GVK Power’s Loss Widens To Rs 285 Crore
DSIJ Intelligence / 15 May 2013
The company has reported a weak profitability in the quarter as the power business remains a drag on the GVK group. The higher fees for the AAI have also reduced the profitability of the Airport business.
If one is looking at investing in the Power sector at this juncture, he/she might want to have a look at the results of GVK Power first. The company which has operations in the infra, power and airport business has reported a loss of Rs 285 crore. A year before, it had reported a loss of Rs 36 crore implying that the situation of the company has only worsened in 1 year leading to a full year of loss for the company. Even on a standalone basis, the company has reported increased losses.
During the quarter, GVK has reported loss of Rs 39.85 crore in the power business. The company in June 2012 installed new equipments which could generate electricity from alternate fuel sources in a view that gas supply has completely eroded. The company is claiming a full capacity charge as the new equipment has increased the plant availability factor but the AP Transmission company (AP Transco) has denied any such charges saying that the company is entitled for the capacity charges only for the gas-based capacity. GVK has filed a petition with APERC for advising AP Transco to pay the capacity charges.
Its road and airport business, however, have done a good job, with revenues from these segments rising by 12% and 46% respectively. The margins of both the businesses however have declined. During the quarter, GVK has reported 50% rise in the annual fee to the Airport Authority of India which has impacted its margins.
Overall, the business margins have run in negatives due to the higher input costs. Fuel cost during the quarter has reduced sharply in view of the lower availability of gas. The other expenses have doubled in the quarter which has largely impacted the company’s profitability.
On the non-operating costs, interest cost has mostly remained flat but due to the loss at the operating level, its interest cover ratio is stressed. Overall, the company has reported loss of Rs 285 which could be a glimpse of the power sector in the future.
The company has reported total debt of Rs 17813 crore. Its net worth due to losses has depleted by 9.65%. The debt to equity ratio has touched 5.5x amongst a weak business outlook. Even the liquidity ratios are in trouble, indicating that the problems may further rise in the future.
There is no reason that the stock should go up in the future. We remain very bearish on GVK Power and advise investors to exit the counter.
If you want to stay updated with the share market news today, keep a close watch on the indian stock market today with real time movements like sensex today live and overall stock market today trends. Investors tracking ipo allotment status, ipo news today, or the latest ipo india can also follow daily updates along with bse share price live data. Whether you are learning how to invest in stock market in india, preparing for a market crash today, or searching for the best stocks to buy in india, insights on top gainers today india, top losers today india, trending stocks india and long term stocks india help in making informed investment decisions.