It was in early December 2007 that the GMR Infra stock hit its lifetime high of R134.35. Five years down the road, it commands a fraction of that value, at R17-18 apiece. The stock crashed last week after the Maldives government decided to annul an agreement that allowed a GMR-led consortium to run and renovate the Malé International Airport, and while the case is in the courts, it doesn’t look good for GMR. Unlike the Sabiha Gökçen International Airport in Turkey, and the Delhi International Airport Limited (DIAL) closer home, Malé was a profitable proposition. And airports, it must be added, bring in a big chunk of the revenues. The crunch in cash flows looks like it’s going to get worse.
GMR group chairman Grandhi Mallikarjuna Rao says the Maldives episode has been a learning experience. But the setback in Malé is a major one and only adds to the several other problems that GMR has been grappling with over the last couple of years. That story is best told through its performance on the bourses; after turning in negative returns in both 2010-11 and 2011-12, the GMR counter is threatening to do an encore this year too, having already lost 35%. Not the kind of track record one had expected when the group drew up a blueprint for straddling the infrastructure space in a country that is short on roads, ports, power and airports.
GMR may not be short on execution skills—witness the world-class airport in New Delhi—but the group’s ambitions have, at times, overtaken its abilities. So, while roads have been rolled out (GMR owns the country’s largest highway concession, all 556 kilometres of Kishangarh-Ahmedabad) and numerous power plants are in the making—72% of the planned 6.2GW of capacity is in the works and 13% up and running—the pace and ambition could have been tempered.
That would not just have lightened the mountain loads of debt it’s carrying on its balance sheet—GMR’s net debt has shot up by some R6,000 crore in the three months between June and September to R35,200 crore—it would have saved its management time that it badly needs to deal with the myriad regulatory and other hurdles. For instance, GMR could have done without the Intergen deal altogether; offloading the 50% stake for $1.23 billion to Huaneng, two years after having picked it up for $1.14 billion in a leveraged buyout, barely breaking even in the