementation of tariff order at DIAL and organic growth of passengers for aviation

segment & commencement of toll collection at 3 new road projects.

Revenue growing at 43% CAGR over FY11-14E

GMR Infra

20.1 30.5 43.6 52.0 58.020.421.1

25.436.2

82.0

3.22.9

2.3

2.3

2.3

0.0

50.0

100.0

150.0

200.0

2010 2011 2012 2013 2014

Revenue (

Rs b

n)

Airports Pow er Roads EPC Mining Others

CAGR 43% (FY11-14E)


Power & Airport which forms ~ 70% of the overall revenues and are expected to grow by

57% and 24% CAGR (FY11-14E) respectively. Traction in the power segment is visible due

to the commencement of operations (2,768 MW) of several thermal based capacities by

FY14E. Traction in revenues is mainly led by the implementation of regulatory mechanism

& streamlining of newer opportunities to earn revenue at Male Airport.

DIAL & MALE driving the airport performance Under development capacity to drive power segment

Airport

11.5 12.4 15.0 19.1 23.04.3 5.2 6.67.3

6.86.1

8.19.3

10.7

4.0

11.113.6

14.7

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2010 2011 2012 2013 2014

Revenue (

Rs b

n)


CAGR 24%

(FY11-14E)

Pow er

2.4 3.5 5.5 5.1 5.57.7 7.5 7.6 7.68.7 7.6 9.8 9.9 10.8- - -

17.0

- - -6.3

18.8

- - -

4.7

- -

15.1

-

20.0

40.0

60.0

80.0

100.0

2010 2011 2012 2013 2014

Revenue (

Rs b

n)

Barge VPGL GPCL VPGL-II Kamlanga Kam.-ext. Emco

CAGR 57%

(FY11-14E)




EBITDA to grow at a staggering pace of 63% over FY11-14E

We expect the company to report EBITDA of Rs67.9bn in FY14E, up from Rs15.5bn in

FY11. Overall EBITDA margins on a consolidated basis will improve from 24.2% in FY11 to

36.3% in FY14E, due to 54% contribution coming from high margin power segment instead

of 24% in FY11. Expansion in EBITDA margins at power and Airport vertical will also

contribute to the overall expansion in margins.

EBITDA outpacing revenues led by margin expansion Overall EBITDA margin to expand to 36% by FY14E

GMR Infra

5.3 6.6 10.8 14.4 16.54.9

11.0

36.8

2.8 3.23.3

6.5

8.9

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

2010 2011 2012 2013 2014

EB

ITD

A (

Rs b

n)


CAGR 63%

(FY11-14E)

GMR Infra

27

24

24

29

36

2622 25 28 28

80 82 81 77 75

28

12 11 12 12

4248 45 45 45

0

20

40

60

80

100

2010 2011 2012 2013 2014

EB

ITD

A M

arg

ins

GMR Infra Airports Pow er Roads EPC Mining Others


Power vertical again steals the limelight with 115% CAGR in EBITDA growth from Rs 3.7bn

to Rs 36.8bn due to commencement of fresh capacity with higher EBITDA margins from

coal based capacities under development. We also expect airport segment EBITDA to grow

at 36% CAGR (FY11-14E) from Rs 6.6bn to Rs 16.5bn.

Integrated coal based power plants to drive margins Tariff policy, growth in pax driving airport performance

Pow er

(0.4) 0.9 2.0 1.5 1.7

8.2

11.0

-

3.2

1.7

9.5

(10.0)

-

10.0

20.0

30.0

40.0

2010 2011 2012 2013 2014

EB

ITD

A (

Rs b

n)


CAGR 115%

(FY11-14E)

Airport

2.7 1.5 2.2 4.2 6.02.2 3.04.2

4.53.9

1.42.6

3.13.6

(5.0)

-

5.0

10.0

15.0

20.0

2010 2011 2012 2013 2014

EB

ITD

A (

Rs b

n)


CAGR 36%

(FY11-14E)




Power vertical to drive profitability for GMR

We expect the company to report net profit of Rs10.8bn in FY14E, turning around from a

loss of Rs 9.3bn in FY11. Major decline in FY11 numbers was led by write off of one time

non recurring loss of Rs 9.4bn from divestment of Intergen. The power vertical will take the

lead in expansion of PAT. We believe both Power and Aviation segment complement each

other extremely well with the power segment contributing to the initial growth and

subsequent growth coming from the aviation segment.

Power vertical steals the limelight at PAT level PAT margins back in green by FY14E

GMR Infra

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

2010 2011 2012 2013 2014

PA

T (

Rs b

n)


1.

