13th November 2011, 08:31 PM
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Senior Member
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Join Date: Nov 2007
Posts: 1,695
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As per this month Outlook profit article, here are few reasons of under performance
Quote:
First
The plants, which rely on supplies from Reliance’s gas blocks in the Krishna-Godavari basin, are facing a tough time following a drop in gas output.
This has led to stalled expansion and may lead to a write-off of Rs 130 crore in the GVK books on account of advance given to the EPC contract.
Secondly
The cost of acquisition of the Hancock mines is $1.26 billion, payable in a phased manner. For this acquisition, loans worth $1 billion at LIBOR + 500 bps (approximately 5.5 percent) have been tied up. However, to tie up debt of $1 billion for the coal mine, the corporate guarantee has been provided by GVK (49 per cent) and GVK Natural Resources PteLtd. Additionally, GVK will pledge the shares of GVK Energy Ltd and GVK Transportation Ltd for the debt tied-up. While analysts say this will be a negative for GVK shareholders, George says the pledge was necessary to secure the loans for the acquisition,"Acquisition transactions are always leveraged.
A clear picture on how leveraged the company is will be revealed only when the FY12 numbers are out. It would be advisable to wait for FY12 numbers before taking the plunge.
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