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Infra Stocks Rally on Debt Reduction

Infrastructure stocks saw a buying rush on Friday led by GMR Infrastructure, which soared as much as 27% during the day after it announced a 47% reduction in debt for the financial year ended March compared to the previous financial year.

However, analysts said the jump in these stocks is unlikely to last beyond two to three sessions.

Among other infrastructure stocks, MBL Infrastructures gained 4% to Rs 26.40, MEP Infrastructure rose 9.8% to Rs 79.20 and GVK Power & Infrastructure jumped 14.4% to Rs 5.94.

Jaypee Infratech, GTL Infra and RPP Infra jumped 5% – 7%.

“There has been considerable distress in the stocks and they have been under pressure for the last four-five years. Anything that refl ects receding stress leads to interest in the sector,” said Dhananjay Sinha, head of research at Emkay Global.

GMR shares ended up 13.7 per cent to close at Rs 17 on Friday, 2nd June 2017.

Gross debt came down to Rs 19,856 crore from Rs 37,480 crore in the previous financial year and net debt to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ratio improved to 4.3 from 10.2 in FY16.

In the liquidity-driven rally in domestic stock markets this year, shares of GVK Power, GMR Infra, GTL Infra, Jaypee Infratech and MEP Infra have gained 10 to 121 per cent.

The sector has been saddled with debt woes for several years now and also one of the major contributors to the bad loans mess in the banking sector.

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