-9.3

-

4.4

11

.8

-0.6

1.6

GMR Infra

3

-14 -1

4 6

-5-7 -7

-2

-1

10 128

11 12

-19

-12-9

1 0

22

127 7 7

-17

-2

60

-25

-15

-5

5

15

25

2010 2011 2012 2013 2014

PA

T M

arg

ins

GMR Infra Margins Airports Pow er Roads EPC Mining


Power segment profits are expected to grow at 60% CAGR from Rs 2.5bn to Rs 10.1bn by

FY14E. We expect the profit contribution from new projects to exceed the profitability from

existing projects. With the commencement of regulatory framework and sustained

momentum in the Indian aviation segment, the existing losses at DIAL will stabilise over the

coming 4 years, which will result in airport segment turning around and contributing

positively to GMR infrastructure.

Underdevelopment capacities will be the key drivers Profitability marred by delays in implementation of

regulatory framework

Pow er

0.1 0.7 0.7 0.61.3 1.4

2.5

1.9

1.1

2.9

-

2.0

4.0

6.0

8.0

10.0

12.0

2010 2011 2012 2013 2014

PA

T (

Rs b

n)


CAGR 60%

(FY11-14E)

Airport

-1.0

-2.2-2.9

-0.9-0.4

0.3

-3.0

-2.0

-0.6

0.8 0.8 1.0 0.7

-0.9

-0.1

-0.1

0.00.00.4 0.5

1.0 0.8

-2.4

-0.6

(4.0)

(3.0)

(2.0)

(1.0)

-

1.0

2.0

2010 2011 2012 2013 2014

PA

T (

Rs b

n)

GMR DIAL incl. RE GHIAL ISGIA Male Airport




Valuation

Valuation methodology

We have used DCF valuation methodology to value the airport assets, since we believe this

is the most appropriate way to differentiate between these in a fair manner given the

different regulatory schemes under which they operate. We think DCF valuation allows less

arbitrary assumptions than sum-of-the parts (SOTP) models based on multiples approach,

especially given the limited breakdown in profitability of various airports. Without firm

regulatory basis for calculating returns on the basis of homogenous methodologies, we

think peer multiples do not depict the true valuations of an infrastructure company in capex

mode. In addition, airports offer long term visibility, which we believe, is more properly

reflected in DCF calculations along with the flexibility to alter the asset base.

We have used similar methodology for valuation of Power, Mining and Road segments as

well, which have different concession lives and different realisations. We have valued the

EPC based on FY13E EBITDA multiple, which is relatively conservative in comparison to

their peers. We have also accounted for the Net cash at the standalone level.

SOTP at Rs 38 - Discounted value offers great long term upside potential

GMR’s share price has underperformed the Nifty over the past year, mainly on the back of

concerns surrounding the airport regulatory mechanism and sub optimal availability of fuel

at gas based power plants. We believe GMR is available at a discount to its long term fair

value and operating assets like DIAL, with overall strategic importance within its portfolio

are being valued ignoring the enormous long term potential. Our SOTP based value of Rs

38 offers 27% upside from the present price. Airport assets including real estate contribute

~49%, Power contributes ~23% and Roads contributes ~10% to the total value. Key risks to

our positive ratings are regulations, delays in implementation and major new plan

announcements.

GMR Infra's SOTP Value

Sector GIL’s Equity Value (in Rs.Cr) Value Per GIL’s share (Rs.) Contribution to overall value

Airports (incl real estate) 71.7 18.4 49%

Roads 14.6 3.9 10%

Power 34.5 8.9 23%

Mines 6.0 1.5 4%

SEZ 3.5 0.9 2%

EPC 9.8 2.5 7%

GIL’s Net Cash 6.9 1.8 5%

GIL's Valuation 147.0 37.8 100%

Source: Emkay Global

While we estimate tariff based mechanism to commence at DIAL in FY13E, we do believe

the regulator will take into account the delay in implementation of the tariff policy and will

reimburse the actual revenues which DIAL was entitled to, had the tariff been implemented

from FY12E itself. Also, commissioning of ~2,800 MW of power capacity by FY13E

coupled with expansion of captive mining and traction in EPC vertical will drive the

operating performance at GMR. We also think it should continue to put on a resilient show

in case economic downturns persist, as the company is better placed than peers in terms of

funding. Superior positioning of the airports will further enhance the operating outlook with

significant growth in aviation traffic mitigating the overall regulatory risk.



Airport constitutes 49% of the overall SOTP

DIAL, including real estate, forms ~74% of the overall airport assets while the remaining 3

airports including the land parcel and ancillary development of hotels form ~26% of the

overall airport SOTP. We have taken a conservative approach for valuing the land parcel at

Hyderabad Airport assigning value per acre at less than 1/3rd

of the Delhi land parcel.

