GVK Power may slip 5%, says SP Tulsian

GVK Power may slip 5% from current levels, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, “There is any confusion with respect to ADF getting scrapped from 1st January 2013 because if you see the judicial view also earlier they were also very much against this. So in my view this seems to be a forgone conclusion. But I have been hearing the analysts, people have only been talking of the fund infusion to the extent of the shares of these both companies. GVK is holding close to about 50 percent in Mumbai airport, GMR is holding 54 percent in the Delhi airport. So, people are talking of the matching contribution, which they need to bring in for the deficit or maybe the revenue or maybe the shortfall, what is being envisaged.”
He further added, “My question is that it is not the question only in respect to the equity contribution because maybe almost double the amount of the equity contribution has to be made good by raising further debt by both these companies. Take for instance if there is a deficit or a revenue shortfall of about Rs 3,000 crore, maybe if I take 2:1 as debt-equity Rs 2,000 crore will come from debt and Rs 1,000 crore will come from equity to be contributed by each partner. So nobody is really talking of the debt contribution. Firstly, it will be very difficult for these companies to raise fresh debt and even if that happens that will further leverage the balance sheet of the company, which will be seen quite bad. GMR is already sitting on the debt of close to about Rs 25,000 crore- Rs 26,000 crore and if further debt gets added that will be seen very bad and going forward from March quarter onwards the amount of ADF was seen booked as an income or maybe seen as a reduction or maybe the charge to the capital cost and all that, which will not come. So there will be a double-whammy contribution in respect to the equity contribution and raising further money, thus leveraging the books of the company. So, I am seeing it quite negative and maybe the weakness can make the stocks to go weaker by additional 5 percent from the current level.”