GMRI : Home user fee grounded

No user fee from domestic passengers means lower revenues for the airport operator

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.

GCPL: Fair, but no glow

Soap and hair colour maker Godrej Consumer Products' rights issue price of Rs 123 was at a discount of 11 per cent to the closing price of the stock on the day the announcement was made.

However, the discount is now lower with the stock having come off on Wednesday to Rs 134.20. Even if GCPL couldn't afford to offer a bigger discount, the rights ratio could have been more favourable ; it appears that the management, which plans to raise Rs 400 crore, does not want to dilute the equity base too much.

So at a ratio of 1:7, the discount virtually vanishes because the average cost at Rs 132.80 is very close to the current market price of 134.20. And so, there's no real incentive for subscribing to the issue.

The Rs 954 crore GCPL's paid "�up equity capital is Rs 22.58 crore and the rights issue can infuse some liquidity into the stock. Also, some amount of the company's debt will be paid off from the money mopped up.

Revenues for GCPL should touch about Rs 1125 crore in FY08, a growth of about 18 per cent over the previous year while net profits should be about Rs 156 crore, a rise of around 11 per cent.

However, going ahead things could get difficult for the FMCG player. The top line growth in FY09 may be far lower at 14 per cent.

The main reason for this is the slowing momentum in the sales of the high-margin hair colour business, which in the December 2008 quarter, grew at just 6 per cent compared with the industry growth rate of 9.5 per cent. The soaps business, however, has posted double digit growth in the past ten quarters.