GVK Power and Infrastructure Ltd, the infrastructure conglomerate, continues to post losses, but the March quarter did see its operating profit margin get a leg-up from higher revenue and cost controls.
GVK’s consolidated revenue growth of 21% was, just as in the past quarters, driven by the airports segment, which accounts for about three-fourth of the firm’s business.
Strong growth in passenger traffic at the Mumbai and Bengaluru airports, along with a moderate rise in cargo traffic, pushed up the airport segment revenue by nearly 25% from the year-ago period.
Revenue from its energy business rose during the quarter as the company used naphtha to fire one of its power plants.
However, according to the management, two gas-based plants of 684 megawatts (MW) are not in operation as gas supply from the KG basin has stopped for several quarters. However, following the recent auction process for gas, the management said its plants could operate at a plant load factor of about 25-35% in the months ahead.
Meanwhile, revenue from the road segment, too, grew 10%, following a slow 4% year-on-year growth in traffic along the tolled roads. But this segment surprised negatively on the profitability front. A provision of Rs.25 crore towards maintenance work resulted in a loss of Rs.4 crore during the quarter, compared with a profit of Rs.13 crore a year ago.
The airport segment clocked the best performance with a profit margin of 33% on the back of a significant rise in profitability from the Mumbai and Bengaluru assets. The energy segment posted a loss at the operating level, given its woes of lack of fuel supply against mounting fixed costs.
Undoubtedly, policy bungling has affected the performance of several infrastructure firms. Delayed projects and non-functional assets have hurt operating profit, while soaring interest costs have pushed such firms into the red. GVK’s interest outgo for the quarter was Rs.360 crore, almost devouring the consolidated operating profit of Rs.392.1 crore.
The strain on cash flows is the result of low revenue accretion with unviable assets. GVK also announced plans to raise about Rs.1,000 crore through qualified institutional placement, though one wonders if the Street would have an appetite for the same.
The firm posted a net loss of Rs.108.7 crore. On a brighter note, it was a tad lower than what the Street expected and also significantly lower compared with a year ago. The coming quarters are critical for private power producers as the government is attempting to solve the fuel shortage problem for private power producers. If the government succeeds, then GVK’s power segment may cease to be a drag on its performance.
