Risk Mitigation in Road Projects

Case of GMR Infrastructures Pvt. Ltd.

By:
Ankul Baria
MBA III Sem(Fin)
 GMR Group
The Company has a unique business model. It currently
operates in three sectors of infrastructure business viz.,
Airports, Power and Roads.
As infrastructure projects, pursuant to the related
concession agreements, are generally required to be
developed and operated as special purpose vehicles, the
Company, as of today, develops and operates all its current
projects/businesses through various subsidiaries.
The Company does not operate any business directly.
It does not have any stand alone revenues except dividends
received from subsidiary(s) and the treasury income
earned on its surplus funds.
As part of the business development efforts, company is
doing extensive analysis and studies on the potential
projects such as:
Detailed traffic studies taking into consideration the
growth prospects specific to project corridors
Tie-up with potential contractors for implementing the
project
Tie-up with Financial Institutions for innovative
financial structuring
Finalization of tolling structure and collecting
mechanisms including State of the Art Highway Traffic
Management Systems (HTMS)
Building adequate expertise and talent to execute the
projects in line with Global Standards
The risks associated with various projects are-
Dramatic changes in land prices,
Changes in rules and regulations,
The effects of which have been difficult to predict and
have caused significant structural changes and
expenditures
Changes in pricing structure,
Alternating periods of contraction and
Expansion and intense competition from within and
outside the industry.
Other Risks
Fluctuating Securities Volume and Prices
The Company’s profitability is sensitive to a variety of
factors, including the volume and value of trading in
securities, the volatility of equity and fixed income
markets, interest rate levels and the shape of the yield
curve.
Industry Changes and Competitive Factors
The Company competes directly with other companies
having similar operations.  Many of the Company’s
competitors have substantially greater capital and
resources than the Company and offer a broader range
services.
Importance of Key Personnel
 The Company is dependent on the continued services of the
management team, and a number of their key investment
bankers and sales and trading securities personnel.  The loss
of such personnel without adequate replacement could have
a material adverse effect on the company.  

Liquidity
 The Company also has commitments to invest in certain
partnerships.  While management believes that funds
provided by operations and existing bank credit facilities
will provide sufficient resources to meet present and
reasonably foreseeable short-term and long-term financial
needs, there is no guarantee that the Company will continue
to have access to these bank lines in the future.
Regulation
The Company’s business is subject to regulation by
various regulatory authorities that are charged with
protecting the interests of broker-dealers' and
investment advisers' customers.  

Effect of Net Capital Requirements

A significant operating loss or extraordinary charge
against net capital may adversely affect the ability of the
Company’s broker-dealer subsidiaries to expand or even
maintain their present levels of business and the ability
to support the obligations or requirements of the
Company
Litigation
Many aspects of the Company’s business involve
substantial risks of liability. In the normal course of
business, the Company and its subsidiaries have been
named as defendants or co-defendants in lawsuits
seeking substantial damages. The Company is also
involved from time to time in governmental and self-
regulatory agency investigations and proceedings.  
Thank You…