GMR Infrastructure Ltd’s performance for the December quarter was below estimates. Its net revenue of 1,956 crore was about 10% lower than Bloomberg’s consensus estimates and 2% lower than a year ago. To be sure, this can be attributed to the end of income from the Male airport (for nearly a month), and the sharp decline in power revenue for want of gas to fire plants.

The firm reported a net loss of 217.5 crore, much sharper than the estimated 100 crore loss.

Like in the past few quarters, airports fared well. A 44% jump in revenue in this business was driven largely by the Delhi airport, which also turned in a profit after tax for the first time. Higher traffic, mainly from international passengers, and revised tariffs offset the one-month loss in revenue from the Male airport, where operations were taken over by the local airport firm. Yet, the segment’s revenue as a percentage of the total was 61%, compared with 54% a year before. Operating margin for the segment improved from 25% a year ago to 37%, with operating profit jumping 44% to around 250 crore.

Meanwhile, GMR’s energy business posted a pathetic performance, eating up profits from other businesses. Net revenue dropped by 13% and operating profit by 57% on the back of lower utilization of the company’s gas-based power units. The deterioration is evident—the energy segment’s net revenue contribution has dropped from 31% to 26% in a year.

Operating loss has increased, too. The management hopes the situation will improve in the coming quarters as some states such as Andhra Pradesh are permitting the use of alternative fuel such as regassified liquefied natural gas to supply power at higher rates to customers who might want to buy more expensive power.

According to the Central Electricity Authority, with a continued decline in domestic gas availability—mainly led by a reduction in gas output from Reliance Industries Ltd’s KG basin wells—plant load levels (all-India) for gas-based units are down to 43.5% between April and December 2012, from 59.9% in FY2011-12. For private sector gas-based plants, plant load levels have dropped to 25% in December 2012 from 55% in April 2012.

Thus far, GMR’s roads business has displayed stable performance, on growth in traffic and tolling revenue. Indeed, the company started tolling on two new roads in December, which will translate into better revenue and earnings in the quarters ahead. Further, GMR’s decision to terminate the 555km Kishengarh-Udaipur-Ahmedabad road contract is seen as a positive by analysts, because it will alleviate stress on the balance sheet. An Edelweiss Securities Ltd report says that a stake sale may make it easier for the company, as all its assets are operational.

That said, GMR’s challenges remain, with uncertainty on compensation for the loss of the Male airport contract. From the current quarter, nearly one-fourth of the airport revenue which accrued from Male and a significant amount of profit will cease—a risk to growth, unless the Delhi airport makes up for it.

Besides, interest costs are mounting; the company’s debt-equity ratio is 3.5, marginally up from end-September. Going forward, with more road assets getting operational, interest costs will start eating into GMR’s profit and loss account. Of course, the management is confident of relief coming by way of interest rate reduction at the macro-level—a 0.5 percentage point cut brings a relief of 200 crore per annum in interest costs.

GMR’s stock continues to languish at around 19. The onus is now on the power segment to energize profitability and the stock price.