However, in the near term we do not forsee any development barring the MRO SEZ at

Hyderabad land parcel over the coming 2 years.

DIAL to form major chunk of Airport value

Project Cost of Equity Total Equity

Value (Rs. bn) Stake (%)

GIL’s Equity Value (Rs.bn)

Value Per share (Rs.)

Contribution to overall value

DIAL 13 28.8 54 15.6 4.0 23%

GHIAL 13 1.3 63 0.8 0.2 1%

SGIA 13 11.0 40 4.4 1.1 6%

Male 14 3.3 77 2.5 0.6 4%

DIAL Real estate 15 66.1 54 35.7 9.2 52%

GMR Hotel & resorts - Hyderabad 1x BV 1.1 63 0.7 0.2 1%

GHIAL - Real estate 15mn/acre 15.0 63 9.5 2.4 14%

Airport Assets Valuation 126.6 69.2 17.8 100%

Net Cash at Airport Holdco 10.5 10.5 2.7

Total Value of Airport Holdco 137.1 79.6 20.5

Value of convertible instruments issued

13.7 8.0 2.0

Total Value of Airport Holdco 123.4 71.7 18.4

Power forms 23% of the overall SOTP value

Operational Assets i.e GEL barge mounted, GMR Power, Vemagiri form ~32% of the

overall power valuation, projects which are expected to commence operations till FY13E

form ~47% of the overall power valuation with the remaining coming from projects

scheduled to start post FY14E.

Valuation driven by captive capacity

Project Cost of Equity Total Equity



Value Per GIL’s share (Rs.)


GEL Barge Mounted 13 3.2 100 3.2 0.8 6%

GMR Power (Chennai) 13 7.2 51 3.7 0.9 7%

VPGL 13 6.4 100 6.4 1.6 12%

VPGL Expansion 14 7.2 100 7.2 1.8 13%

Kamalanga (Incl. extension) 14 22.5 80 18.0 4.6 33%

EMCO 14 3.7 100 3.7 0.9 7%

Chattisgarh 14 10.0 100 10.0 2.6 18%

Alaknanda 15 1.0 100 1.0 0.3 2%

Island Power 1x BV 1.4 100 1.4 0.4 3%

Power Assets Valuation 62.8 54.8 14.1 100%

Net Cash at Power Hold Co -14.2 -14.2 -3.6

Total Value of Power Holdco 48.6 40.6 10.4

Value of convertible instruments issued

7.3 6.1 1.6

Total Value of Power Holdco 41.4 34.5 8.9



Mining contributes 4% of the overall valuation

Indonesian Mines PT Barsentosa forms ~90% of the overall while the South African mines

forms ~10% of the overall mining value. In our valuation case, we have not considered the

domestic mining operations as we believe the upsides of such operations will be captured in

the power vertical.

Indonesia mines to be the major driver

Project Book Value Total Equity





Indonesian Mines 1.5x 3.6 100.0 5.4 1.4 90%

Homeland Energy 0.5x 1.1 55.8 0.6 0.2 10%

Road to contribute 10% to the overall SOTP

Toll based projects form the bulk of the overall value with ~84% value coming from this

segment. ~16% of the overall road value comes from annuity based projects. We have not

included Ahmedabad – Kishangarh project in our valuations.

Valuation driven by toll based project forming 82% of the value

Toll based projects Cost of Equity

Total Equity Value

Stake Equity Value -

GMR Infra Per share

Contribution to

overall value

GMR Ambala Chandigarh Expressways Private Limited (GACEPL) 14.0% -87.5 100.0% -87.5 -0.02 -1%

GMR Jadcherla Expressways Private Limited (GJEPL) 13.0% 2,037.0 100.0% 2,037.0 0.56 14%

GMR Ulunderpet Expressways Private Limited (GUEPL) 13.0% 1,769.0 100.0% 1,769.0 0.48 12%

GMR Hyderabad Vijaywada Expressways Private Limited (GHVEPL) 14.0% 6,081.7 74.0% 4,500.5 1.23 31%

GMR Hungud Hospet Expressways Private Limited (GHHEPL) 14.0% 3,414.7 51.0% 1,741.5 0.48 12%

Total Fair Value - a 13,214.9 9,960.5 2.72 69%

Annuity based projects

GMR Tuni Anakapalli Expressways Private Limited (GTAEPL) 12.0% 936.8 61.0% 571.5 0.16 4%

GMR Tambaram Tindivanam Expressways Private Limited (GTTEPL) 12.0% 2,002.5 61.0% 1,221.5 0.33 8%

GMR Pochanpalli Expressways Private Limited (GPEPL) 12.0% 1,648.7 100.0% 1,648.7 0.45 11%

GMR Chennai Outer Ring Road Private Limited (GCORRPL) 13.0% 1,338.4 90.0% 1,204.6 0.27 7%

Total Fair Value - b 5,926.5 4,646.3 1.21 31%

Total Value of Road Portfolio - (a+b) 19,141.3 14,606.7 3.93 100%

SEZ to contribute 3% of the SOTP value

Krishnagiri SEZ forms ~94% of the overall SEZ value, which is considered at 1x its book

value while the Hyderabad MRO operations, which are scheduled to commence operations

in FY12E, are valued at 1.5x considering the heavy demand of MRO operations in India.

