GMR Infra drops after setting rights issue price at a discount

GMR Chhattisgarh Energy Limited
(“The Chhattisgarh Power Project”)

[Editor: The shares of GMR Infrastructure Ltd did not fall only because of keeping the Rights issue price at Rs.15, but also because from FY16, all services provided by government to business entities will be taxable, unless specifically exempted. Companies bidding for telecom spectrum and coal blocks might be in for a shock, as the Budget has proposed an enabling provision to allow service tax at 14% on “all services” provided by the government to business entities. “As of today, this will practically mean any service, including allocation of spectrum or mines, will attract service tax on the fee or royalty to be paid by companies,” says Sachin Menon, chief operating officer (tax), KPMG.

Meanwhile, you must have read the media reports that GMR Chhattisgarh Energy won the Talabira-1 coal block in Odisha for an estimated Rs.1,375 crore. The Odisha mine, earmarked for the power sector, has extractable reserves of 28.77 million tonnes. This coal mine, could be used for Kamalanga Energy Ltd (GKEL), too. Moreover, in addition to the FSA with Coal India, GKEL also has a Firm linkage of Coal Supplies for 500 MW, assuring fuel linkage to Kamalanga Thermal Power Plant to its full capacity. Total plant capacity is 1,400 MW, and currently, 1,050 MW is operational. Also, GMR Chhattisgarh Energy Limited (“The Chhattisgarh Power Project”) is developing 1370 MW Coal based, thermal Power Plant in the state of Chhattisgarh. Besides, a state of the art Rural BPO center created by Kakinada SEZ Pvt. Ltd. (KSEZ), a GMR Group Company, was inaugurated in January, 2015. The center has been conceived and built in collaboration with TATA Business Support Services Ltd. (TBSSL), one of the largest Domestic BPO Services companies in India.

It is to be  noted that dragged by higher finance cost, the company's net loss increased in December quarter to Rs.638.33 crore. Finance cost surged to Rs. 927.56 crore in the third quarter. Therefore, this Rights issue will provide the necessary cushion to the company. GMR Infrastructure Ltd has fixed Record Date as March 12, 2015 for the purpose of Rights Issue in the ratio of 3 Equity Share(s) for every 14 Equity Share(s) held as on Record Date. One should therefore, buy the shares of  GMR Infrastructure Ltd, at around Rs.17.70 and keep holding for a short term target of Rs.22. If you buy the shares of GMR Infrastructure Ltd, on or before 10 March, 2015, you are eligible for rights issue] 

March 2, 2015: GMR Infrastructure declined 2.4% to Rs 18.30 at 11:00 IST on BSE after the company has set a rights issue price of Rs 15 per share, which was at a discount of 18.03% to current ruling price. 

The company made the announcement before market hours today, 2 March 2015.

Meanwhile, the BSE Sensex was up 41.25 points, or 0.14%, to 29,402.75.

On BSE, so far 9.09 lakh shares were traded in the counter, compared with an average volume of 19.33 lakh shares in the past one quarter.

The stock hit a high of Rs 19 and a low of Rs 18.10 so far during the day. The stock hit a 52-week high of Rs 38.30 on 10 June 2014. The stock hit a 52-week low of Rs 15.35 on 16 December 2014.

The stock had outperformed the market over the past one month till 28 February 2015, rising 11.28% compared with 0.67% fall in the Sensex. The scrip had, however, underperformed the market in past one quarter, falling 3.35% as against Sensex's 2.33% rise.

The large-cap infrastructure firm has an equity capital of Rs.436.12 crore. Face value per share is Re.1.

GMR Infrastructure said that the board of directors of the company at its meeting held on 28 February 2015, has finalised the terms and conditions of rights issue. The rights issue size will be of Rs 1401.83 crore, consisting of 93.45 crore shares and will be allotted in the ratio of 3 shares for every 14 shares held, with issue price of Rs 15 per share.

The rights issue price of Rs 15 per share was at a discount of 18.03% to the current ruling price of Rs 18.30 per share.

GMR Infrastructure's consolidated net profit fell 44.7% to Rs 638.33 crore on 2.1% rise in total income to Rs 2842.76 crore in Q3 December 2014 over Q3 December 2013.

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