GVK Power: Airports shore up profits

GVK Power: Airports shore up profits

For the September quarter, GVK Power and Infrastructure Ltd (GVKPIL) registered a marginal 2.2% year-on-year (y-o-y) increase in consolidated revenue to 503.4 crore. Net profit, though in line with Street expectations, dipped around 3% to 42.8 crore.

Surprising positively was the 64% y-o-y jump in the share of profit from the two airports that it manages— Mumbai International Airport Ltd and Bangalore International Airport Ltd—to 22.02 crore. This was the result of a 13-14% y-o-y rise in both passenger and air traffic during the quarter, when compared with a year ago. According to an analyst from a Mumbai-based broking firm, “Bangalore airport has achieved its full-year target within the first half, with a good operating profit margin of 64%." GVK has not been granted a revision in its user-development-fee, which would add to revenues and profits, like in the case of its peer GMR Infrastructure Ltd.

Also See Power Performance (PDF)

What pulled down profits was the core roads and power business. Power revenue at 453.9 crore constituted 90% of GVKPIL’s total during this quarter compared with around 91% a year-ago. But its profit (before interest and tax) at 65.2 crore, accounted for only 65.7% of the total compared with 72.3% a year ago and 77% in the previous sequential quarter. This was due to a major maintenance shutdown of one of its power units. Relief came in from its single road project (Jaipur-Kishangarh), where a 10% hike in toll rates from 1 June and improved passenger traffic compensated for lower truck traffic due to floods in the region.

On the whole, operating profit from its key businesses grew 3.3% y-o-y and 23% quarter-on-quarter (q-o-q) to 155.5 crore during the quarter. Lower other expenses as a percentage of sales led to a q-o-q jump of nearly 400 basis points in operating profit margin to 30%.

Meanwhile, the infrastructure conglomerate has been restructuring business operations. During the quarter, all its power subsidiaries have been consolidated under a single entity— GVK Energy Ltd—a wholly owned subsidiary of GVKPIL. “It is in line with our intent to consolidate businesses under identifiable verticals, which makes it more investor-friendly," said Isaac George, chief financial officer of GVKPIL.

GVKPIL shares rose 2.35% to 43.50. Analysts estimate that upside in the stock during fiscal 2011 could come by way of higher air traffic beginning next quarter, better plant load factor in its power segment or any fund-raising in its energy or airport verticals.

Graphic by Yogesh Kumar/Mint

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