Krishnagiri SEZ forms major chunk of valuation

Project Book Value Total Equity





Krishnagiri 1x 3.5 95 3.3 0.85 94%

Hyderabad MRO 1.5x 0.3 63 0.2 0.05 6%

SEZ's Valuation 3.8 3.5 0.9



EPC to contribute 7% to the SOTP value

With prior experience of executing contracts in aviation & road sector, GMR is progressively

increasing its array of offering. GMR order backlog is likely to grow exorbitantly from Rs 32

bn to Rs 75bn, led by addition of Ahmedabad – Kishangarh project and also, addition of

works from Male Airport. We have considered a 4x FY13E EBITDA multiple, which leaves

room for positive surprises.

EPC arm valued at a 4x FY13 multiple

Description EV/EBITDA Total Equity value Stake Equity Value - GMR Per share

EPC 4x FY13 9.8 100.0% 9.8 2.5

Relative valuation

PE (x) PB (x) EV/EBITDA (x) ROE (%)

Company Name FY11P FY12E FY13E FY11P FY12E FY13E FY11P FY12E FY13E FY11P FY12E FY13E

GMR Infrastructure NA NA 26.3 1.2 1.2 1.2 20.9 18.9 13.7 -13.0 -0.8 5.5

Bloomberg Consensus

Domestic peerset 13.7 12.7 10.1 1.6 1.4 1.2 13.6 10.7 8.3 11.3 10.4 11.5

Gvk Power & Infrastructure 14.3 12.9 10.0 0.8 0.6 0.6 14.2 11.0 7.3 5.0 4.9 5.8

Reliance Infrastructure Ltd 7.4 6.9 5.4 0.5 0.5 0.4 12.1 7.9 6.3 7.8 7.4 9.2

Jaiprakash Associates Ltd 11.2 12.3 9.1 1.1 1.0 0.9 12.6 11.0 8.7 12.7 9.8 11.3

Larsen & Toubro Ltd 22.0 18.7 15.7 4.0 3.5 3.0 15.5 12.9 11.0 19.7 19.5 19.8

(Values in USD mn)

International Airport peerset 20.7 17.5 13.8 1.6 1.5 1.4 9.3 8.5 7.5 10.1 9.8 10.9

Europe Airports 18.1 15.7 14.4 2.2 2.1 2.1 8.7 7.8 7.4 15.3 13.3 14.2

ADP 19.6 17.7 16.0 1.7 1.6 1.5 8.8 8.0 7.5 8.9 9.2 9.8

Flughafen Zuerich AG-Reg 17.4 13.5 12.1 1.4 1.2 1.1 7.8 6.4 6.1 8.2 9.3 9.4

Kobenhavns Lufthavne 17.1 16.0 15.0 3.6 3.7 3.7 9.6 9.0 8.6 29.0 21.3 23.4

Asian Airports 19.8 14.3 12.2 1.5 1.4 1.3 8.6 7.3 6.4 9.4 10.1 10.7

Airports Of Thailand PCL 30.5 19.2 14.6 0.9 0.9 0.8 8.0 6.8 6.3 3.0 4.4 5.9

Malaysia Airports Hldgs Bhd 19.4 17.5 16.0 2.0 2.0 1.9 12.1 10.5 9.4 9.6 11.3 11.3

Beijing Capital Intl Airpo-H 27.7 13.1 10.6 1.0 0.9 0.8 10.4 8.3 7.5 3.5 6.7 7.9

Hainan Meilan Intl Airport-H 10.9 9.1 7.8 1.2 1.0 0.9 5.0 3.5 2.7 10.9 10.5 11.4

Shanghai International Air-A 21.1 16.5 14.5 1.8 1.6 1.5 12.2 10.2 8.8 8.6 10.2 10.7

Guangzhou Baiyun Internati-A 14.5 12.6 11.0 1.4 1.3 1.2 5.1 4.8 4.3 10.1 10.1 11.0

