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Infra stocks rally on debt reduction

Sector not out of the woods yet, say analysts.

, ET Bureau|
Updated: Jun 03, 2017, 11.28 AM IST
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Analysts said the jump in infra stocks is unlikely to last beyond two to three sessions.
Analysts said the jump in infra stocks is unlikely to last beyond two to three sessions.
Infrastructure stocks saw a buying rush on Friday led by GMR Infrastructure, which soared as much as 27 per cent during the day after it announced a 47 per cent 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 per cent to Rs 26.40, MEP Infrastructure rose 9.8 per cent to Rs 79.20 and GVK Power & Infrastructure jumped 14.4 per cent to Rs 5.94.



Others such as Jaypee Infratech, GTL Infra and RPP Infra jumped 5-7 per cent.

“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.

“However, one needs to see if cash flows improve. The government is focusing on infrastructure spending. One needs to see if it gets translated,” added Sinha.

GMR shares ended up 13.7 per cent to close at Rs 17 on Friday.

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 March quarter, the company’s standalone net loss widened to Rs 2,478.7 crore from Rs 1,787 crore a year ago.

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.

A few such as Lanco Infratech, MBL Infra and RPP Infra have fallen 0.2- 38 per cent this year.

“News flow-led positive sentiments can lead to two-three days of up-move but skepticism will remain till the over-leveraged companies show sustained improvement in their leverage ratios and operational performance in the balance business,” said Deepak Jasani, head-retail research at HDFC Securities.

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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