ICRA Online assigns Equity Grading to GMR Infrastructure

ICRA Online has assigned the Fundamental Grade 3+ and the Valuation Grade C to GMR Infrastructure Limited (GMR Infra). The Fundamental Grade 3+ assigned to GMR Infra implies that the company has “good fundamentals” relative to other listed securities in India. A “+” sign appended to the Fundamental Grade indicates its relative position within the grading category. The Fundamental grade factors in GMR’s sectoral and geographically diversified presence across energy, airports (including associated real-estate development), roads and SEZs, imminent turnaround in airport operations, substantial ramp up in the energy segment, funds availability for immediate investment requirements and proven execution capabilities. GMR Infra has recently completed substantial capex within the airports segment and is now at the cusp of a 10-fold increase in capacity within the energy segment. Earnings are thus expected to ramp up substantially relative to past levels. Recent fund raising initiatives are expected to meet immediate equity investment requirements with the potential for further value unlocking within the energy and airports segment as GMR Infra consolidates its position within these segments.  Downsides could be from delays in project implementation, regulatory risks particularly in the airports segment, weakening merchant power prices, disruptions in fuel supply and delayed land monetisation at airports.  In the event of any increase in equity commitments through further expansion of its project portfolio, dilution within GMR Infra is also a possibility. The Valuation Grade C implies that the company is “fairly valued on a relative basis” (as on the date of the grading assigned).

An ICRA Equity Research assessment, while not specifying any target price for the shares evaluated, captures two key factors - fundamental earning quality (fundamental grade) and relative valuation (valuation grade) - that influence the price behaviour of equity shares of companies over the medium and long term. The fundamental grades are on five-point scale, with 5 being the highest grade, and 1 the lowest. Similarly, valuation grades are also on five-point scale, wherein A being significantly undervalued and E significantly overvalued.

About GMR Infra:
A leading player in the Indian infrastructure sector, GMR Infra has a diversified presence across energy, airports, roads and SEZs. The Hold Co for the Group’s diverse interests, GMR Infra’s asset ownership extends beyond India to countries like Indonesia, Turkey, Maldives, Canada, Singapore etc. Operational assets of the Group include 3 power projects (cumulatively at 823 MW), 3 airports (Delhi, Hyderabad, Istanbul) and 6 road projects (3 annuity, 3 toll) – the thrust of the Group’s expansion plans over the medium term are however in the energy segment with approx 8448 MW under various stages of implementation. GMR Group also had a sizeable ownership interest in InterGen N.V., a Netherlands-based power producer with asset ownership extending across 5 countries – the Group has recently announced the sale of its 50% stake in InterGen to the China-based Huaneng Group to consolidate its energies on the Indian energy segment.

About ICRA and ICRA Online:
ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment information and credit rating agency. Today, ICRA and its subsidiaries, along with their subsidiaries, together form the ICRA Group of Companies. ICRA is a public limited company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. ICRA is an associate of Moody’s Investors Service, who is also its largest shareholder.

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For a detailed equity research report on GMR Infrastructure Limited, visit our website www.icra.in