GVK Power’s Q3 net hit by gas shortage

GVK Power’s Q3 net hit by gas shortage

Mumbai: Lower demand and fuel shortage at its gas-based power projects have taken a toll on GVK Power and Infrastructure Ltd’s revenue and profit margin.

The Hyderabad-based company posted a net profit of Rs41.91 crore in the three months ended 31 December, down 8.71% from a year earlier.

Sales slipped 29.39% to Rs459.56 crore.

“The three gas-based projects—464 megawatt (MW) GVK Gautami Power Ltd and 235 MW Phase-I and 220 MW Phase-II Projects of GVK Industries Ltd—have recorded a revenue of Rs408 crore. However, they were not able to operate at full capacity due to restricted supply of gas," the company, one of India’s largest infrastructure developers, said in a statement.

Operating profit—or earnings before interest and depreciation—fell to Rs129.19 crore from Rs140.77 crore.

GVK’s subsidiaries performed better. GVK Jaipur Expressway Pvt. Ltd posted a 10% rise in revenue, while Mumbai International Airport Pvt. Ltd and Bangalore International Airport Ltd reported increases of 15% and 22%, respectively.

“The results of GVK are disappointing as its power division has not performed well. The power plants could not run in fullest capacity as it did not get gas from Reliance Industries Ltd and (due to) poor demand," said Vibhor Singhal, an analyst with Alchemy Share and Stock Brokers Pvt. Ltd.

Demand suffered because of increased supply from hydropower plants in Andhra Pradesh following good rains, he added.

The airport business, too, faces concerns, he said, as the Airports Economic Regulatory Authority of India’s (Aera) guidelines “are not clear for airports in Bangalore and Mumbai".

Aera has decided that all major airports except New Delhi and Mumbai will charge clients under a so-called single-till model, which potentially benefits airlines and passengers but hurts airport operators, Mint reported on 17 January.

Under this model, airport charges are fixed by taking into account all principal airport activities, including aeronautical or flying-related activities and non-aeronautical activities such as commercial use of airport space. The dual-till model, on the other hand, considers only aeronautical activities.

Airlines prefer the single-till model as airport charges, being drawn from a larger number of sources, are likely to be lower for them. But airport operators say this model reduces their earnings as non-aeronautical activities are still in their infancy at Indian airports.

“Still there is no clarity on single-till, double-till or hybrid till (a mix of both models). This could have an adverse impact on its (GVK’s) stocks," Singhal said.

Over the past month, GVK Power has shed 18.87% on the Bombay Stock Exchange, while the exchange’s power index lost 8.18%.

On Monday, GVK Power gained 0.31% to close at Rs32.85, while the power index rose 1.31% to 2,744.2 points.