Energy segment gets fuel to power GMR Infra’s performance

Energy segment gets fuel to power GMR Infra’s performance

GMR Infrastructure Ltd’s operating performance improved in the quarter ended September as its ailing energy business was boosted by fuel supplies.

A dramatic increase in the plant load factor pushed up the operating margin of the segment from 4% a year ago to 21%.

Operating profit for the segment rose six times, which helped the company narrow its loss to Rs.374 crore from Rs.554 crore for the segment.

Meanwhile, the private sector infrastructure firm’s airport business fared well, too, on the back of rising passenger and cargo traffic.

The operating margin of its Delhi airport asset, the best of the pack, grew by a remarkable 400 basis points (bps) to 66%. One basis point is one-hundredth of a percentage point. Other airport assets, too, put up a decent show.

While the legal issues around the Male airport continue, operating margin of the segment as a whole rose significantly from a year ago.

The good news is that GMR has been allowed to collect airport charges from November at Hyderabad, which should improve its financials in the forthcoming quarters. In addition, credit rating agencies have revised their rating to the Delhi airport project upward.

Although the firm’s road assets also put up a better show, prospects seem limited given that there are no new assets that would add to revenue.

Any accretion, therefore, hinges on higher traffic, which, in turn, depends on an improved economic scenario.

From a retail equity investor perspective, the stock has had little to offer—over the last one year and more, the stock has been vacillating in a band between Rs.10 and Rs.20.

That said, the macro-level efforts to disentangle bottlenecks in infrastructure development and lower interest rates are positives on which the firm could ride to improve its financials. GMR’s operations churned out a cash profit of Rs.134 crore, compared with a loss a year ago, on the back of a 52% jump in operating profit. As a result, net loss fell drastically from Rs.690 crore a year ago to Rs.375 crore.

Certainly, GMR’s woes are on the ebb. But the improvement is not enough to boost investor confidence yet.