Xiamen International Air-A 14.2 12.3 11.0 2.6 2.1 1.8 7.6 6.7 5.9 19.9 17.8 17.0

Australian Airports 25.5 26.8 16.9 1.1 1.1 1.1 11.6 12.0 10.2 6.4 5.5 7.9

Australian Infrastructure Fd 7.3 8.6 7.7 0.7 0.6 0.6 6.8 6.6 5.9 9.3 7.2 7.5

Map Group 43.6 48.4 21.8 1.1 1.5 1.4 14.4 16.6 12.6 3.5 3.8 10.4

Auckland Intl Airport Ltd 25.7 23.5 21.4 1.6 1.2 1.2 13.8 12.8 12.1 6.2 5.5 5.9



Annexure

Financial highlights – Portfolio assets

AIRPORT :

DIAL's Financial performance

DIAL (Rs Bn) Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 CAGR (FY11-14E)

Revenues (incl RE) 11.5 12.4 15.0 19.1 23.0 23%

Aero (Incl Cargo) 6.0 6.0 7.1 9.2 12.0 26%


Real Estate rentals 0.5 0.8 0.8 1.5 1.5 25%

EBITDA 2.7 1.5 2.2 4.2 6.0 60%

EBITDA Margin 23.3 11.8 14.9 21.8 26.2 30%

PAT 0.4 (4.5) (7.8) (5.5) (3.6) -7%

PAT ( GMR Share ) 0.3 (2.4) (4.2) (3.0) (2.0) -7%

CFO 4.0 0.4 6.5 8.4 12.6 222%

Drivers

Passengers (mn) 25.5 29.6 34.7 39.2 43.4 14%

Capex -41.2 -11.6 0.0 0.0 0.0

Cumulative land parcel monetized 45 45 45 75 75 19%


GHIAL's financial performance

GHIAL (Rs Bn) Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 CAGR (FY11-14E)

Revenues 4.3 5.2 6.6 7.3 6.8 10%

Aero (Incl Cargo) 2.2 3.0 4.4 4.8 4.0 10%


Others NA

EBITDA 2.2 3.0 4.2 4.5 3.9 10%

EBITDA Margin 52.8 57.6 64.4 62.0 57.7 0%

PAT (1.0) 1.2 1.2 1.6 1.1 -2%

PAT ( GMR Share ) (0.6) 0.8 0.8 1.0 0.7 -4%

CFO 1.6 2.8 4.7 4.9 4.4 16%

Drivers

Passengers (mn) 6.5 7.5 8.5 9.7 11.0 13%

Capex 0.0 0.0 0.0

Cumulative land parcel monetized We have not considered monetization of land parcel in our model




ISGIA's financial performance

ISGIA Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 CAGR (FY11-14E)

Revenues 3.8 6.1 8.1 9.3 10.7 21%

Revenues 0.6 1.0 2.0 2.2 2.6 37%

Aero (Incl Cargo) 0.6 1.1 1.6 1.9 2.2 27%

Fuel 2.6 4.0 4.5 5.2 5.9 14%

EBITDA 0.6 1.4 2.6 3.1 3.6 38%

EBITDA Margin 15.3 22.9 31.9 33.0 34.1 14%

PAT (0.6) (0.9) (0.1) (0.1) (0.0) -66%

PAT ( GMR Share ) (0.6) (0.9) (0.1) (0.1) (0.0) -66%

CFO 0.9 (0.7) 0.6 1.1 1.7 NA

Drivers

Passengers (mn) 7.7 12.2 15.4 17.9 20.6 19%

Capex

Cumulative land parcel monetized


Male Airport's financial performance

Male Airport Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 CAGR (FY11-14E)

Revenues 4.0 11.1 13.6 14.7 55%

Aero Revenue 0.2 0.6 1.3 1.4 96%

Non Aero Revenue 0.7 2.7 3.6 3.8 81%

Fuel 3.1 7.8 8.6 9.4 44%

EBITDA 0.5 1.1 2.0 2.2 63%

EBITDA Margin 13.0 9.9 15.0 15.1 5%

PAT 0.5 0.6 1.3 1.0 29%

PAT ( GMR Share ) 0.4 0.5 1.0 0.8 29%

CFO - 1.6 1.9 2.3 NA

Drivers

Passengers (mn) 2.5 2.6 2.7 2.8 4%

Capex 3.4 6.3 6.6 2.4

Cumulative land parcel monetized




POWER :

Barge Mounted financial performance

Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 CAGR (FY11-14E

Barge mounted (235 MW)

