Global Vectra Helicorp Ltd is India’s largest dedicated offshore air-logistics helicopter company, serving the oil & gas exploration and production sector.
Global Vectra Helicorp Ltd (GVHL) is India’s largest dedicated offshore air-logistics helicopter company, serving the oil & gas exploration and production sector.
Incorporated in 1998, this Mumbai-based company is a part of Rs 4,000 crore Vectra group of companies. Its main base is located at Juhu and the forward bases are located at Bhubaneshwar, Vishakhapatnam, Rajamundry, Porbander and Pondicherry.
GVHL has steadily increased its fleet size to 31 helicopters with an average fleet size of around 4 years. The fleet includes 24 Bell412 helicopters used for offshore activities, two EC135, two EC155 and three AS350B3 helicopters.
GVHL has strong in-house maintenance, repairs and overhaul (MRO) capability which reduces servicing time for helicopters, resulting in additional flying hours. GVHL is in the process of opening some more bases in South India to cater for the expanding operations to its clients.
GVHL plans to invest around Rs 650 crore over the next two years to increase its fleet size to 45 helicopters and consolidate its operations.
Business: GVHL’s primary business as an air logistics company is transportation of personnel and cargo to offshore locations across the eastern and western coastlines of India. It has dedicated 24 of its helicopters for offshore activities. Its clients include big names in exploration segment, namely ONGC, Reliance Industries, British Gas, Gujarat State Petroleum Corp and Transocean Offshore.
Recently, it has started widening its services and customer base by entering into onshore charter services for corporate sector, heli-tourism, airport shuttle services and overseas offshore business. GVHL has tied up with private jet operator BJETS to offer end-to-end private travel solutions to corporate and high profile customers by issuing prepaid hour cards which can be used seamlessly across BJETS and GVHL’s fleet.
Investment rationale: GVHL enjoys market leadership position in offshore air logistics business with more than 55% share. Going forward, it intends to focus more on offshore activities which are non-oil & gas.
The prospects for offshore helicopter services are directly linked to the scale and momentum of offshore oil & gas exploration and production. Following the sharp decline in the price of crude oil, the fundamentals for global oil services companies might take significant time to improve.
However, long-term growth prospects remain attractive on account of increasing acreage under exploration in India. Also, deployment of additional rigs, entry of new players under NELP VI & NELP VII and the government’s long-term vision to have complete exploration coverage by 2025 would be growth drivers for GVHL.
Concerns: Volatility in oil prices and prevailing economic slowdown may lead to low momentum in oil exploration activities, which may hurt customers’ revenues, in turn leading to new orders and tenders being trimmed or cancelled. However, GVHL has entered into a long-term contract for most of its fleet and has also signed fuel price escalation clause.
Valuations: In FY09, GVHL took a hit from higher direct operating expenses on account of higher fuel cost, higher lease rentals and higher insurance cost due to fleet expansion. Also, increase in cost associated with staff and spares/maintenance and forex losses sent the company deep into the red.
But high revenues from new contracts at better rates, fleet expansion plans and new onshore services coupled with several cost management initiatives would yield better performance going forward. Also, margins are set to improve with fleet age getting shorter, improved realiasation and cost management initiatives taken by company.
GVHL revenues are expected to grow at CAGR of 27% over FY08A-FY10E. At the current market price of Rs 49.45, the stock trades at a P/E of 16.93x its FY10E earnings. Considering the stock is trading at 3.74x its book value, GVHL looks overvalued at current levels. Investors should wait for lower levels to buy. Once financials improve significantly, they can keep a view on it from very long-term perspective.
Disclosure: The writer does not hold
any shares in the company.
ujauhari@rediffmail.com
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}