Aug 03, 2011, 11.18 AM IST | Source:

Buy GTL Infra; target of Rs 20: A C Choksi

A C Choksi is bullish on GTL Infra and has recommended buy rating on the stock with a target of Rs 20 in its July 29, 2011 research report.

A C Choksi is bullish on GTL Infra and has recommended buy rating on the stock with a target of Rs 20 in its July 29, 2011 research report.

GTL Infrastructure Limited formed in Feb.2004 belongs to the Global Group enterprise. The Global Group has 7 operating companies (two of which are listed on the stock exchanges) operating in 46 different countries. GTL Infrastructure Limited is engaged in the business of Shared Passive Telecom Infrastructure in India. The company builds, owns, operates and maintains passive network infrastructure (towers) to cater to the infrastructure needs of cellular telecom operators. GTL's towers are distributed across High Average Revenue Per User (ARPU) generating Metros and Class A Circles and high growth regions of Class B & C Circles which benefits the telecom operators to rollout 2G, 3G or BWA on a pan-India basis in a short time.

The company reported a net loss of Rs. 139 crore in the year ended March 2011 as against a net loss of Rs. 2.58 crores during the previous year. Sales rose 40.86% to Rs. 490.12 (standalone) crores in the year ended March 2011 as against Rs. 347.95 crores during the previous year. The company has outstanding FCCBs worth USD 228 million or Rs 1007.78 crores due in Nov.2012 which are redeemable at a premium of 40%. The company has a debt of Rs 5040 crores at an interest of 10.5% which is mostly secured, as the company has an asset cover ratio of one and half times. The stock price of the company fell by 48.5% on June 20, 2011 after its parent company GTL Ltd withdrew a $ 300 million capital raising plan for the company. Rumours about the company's promoters having pledged all their shares also added to this decline. The promoters of GTL Ltd pledged 99% of their shares on July 4, 2011 with their lenders due to the amount of outstanding debt in the company. Both GTL and GTL Infrastructure have gone for a Capital Debt Restructuring to change their capital structure in order to help them with their debt crisis. The telecom industry has also faced problems post the 2G scam as many investors refrained from investing in the sector. Higher interest rates, low average revenue per user and inflated diesel costs have affected the company's profitability significantly.

Higher interest rates, low ARPU and hiked diesel costs have affected the profitability of the telco's is the last year. We believe that ARPU growth with new services like the 3G and the NTP-2011 along with various other measures taken by the government will offer positives to the telecom sector in the coming future. GTL Infrastructure has a portfolio of 32,650 towers. Considering the level of operations the company will not find it difficult to redeem the outstanding FCCB's. The company's consolidated figures suggest that the company will start making decent profits in the future. We believe the CDR will prove successful and GTL Infrastructure will be able to slash the debt mountain off its balance sheet as most of the debt is secured as the company has an asset cover ratio of 1.5 times. We recommend a 'BUY' call on the stock with a target price of Rs 20, says A C Choksi research report.

Shares held by Financial Institutions/Banks

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