GVK Power and Infrastructure is one of the foremost infrastructure holding company. Founded by Dr. GVK Reddy, this company owns a wide range of infrastructure assets in Airports, Energy, Transportation and resources. GVK is a key infrastructure player in India, with increasing interests abroad. For more info check, http://www.gvk.com/
Dr. GVK Reddy, the founder chairman has been conferred with the "Padma Bhushan" award from the Government of India in the category of Trade and industry. He is a first generation industrialist with interests in infrastructure construction, hospitality, biotechnology and petrochemicals. He was also conferred with the "Infrastructure person of the year" for his contribution to the infrastructure of India.
NUMBERS - THE LATEST
Market cap: 1240 crores CMP on Day25 June2015: Rs 8.40 BV: 12 rs.(approx)
Revenue FY14: 2820 cr Net profit FY14: (368 cr)loss FV: 1
POSITIVES - MULTIBAGGER POTENTIAL
1. GVK increased its stake in MIAL, Mumbai International Airport, to over 50% by acquiring 13.5% stake from Bid Services Division for USD 231 million. After this transaction MIAL became a subsidiary of GVK Airports which is a subsidiary of GVK Power and infra, the listed company. GVK has concession rights, for its share of revenues and profits for 30 years, with a provision for another 30-year extension.
2. GVK hiked its stake in BIAL, Bangalore International Airport, to over 43% by acquiring 53 million shares from Siemans Project ventures for Rs. 613 crores. Even here the concession rights, is for 30 plus 30 years.
3. The IPO of GVK Airport Developers, which is a 100% subsidiary of listed GVK company, could prove to be a game changer for the company. In all probability, the IPO could well happen before December 2015
4. Consolidated EBITDA for FY2015 stood at Rs. 1143 crores as against Rs. 1005 crores the previous year. This is clear evidence that the company is heading in the right direction.
5. MIAL recorded revenue of Rs. 637 crores for Q4FY2015 as against 544 crores in Q4FY14. EBITDA margin improved to 47% compared to 28% the previous year. Net profit is Rs. 17 crore vs net loss of Rs. 58 crore. BIAL recorded revenue of Rs. 255 crores for Q4FY2015 as against 163 crores in Q4FY14. EBITDA margin improved to 69% compared to 51% the previous year. Net adjusted profit is Rs. 83 crore vs net loss of Rs. 86 crore.
INTERESTING INFO
1. In 2014 GVK awarded 1.16 million sq ft of land for rs. 580 crore at the Mumbai international airport for commercial development. This is part of overall commercial development of 22 million sq ft over next 10 years.
2. GVK was awarded the contract to modernize and develop green field international airports in North Bali and Yogyakarta(Java) both in Indonesia.
3. In the hospitality sector, Taj GVK is an alliance between the Taj group and GVK, which has 4 hotels in Hyderabad, and one each in Chennai and Chandigarh.
4. GVK EMRI (Emergency Management and Research Institute) is one of the most important social initiatives of the company. This service is spread across 15 states. With the help of this widespread initiative and equipped with over 9000 ambulances, around 30 million cases have been attended to and over 1 million lives saved
NEGATIVES - POSSIBLE RISKS
1. Company has been making losses q-o-q since the last several quarters. From a quarterly loss of 235 crores in Q4FY14 it has come down to 108 crore loss in Q4FY2015. There is a strong possibility that the company could come in green over the next few quarters.
2. Non-availability of gas supply for its 2 gas based power projects. This was bad luck with no fault on the side of the company. As per latest development, AP Transco, have exercised their option to buy out the Phase 1 Jegurupadu gas plant of 217 MW. This should ease out some pain for GVK.
3. With more projects coming into LIVE mode, and an increased revenue stream, and a growth in operational profits, the company is headed in the right direction. A successful IPO of the airports venture and reduced interest rates, could all auger well for the company.
MY TAKE
GVK is popularly referred to as "GVK Power" in the stock market. It is also often mistakenly assumed as just one of the other private power producers. Though it started out as a private power producing company, over the last 10 years it has become a full fledged infrastructure asset owning company.
This company currently owns and manages 2 of the busiest airports in the country, 2 gas powered power plants, 3 road projects and few other. Projects under implementation are one 540 MW coal based thermal power plant, two hydro electric power projects cumulatively over 1100 MW, 2 airports in Indonesia, and a coal mine in Australia.
Today this company is available at a market cap of around 1200 crores.
This is deeply deeply undervalued. As they say, "the best time to buy is when it seems situation is at the worst" (only provided it is a good quality company, and you are very sure about its future prospects based on real facts and evidence)
The last 3 years have been terrible for the company. Everything that could go wrong went wrong. It did not get the promised gas supplies for its gas power plants, lost one of its coal mines, and a stubborn interest rate scenario with escalating debts.
It seems like the worst is over. The developments of the last 3 months, and the probability of positive events over the next 3 - 6 months make this an excellent turn around story. The turnaround is surely happening. This is a great time to be accumulating shares of a fantastic future potential company at very cheap valuations.
A strong potential multibagger!!
Disclosure: I own shares in GVK.
For consultation(commercial) and JV ideas;
you can contact me via zorbayogi9@gmail.com
Important Note: Potential multibaggers are those stock which have potential to give 200 - 1000% profits. Obviously such returns take time. Probably 3 - 4 years or more. Short term volatility is the reality of the stock market and that will always happen. Short term movements(upside and downside) are impossible to predict. Only invest funds that you will not need for the next 3 - 4 years. As long as you buy a stock for the right reason and are convinced about the future prospects of the company, there is no need to worry if the share price goes down and stays down for a period of time after you buy; provided you have followed the cardinal stock market mantra BUY LOW.
Very important note: The objective of this blog is to share knowledge and info about multibagger ideas/opportunities. Neither is this trading website nor an analyst website nor a Buy/Sell call website. For stock market success, always do your home work, own analysis and make your own decisions.
