>GMR INFRASTRUCTURE (NOMURA)

Fund raising post QIP failure a surprise

Investment Conclusion
We reiterate our REDUCE rating on GMR Infrastructure (GMRI) given what we deem to be its expensive valuation and our expectation of several disappointments relating to growth opportunities and in the airports segment. GMRI revealed plans to raise INR75bn yesterday, although its apparent need is much less, in our opinion. Importantly, it did not share any concrete
plans to use the funds thus raised; this is a key concern.

Summary
■ In an analyst meeting yesterday, GMRI shared its vision to grow at a rapid pace and with a hurdle rate of 16-18% IRR from new projects.

■ It believes dividends from InterGen would be sufficient to pay off acquisition debt.

■ Surprisingly, GMRI revealed plans to raise INR75bn over FY10-12 even as medium-term
requirement for projects under development is only INR28.5bn as per GMRI's estimates.

■ The plan envisages a separate listing of segment holding companies with a view to unlock value. We see this as a negative for the parent as one would now attribute a holding discount to GMRI since investors can pick and choose segments in which they would want to invest.

To see full report: GMR INFRASTRUCTURE