GMRI : Home user fee grounded

GMR Infrastructure's take-off from the Hyderabad airport isn't going to be as profitable as it had planned. The holding company, which will run the Delhi and Hyderabad airports, has decided not to charge domestic passengers a user development fee at the Hyderabad airport; the Rs 1,697 crore firm had been hoping to collect a stiff user fee of between Rs 600-700 from domestic travellers. International passengers, however, will have to cough up $25. Moreover, GMRI is understood to have refrained from upping the landing and parking charges for aircraft. As a result, the net asset value for the Hyderabad airport could be lower by about 25 per cent, estimate analysts, some of whom had pencilled in a charge of Rs 725 per passenger from 50 per cent of domestic passengers travelling on full service airlines. With the charges for landing and parking charges not to be applied for the present, analysts have also shaved off about 5 per cent from the sum-of –the –parts valuation for the stock for FY09; many of them had factored in a 12-14 per cent increase. As such, the company is now being valued at between Rs180-190. Over the past one year, the stock has been an outperformer. However, from its peak of Rs 263 in December 2007, the stock has corrected by over 40 per cent and now trades at Rs 156. That leaves an upside of nearly 20 per cent.

While the market has been weak, the GMRI stock has also corrected because of legal issues relating to long-term refundable deposits from third party developers for real estate near the Delhi International Airport(DIAL) and revenue sharing with the Airports Authority of India(AAI).

Besides, there are some issues regarding the proposed international airport near Greater Noida and its impact on DIAL.

GMRI, which also has a presence in the roads and power sectors, is expected to post revenues of Rs 1900 crore in FY08 and up that to Rs 2500 crore in FY09 by which time the operating margin should rise to between 36-38 per cent and net profits to about Rs 200 crore.