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GVKP IN, Mkt Cap US$1.5b, Buy


GVK Power and Infrastructure has concluded 2nd round of private equity investment in GVK Energy (power holdco). Actis and Government of Singapore (GIC) would invest Rs.3.5b each in GVK Energy, of which Rs.2.2b each will be invested in the first tranche for an equity stake of 10.97%. Post this investment, total PE fund infusion in GVK Energy stands at Rs.15b (3i Rs.8b and Actis/GIC Rs.7b) leading to a dilution of 24.97%. This combined deal values GVK Energy at Rs.60b. GVK Energy includes all the power assets of the GVK Group, except Goriganga (371MW) and Rattle (670MW) hydro power projects;which  continue to be part of GVK Power.

We expect GVKPIL to report consolidated net profit of Rs.2.7b in FY11E (up 67% YoY) and Rs.4.3b in FY12E (up 60% YoY). The stock trades at a PER of 23x FY11E and 14x FY12E. We arrive at a SOTP based target price of Rs.52/sh, comprising of Airport (including Bangalore airport at book value) at Rs.25/sh, Roads at Rs.7/sh, Power portfolio at Rs.18/sh and investment in other projects, cash at Rs.3/sh. Maintain Buy.