Year: 2008

If P. Chidambaram stakes claim for India’s growth story and record tax collection, he should not hesitate to paint himself in black for the co-lateral damage he has caused to 80%+ of India’s population by doubling the Inflation during his tenure and making it reach a new 13 year high of 11.42% [Higher than the highest rate of Interest offered by Bank’s Certificate / Fixed Deposits]

Rising global oil prices with record Inflation has put the Indian markets into PANIC selling mode by Institutional Investors. Until yesterday, Net FIIs selling in the Indian market for the month of June is Rs 9,500 crore [$2 bn].

Update:
Looking at the components, primary articles were up 10.96%; manufactured products were up 9.74% while the fuel price index was up 16.37%. Similar to trends seen since March this year, the uptrend is due to edible oils classified under non-food articles, fuel (with market determined fuels up 30%-50%), basic metals up 21.3% and iron-ore up 42.6%.

Upward revisions to the index continue with the April 19 data being revised up from 7.57% to 8.23%. Of the headline 11.42% WPI number, 2.49% is attributed to primary articles, 5.42% to manufacturing and 3.54% to the fuel index.

JK Paper reported Q3FY08 results. Net revenues increased by 17.8% YoY / 7.1% QoQ to Rs 2.2 bn. EBITDA margins declined sharply by 530 bps YoY / 240 bps to 15.2%, as against consensus expectations of 18%.

Increase in raw material by 54.9% YoY and 60.2%YoY increase in power and fuel cost put pressure on margins. Raw material as percentage of sales for the quarter was 27.1% (20.6% previous year) and power and fuel was 10.7% (7.9% previous year). As a result, EBITDA was down by 12.4%YoY / -7.6% QoQ to Rs 336 mn (we expected Rs 383 mn). Higher other income of Rs 52 mn as against mere Rs 2 mn previous year supported financials. Commissioning of new packaging plant led to increase in depreciation and interest charge. Depreciation increased by 35.7% YoY to Rs 170 mn while interest increased by 83.8% to Rs 143 mn. As a result PBT declined by 58.3% to Rs 76 mn.

Company on fully diluted basis reported EPS of Rs 2.0 as against Rs 1.5 previous year.

GMR Infrastructure has acquired 50% stake in Intergen, a power utility with assets in UK, Mexico, Netherlands, Australia and Phillipines, for US$1.1 B. Intergen has an operating capacity of 7,658MW, while its attributable capacity is 6200MW. 85% of Intergen’s capacity is natural gas based, while the rest is coal-based. GMRI has purchased the stake from AIG, while Ontario Teachers’ Fund holds the balance 50%.

Intergen clocked revenue of US$1.6B, EBITDA of US$613M, PAT of US$105M, FCF of US$330M and distributed US$140M dividend in 2007. It appears highly leveraged with gross debt of US$4.3B as against equity of US$600M, but we believe this is not unusual amongst utilities, as it is within the prescribed DSCR of 1.4.

GMR’s Modus Operandi behind Intergen Investment:
GMR has funded its US$1.1B investment via domestic bridge loans at 10.5%. Interest payment should negate US$50 mn of GMR’s estimated share of Intergen’s profits (based on 2007 data). Intergen’s generous dividend payout will go towards debt servicing at least through 2010, in our estimate. Refinancing the loan via forex loans and equity injection would enhance contribution at the net level.