Revenues 2.4 3.5 5.5 5.1 5.5 16%

EBITDA -0.4 0.9 2.0 1.5 1.7 23%

EBITDA Margin -17.4 25.8 36.0 30.4 31.2

PAT 0.1 0.7 0.7 0.6 0.1 -58%

PAT Margins 5.9 20.3 12.4 11.0 0.9

CFO (463.3) 752.8 1,480.6 1,341.9 1,571.8 28%

CAPEX (2,010.0) (4,020.0) - - -

Units produced 683.7 867.6 1,265.8 1,265.8 1,363.2 16%

PLF 28% 59% 70% 70% 70%

Realisation per unit 3.5 4.1 4.3 4.0 4.0

Variable cost per unit 2.0 2.0 2.0 2.0 2.0

Contribution per unit 1.4 2.0 2.3 2.0 2.0

Fixed cost per unit 1.6 1.8 1.7 1.7 1.6


Vemagiri Plant financial performance


Vemagiri Plant (370 MW)

Revenues 7.7 7.5 7.6 7.6 7.6 1%

EBITDA 2.2 2.2 2.4 2.4 2.4 4%

EBITDA Margin 29.1 29.0 30.9 32.0 31.6

PAT 0.9 0.7 1.1 1.3 1.4 25%

PAT Margins 12.3 9.5 14.6 17.0 18.3

CFO 2,199.2 1,976.9 2,043.4 2,095.0 2,045.0 1%

CAPEX - - - - -

Units produced 2,515.2 2,515.2 2,515.2 2,515.2 2,515.2 0%

PLF 86% 80% 80% 80% 80%








GPCPL - Chennai financial performance


GPCL-Chennai-LSHS (200 MW)

Revenues 8.7 7.6 9.8 9.9 10.8 12%

EBITDA 1.2 1.0 0.6 0.6 0.6 -15%

EBITDA Margin 13.6 12.5 5.7 5.7 5.4

PAT 0.7 0.4 0.3 0.2 0.2 -20%

PAT Margins 7.5 5.3 2.9 1.8 1.9

CFO 989.1 873.7 939.1 1,472.4 414.4 -22%

CAPEX - - - - -

Units produced 1,189.6 883.7 1,019.7 934.7 934.7 2%

PLF 65% 52% 60% 55% 55%






Rajahmundry financial performance


Rajahmundry (768 MW)

Revenues - - - 2.3 17.0 NA

EBITDA - - - 1.1 8.2 NA

EBITDA Margin NA NA NA 47.8 48.6

PAT - - - 0.4 2.5 NA

PAT Margins NA NA NA 19.1 14.6

CFO - - - 573.5 5,281.8 NA

CAPEX (3,630.0) (18,150.0) (11,220.0) - -

Units produced - - - 571.0 4,241.8 NA

PLF 0% 0% 0% 70% 65%

Realisation per unit NA NA NA 4.0 4.0

Variable cost per unit - - - 1.8 1.8

Contribution per unit NA NA NA 2.2 2.2

Fixed cost per unit - - - 1.8 1.9


Kamlanga financial performance


Kamalanga (1050 MW)

Revenues - - - 6.3 18.8 NA

EBITDA - - - 3.6 11.0 NA


PAT - - - 0.7 1.9 NA


CFO - - - 2,109.8 7,687.6 NA

CAPEX (13,166.0) (16,344.0) (9,534.0) (6,356.0) -

Units produced - - - 2,267.6 6,802.8 NA

PLF 80% 80%








Kamlanga Ext. financial performance


Kamalanga Ext. (350 MW)

Revenues - - - - 4.7 NA

EBITDA - - - - 3.2 NA

EBITDA Margin NA NA NA NA 67.2

PAT - - - - 1.1 NA

PAT Margins NA NA NA NA 22.7

CFO - - - - 1,889.6 NA

CAPEX - (4,350.0) (5,400.0) (3,150.0) (2,100.0)

Units produced - - - - 1,157.4 NA

PLF 70% 70%

Realisation per unit NA NA NA NA 4.1

Variable cost per unit - - - - 0.8

Contribution per unit NA NA NA NA 3.2

Fixed cost per unit - - - - 1.8


Emco’ Wardha financial performance


EMCO (600 MW)

Revenues - - - 2.6 15.1 NA

EBITDA - - - 1.7 9.5 NA


PAT - - - 0.7 2.9 NA


CFO - - - 1,021.7 6,409.2 NA

CAPEX - (6,960.0) (12,180.0) (12,180.0) (3,480.0)

Units produced - - - 637.7 3,826.4 NA

PLF 80% 80%








ROAD :

Performance for annuity based project

Rs Mn Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 CAGR (FY11-14E)

