Private sector infrastructure company GMR Infrastructure Ltd could not have fared better in the quarter ended December given policy hurdles, its increasing thirst for capital due to project expansions that have been lined up, and uncertainty on payments outstanding from various government quarters.
The December quarter’s reported net loss at Rs 100.8 crore, after adjusting for its minority stake in other firms, was five times that posted a year ago. This is in spite of the 47% surge in net revenue to Rs 1,999.3 crore.
But the revenue growth did not translate into strong operating profit. At Rs 450 crore, operating profit grew at a relatively slow 20% from the year-ago period. The management attributes this to several exceptional charges and provisions made against receivables in the airports segment, customs duty payable on replacement equipment for one of its power projects, impact of the depreciated rupee on imports, and mark-to-market losses incurred on borrowings.
As has been the case in the last few quarters, the December quarter, too, saw the highest contribution from the airports segment, whose revenue and operating profit account for almost half of the total. On the back of a 29% year-on-year surge in passenger traffic, the segment’s revenue and operating profit grew 43-44%.
What soured GMR’s overall performance was the energy segment. Given the bottlenecks choking the sector, ranging from fuel paucity to poor merchant power tariffs, the segment posted a 37% year-on-year drop in operating profit, notwithstanding the meagre 17% growth in revenue. Aggravating this was the deplorable financial state of distribution firms. GMR, for instance, had around Rs 776 crore outstanding from the Tamil Nadu Electricity Board as on 31 December.
Net losses mounted across segments, except for engineering, procurement and construction. A few analysts, however, reckon that exceptional factors that pulled down losses by around Rs 99 crore need to be adjusted.
And now to GMR’s burgeoning gross debt. It rose by Rs 6,400 crore from the preceding quarter to around Rs 30,000 crore at the end of the December quarter. The only comfort is that its ability to service interest cost is stable. In fact, its ability to throw out cash flows from assets and an expected decision on tariff revision at the Delhi airport had seen the stock rally 27% in the last one month to Rs 29, beating the CNX Nifty, which returned about 17% during the period.
That said, there’s no debating that better capacity utilization and more remunerative tariffs in the energy sector will give a fillip to profitability. That, for now, is jeopardized due to fuel shortage—a key issue that has seen deferrals and delays in power projects.
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Also See | Quarterly performance (PDF)