Shares of GMR Infrastructure Ltd have risen sharply in the past three trading sessions. It is no coincidence that the government has allowed the GMR-led consortium Delhi International Airport (P) Ltd (DIAL) to impose an airport development fee (ADF) on passengers flying out from Delhi around the same time. The airport development company has been allowed to charge ADF on an ad hoc basis for three years. The government has set a condition that the net present value of the receipts from such collection (excluding taxes) shouldn’t exceed Rs1,827 crore. This amount is the shortfall in DIAL’s fund-raising efforts for the project.
But apart from being a positive in terms of investor sentiment, the move does little to analysts’ estimates of the company’s value. A number of brokers, including Citigroup and IIFL Cap, had assumed that the project would be fully funded, thanks to the monetization of real estate that came along with the airport tender. With the real estate sector in a slump, these funds are not easily coming by, prompting the government to allow ADF.
As far as analysts’ estimates and models go, the only change is the revenue stream through which part of the airport development project would get funded. It’s not that the markets had estimated further equity dilution at DIAL to fund the shortfall, which is now getting reversed. As a result, the valuation estimates of the company remain the same.
Also, as IIFL Cap says in a recent note on the company, “At the time of tariff setting on cost recovery principles, the regulator would take cognizance of the reduced capital employed. To that extent, potential hikes in aero tariffs would be lower.” But the pressure the company was facing in terms of monetizing real estate assets has now eased, and is hence a marginal positive.
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