Revenues 2,484 2,483 2,485 3,726 3,726 14%

GTTEPL - TambaTindi 810 810 810 810 810 0%

GTAEPL - TuniAnka 590 590 591 590 590 0%

GPEPL - Pochanpalli 1,084 1,084 1,084 1,084 1,084 0%

GCORRPL - ChenORR - - - 1,243 1,243 NA

EBITDA 2,107 2,073 1,968 3,124 3,083 14%


GTAEPL - TuniAnka 475 469 479 473 468 0%

GPEPL - Pochanpalli 985 993 858 845 831 -6%

GCORRPL - ChenORR - - - 1,181 1,163 NA

PAT 82,576 85,692 87,090 99,225 111,714 9%


GTAEPL - TuniAnka 102 75 97 102 89 6%

GPEPL - Pochanpalli 56 50 (72) (53) (35) NA

GCORRPL - ChenORR - - - 27 (220) NA

Performance for Toll based road projects

Rs Mn Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 CAGR (FY11-14E)

Revenues 979 1,419 1,583 4,712 8,175 79%

GACEPL - AmbaChan 185 217 242 269 299 11%

GJEPL - FaruJagd 419 512 571 634 705 11%

GUEPL - TindiUlu 375 690 770 855 951 11%

GHVEPL - HydVij - - - 2,796 4,146 NA

GHHEPL - HunHos - - - 158 2,073 NA

EBITDA 702 1,165 1,313 3,343 5,812 71%

GACEPL - AmbaChan 120 158 180 202 227 13%

GJEPL - FaruJagd 326 420 474 529 503 6%

GUEPL - TindiUlu 255 586 660 738 827 12%

GHVEPL - HydVij - - - 1,733 2,467 NA

GHHEPL - HunHos - - - 141 1,787 NA

PAT (918) (517) (447) 59 114 NA

GACEPL - AmbaChan (413) (272) (284) (272) (260) -1%

GJEPL - FaruJagd (216) (31) 8 57 22 NA

GUEPL - TindiUlu (289) (215) (171) (108) (37) -45%

GHVEPL - HydVij - - - 357 352 NA

GHHEPL - HunHos - - - 26 38 NA




Glossary - Definition of important terms – acronyms used in the report

Aero Revenue :

Aero revenues include services provided by an operator which assists in conducting day to

day operation in relation to the aircraft and includes :-

� Landing, Housing and parking charges for Aircraft,

� Ground facility in connection with aircraft operation

� Ground safety services at an airport

� Ground handling services related to aircraft, passenger or cargo

� Cargo facility at an airport

� Supplying fuel to aircraft

� Passenger service fee

� User development fees

Non Aero Revenue :

All revenues which cannot be classified as Aero revenues are considered as Non Aero

revenue and includes

� Fuel farm

� Flight catering

� Advertisement

� Retail

� Food & Beverages

� Land and space

� Others

Single Till :

Under the single till mechanism entire benefit from the Non Aero segment is utilised in

subsidizing the operations from the Aero segment.

Dual Till :

Under the dual till mechanism both the Aero & Non Aero revenues are completely different

and entire upsides from the Non Aero vertical is captured by the Airport operator.

Hybrid Till :

Under the Hydbrid till a part of benefits from Non Aero segment is utilised in subsidising the

operations of the Aero segment, however some part of upsides from the Non Aero segment

will belong to the airport operator. The percentage will vary from airport to airport depending

on the concession agreement – DIAL & MIAL falls under this mechanism where 30% of Non

Aero revenues are utilised in subsidising the Aero operations.

ADF – Airport development fees

Airport development fee is a mode of charging fee to every departing passenger for

supporting the construction & development of the airport.

UDF – User development fees

User development fees is a mode of levying a charge on every departing passenger for

supporting the regular daily operations and is approved by the regulator to support meet the

shortfall from other sources of revenue



Key Financials (Standalone)

Income Statement Balance Sheet

Y/E, Mar (Rs. m) FY10 FY11 FY12E FY13E Y/E, Mar (Rs. m) FY10 FY11 FY12E FY13E

Net Sales 45,665 57,738 82,906 117,609 Equity share capital 3,667 3,892 3,892 3,892

Growth (%) 14% 26% 44% 42% Reserves & surplus 63,003 72,854 74,405 79,405

Total Expenditure 32,022 42,183 61,368 81,052 Shareholders Funds 66,671 76,746 78,297 83,297

Raw material 10,717 19,896 26,199 40,578 Minority Interest 17901.5 19981 17172.7 15910.1

Employee expenses 3,110 4,219 4,878 4,014 Preference share 2,000 18,149 18,149 18,149

Power & Fuel cost 14,489 13,815 14,325 17,657 Secured Loans 162,294 189,107 273,867 350,263

Selling and Admin 3,114 3,615 4,612 5,636 Unsecured Loans 46,080 53,189 53,189 53,189

