GMR Infrastructure Limited (NSE:GMRINFRA) Is Expected To Breakeven In The Near Future

GMR Infrastructure Limited (NSE:GMRINFRA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. GMR Infrastructure Limited engages in engineering, procurement, and construction (EPC) contracting activities in India and internationally. With the latest financial year loss of ₹24b and a trailing-twelve-month loss of ₹32b, the ₹156b market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on GMR Infrastructure's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for GMR Infrastructure

Consensus from 3 of the Indian Infrastructure analysts is that GMR Infrastructure is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of ₹2.1b in 2023. Therefore, the company is expected to breakeven roughly 3 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 66% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of GMR Infrastructure's upcoming projects, though, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with GMR Infrastructure is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of GMR Infrastructure which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at GMR Infrastructure, take a look at GMR Infrastructure's company page on Simply Wall St. We've also put together a list of essential factors you should further research:

1. Valuation: What is GMR Infrastructure worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether GMR Infrastructure is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on GMR Infrastructure’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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