Exit GMR Infrastructure, says Phani Sekhar

Phani Sekhar, Fund Manager-PMS at Angel Broking told CNBC-TV18, "The kind of leverage that sits on many of these balance sheets especially the likes of GMR Infrastructure which right from the beginning was into very long term asset ownership models is mindboggling and to that extent one is not surprised to see stocks in single digits and going all the way to Rs 30 because even at Rs 30-35 the equity values are so low that it doesn’t make much of a difference to the overall enterprise value.”

“But over the medium to long-term we are still not getting signs that the government is really in a position to start the virtuous cycle of investment which we saw in 2004-05 which actually coincided with the rise of many of these infrastructure companies. Till that happens I guess it will be very difficult for all of these companies to get back,” he added.
“Now the crucial difference between what these companies were 10 years back and what they are now, is the amount of debt that is sitting on many of these balance sheets. So it will not be that once this cycle starts they will start running. They will have to deal with the debt issues if they have to think of growing. So there are multiple challenges. So my advice to the investors would be to get out of this stock because it is going to take a very long time. And if things indeed get promising and there is always an opportunity for one to get back into these stocks and I believe you will still get them at better rates.”