Others 7,267 10,869 11,354 13,167 Loan Funds 208,374 242,296 327,056 403,452

EBIDTA 13,643 15,555 21,538 36,557 Net Deferred Taxes 2,535 764 1,351 2,434

Growth (%) 28% 14% 38% 70% Total Liabilities 297,480 357,936 442,026 523,242

EBIDTA % 29.9% 26.9% 26.0% 31.1% Gross Block 148,896 243,702 256,796 380,987

Depreciation 6,122 8,609 9,957 12,696 Less: Acc Depreciation 23,416 31,503 41,460 54,156

EBIT 7,521 6,946 11,581 23,860 Net block 125,481 212,200 215,336 326,831

EBIT Margin (%) 13.4% 14.9% 12.0% 10.8% Capital WIP 103,829 94,898 159,894 137,373

Other income 2,913 (4,873) 2,825 2,700 Investment 46,411 29,741 29,741 29,741

Interest 8,503 12,301 15,735 19,539 Current Assets 41,408 74,921 86,341 70,103

PBT 1,931 (10,228) (1,330) 7,021 Inventories 1,159 1,846 1,626 1,637

Tax -319 239 2,110 3,846 Sundry Debtors 8,649 13,199 16,264 20,321

Effective tax rate (%) -16.5% -2.3% -158.6% 54.8% Cash and Bank 16,826 33,732 36,743 18,743

Adjusted PAT 2,250 (10,467) (3,440) 3,175 Loans and Advances 13,156 18,516 23,788 21,782

Growth (%) -19% -565% -67% -192% Other current assets 1616.5 7627.8 7,920 7,620

Net Margin (%) 4.9% -18.1% -4.1% 2.7% Current Liab & Prov 19,653 53,898 49,361 40,880

(Profit)/loss from JV's/Ass/MI 669.4 -1170.3 -2808.3 -1262.6 Current liabilities 15,775 51,617 49,361 40,880

Adjusted PAT After JVs/Ass/MI 1,581 (9,297) (631) 4,437 Provisions 3,878 2,281 0 0

E/O items 0 0 0 0 Net current assets 21,755 21,024 36,980 29,223

Reported PAT 1,581 (9,297) (631) 4,437 Miscellaneous Exps 5 74 74 74

Growth (%) 489% -688% -93% -803% Total Assets 297,480 357,936 442,026 523,242

Cash Flow Key ratios

Y/E, Mar (Rs. m) FY10 FY11 FY12E FY13E Y/E, Mar (Rs. m) FY10 FY11 FY12 FY13

PBT (Ex-Other income) 1,931 (10,228) (1,330) 7,021 Profitability (%)

Depreciation 6,122 8,609 9,957 12,696 EBITDA Margin 29.9 26.9 26.0 31.1

Interest Provided 5,697 12,321 15,735 19,539 Net Margin 3.5 -16.1 -0.8 3.8

Other Non-Cash items -916 4,390 ROCE 3.0 2.1 2.9 4.9

Chg in working cap 187 17,724 -12,946 -10,243 ROE 2.4 -13.0 -0.8 5.5

Tax paid -511 -2,434 -1,523 -2,763 RoIC 4.3 3.0 4.7 6.5

Operating Cashflow 12,511 30,382 9,893 26,251 Per Share Data (Rs)

Capital expenditure -68,725 -74,050 -78,090 -101,670 EPS 4.3 -2.4 -0.2 1.1

Free Cash Flow -56,214 -43,667 -68,197 -75,419 CEPS 6.0 -0.2 2.4 4.4

Other income BVPS 18.7 24.4 24.8 26.1

Investments -31,868 9,660 0 0 DPS 0.0 1.0 0.0 0.0

Investing Cashflow -101,443 -64,390 -78,090 -101,670 Valuations (x)

Equity Capital Raised 3,839 15,907 0 0 PER 7.0 -12.6 -185.0 26.3

Loans Taken / (Repaid) 97,293 23,542 84,760 76,396 P/CEPS 5.0 -169.9 12.5 6.8

Interest Paid -7,615 -11,783 -15,735 -19,539 P/BV 1.6 1.2 1.2 1.2

Dividend paid (incl tax) -5 -87 EV / Sales 6.6 5.6 4.9 4.3

Income from investments 0 EV / EBITDA 22.1 20.9 18.9 13.7

Others -708 23,029 Dividend Yield (%) 0.0 1.0 2.0 3.0

Financing Cashflow 81,093 50,608 69,025 56,857 Gearing Ratio (x)

Net chg in cash -7,839 16,906 828 -18,562 Net debt/ Equity 2.2 1.8 2.6 3.3

Opening cash position 24,665 16,826 33,732 34,560 Net Debt/EBIDTA 14.0 13.4 13.5 10.5

Closing cash position 16,826 33,732 34,560 15,999 Working Cap Cycle (days) 39.4 -80.3 1.0 32.5



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