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GMR Infra Fully Valued SOTP Valuation – Neutral Rating

November 27, 2007

Merill lynch just a while ago initiated coverage on the stock of GMR Infrastructure with a neutral rating. GMR’s head-start in profitable airport development at India’s capital city (Delhi), fast growing cities such as Hyderabad and at Istanbul, Turkey. With India likely to auction 35 non-metro airports & many east-European airports coming-up for bidding, we see immense opportunity for growth ahead. Expansion into toll road development as India aims to quadruple road capex and also Power Generation. Entry into real-estate development led by access to prime land-bank (next to airports) and scale-up the business through SEZs.

GMR has a portfolio of extremely profitable assets such as airports
– Delhi airport / Aerotropolis; Hyderabad & Istanbul with multiple / new revenue streams.

Here is the sum of parts valuation of GMR Infrastructure stock.
Airports – Rs 176
Power – Rs 48
Roads – Rs 8
Total – Rs 232. The valuations have been done on DCF basis. GMR Infra is likely to report an EPS of Rs 1.16 and Rs 2.38 for FY08 and 09 respectively. Merill Lynch maintains a neutral rating with a price objective of Rs 232 on the stock.

DalalStreet.Biz Analyst Recommendation: We do not recommend our investors to invest in the stock as we are not very comfortable with the absurd valuations GMR enjoys on the basis of land bank and other valuations. Yes, we are conservative and we believe in value investing.

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