GMR Infrastructure reported a net loss of Rs 62.5 crore for the quarter ended September 30, its third successive quarterly loss. This was primarily due to the net loss recorded by Delhi International Airport Limited (DIAL) of Rs 227 crore on higher capital costs. A Subbarao, Group Chief Financial Officer, GMR Infra, and Sidharth Kapur, Chief Financial Officer, GMR Airports, in an interview with Mahesh Kulkarni, lay bare the factors that led to the losses. Edited excerpts:
You have reported net losses for the last three quarters, despite higher revenues and good operating profits. What are the major contributors to the revenue and the reasons for the losses?
The results are pretty good, in terms of top line and earnings before interest, taxes, depreciation and amortisation (Ebitda) levels, which show the fundamental strength of the business. The top line has grown significantly, close to 50 per cent, and Ebitda levels show the viability of the businesses. The Ebitda has grown by about 41 per cent on a consolidated basis. The profit after tax is impacted by one or two factors. The major factor being Delhi International Airport, where, on the 100 per cent basis, we have posted a Rs 227-crore loss for the quarter. Even after minority basis, the loss is about Rs 120 crore. However, this is a temporary situation and we will overcome this in the next one or two quarters, once the tariff revision process for the airport is completed. Each of the business units is robust in terms of top line growth and Ebitda levels. In the infrastructure business, there is time for the capacity cost absorption. In the airport business, it is two to three years, toll road project takes two to three years. We will overcome these in the road sector and the airport sector by the end of the current financial year. We are confident of better things from the next financial year, both in the top line and the bottom line.
When would the tariff in Delhi airport be revised?
Until we took over the airport in 2006, the Airports Authority of India was fixing the tariff, which was not adjusted to inflation. Since then, they were not revised, except in 2008 — 10 per cent. The traffic growth is four-fold since we took over and we are touching 34 million passengers this year. All the modernisation has added to the costs of the airport operations, which is still one of the lowest in the world. There is no correlation between costs and revenues. Costs are efficient, but very high. The revenues are extremely low. This situation has to be rectified. Under the concession document, we are entitled to a regulatory tariff increase, which includes landing fees for the carriers, handling charges and passenger fees. We are in talks with the regulator for a tariff increase. The consultation process is on and we should have the final approval in place by March 2012. We are entitled to an increase in tariff from 2009. We will take into account the past losses and these would be recovered by the tariff increase. Ever since Delhi airport was started, it has been running in losses. We have made a loss of Rs 700 crore annually, on an average. That is what is absorbing all the positive trends from all other sectors. However, this is a temporary situation The P&L of Delhi airport is costed fully, while the revenues have not been revised, which is the major reason for losses.
What was the cash-flow loss at the Delhi airport during the current year?
During the first half of the current financial year, we lost around Rs 190 crore, and the losses in the last financial year were of the same order. This financial year, we are likely to end up with a loss of close to Rs 400 crore. The Delhi airport’s quarterly revenue was Rs 365 crore. But roughly 30 per cent of the traffic comes from the T3 terminal. International traffic has now moved to T3. We should be recording about 34 million passengers this year, compared with 29.5 million passengers last year, a growth of about 20 per cent.
Your energy business also recorded a massive drop in profits during the quarter.
The Energy sector continued to be positive in the second quarter. But the quarter was somewhat impacted by a couple of factors like the annual maintenance shutdown and marginal lower availability of gas and lower merchant tariff because of the monsoon season. The fourth factor was rupee depreciation, which caused an escalation in gas prices, as they are measured in dollar denomination. From the next year, in the road sector, the major assets of Ahmedabad and Krishnagiri would join the revenue stream and Delhi airport would contribute to the revenues. All the three sectors would start firing all cylinders.
What do you think about the third and fourth quarters, given the interest and depreciation costs rising this year?
No new assets are being commissioned in the next two quarters. So, interest costs would remain stable, compared to the current quarter, because interest costs would substantially go up only when new debt is borrowed and commissioned, otherwise a marginal increase would be there, owing to the interest rate increase. We don’t expect any further rate increase. Inflation is expected to decline by March. There is general optimism that there would be no further rise in interest costs.
Are you confident of moving into the profit territory in the remaining quarters of the year?
The trends would be much better than the current quarter. The turning point is Delhi airport tariff fixation. We are waiting for the airports regulator to pass an order.