After dropping to its all-time low of Rs 16.75 last Thursday post the Maldives’ government cancelling the airport contract with GMR Infrastructure, the latter’s share price has recovered 17.3 per cent, including the 5.4 per cent rise seen on Monday. The gains are consequent to the company getting a stay order against the cancellation of the contract from the High court of Singapore. Secondly, post the event, promoters have also bought shares from the open market. While most analysts believe there would not be much impact on stock valuations even if the airport development contract is cancelled, they see potential loss in revenues and profits which could mean some pressure on the stock in the interim as it would come at a time when some of GMR’s domestic businesses are under pressure.
GMR has so far has invested about Rs 126 crore in the airport through its 77 per cent subsidiary, GMR Male’ International Airport Private Ltd (23 per cent is held by Malaysia Airports Holding Berhad). This investment is equal to 1.4 per cent of GMR’s consolidated shareholders’ funds of Rs 9,161 crore (as of end-September) and 1.7 per cent of its market capitalisation of Rs 7,648 crore. This explains that even if the investments are required to be written off (worst case scenario) the valuations may not change drastically. Secondly, GMR’s stock is currently trading near historically low levels and analysts believe that most of the negatives are reflecting in the price.
03/12/12 Jitendra Kumar Gupta/Business Standard
