GVK sees power sector margins improving

Despite expanding its presence in airports and roads segments, GVK Power and Infrastructure Ltd (GVK PIL) is likely to remain focused on the energy sector.

“We will continue to have about 70-80% of revenues coming from the power sector. In fact, the power sector margins are likely to improve in the days to come,” Isaac George, GVK group’s CFO, told DNA.

The company in FY10 had revenues of Rs 1,787 crore, of which 90%, or Rs 1,603 crore, came from power. In 2008-09, the power sector’s contribution was at about 69%. The road sector’s contribution to the topline dropped from FY09’s 28.39% to 9.55%.

“As a percentage of our total revenues, the contribution from road sector has dropped. But on its own the revenues from this sector too have grown from Rs 146 crore in FY09 to Rs 171 crore,” he said.

However, the company has seen its operating margins contract from 18.7% in FY09 to 18.05% in FY10.

“The contraction was primarily due to the huge expenditure we had on two projects,” George said.

Net margins too have undergone significant change during FY10. Within the power sector, the margins expanded from 2.77% in FY09 to 14.26% in FY10. Similarly, the net margins in road sector dropped from 56% in FY09 to 45.28% in FY10.

“Our focus continues to be on power. Though the revenues from power sector are going to be between 70% and 80%, the margins from this area are going to improve,” he said.

GVK has interest in Bangalore and Mumbai airports. “The airport revenues are not taken into the consolidated accounts of GVK PIL. But the profits from these operations get added to the balance-sheet,” he said.

Attempts are being made to consolidate the airport shareholding into a single holding company.

The airports holding company will jointly own and operate the two airports.