Shares of GMR Airports Infrastructure plunged 6 percent to touch a day's low of Rs 62.80 after hitting 13-year high of Rs 66.75 in Friday's trade as downgrades chased the mid-cap company. Domestic brokerage house Kotak Institutional Equities have downgraded its recommendation to ‘sell’ from 'add' earlier on limited cash flow reinvestment.

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Kotak has increased its fair value on the counter to Rs 54 from Rs 53 earlier, factoring the likely reinvestment over the next 15 years of attributable free cash flow (post-interest cost) at 2 times price-to-book ratio (P/B).

At 1:13 pm today, the scrip was trading 3.85 percent lower at Rs 62.40 apiece on NSE. The stock has rallied 16 percent in the last five trading sessions, taking their six-month return to 67 percent. In the last one year, the stock has zoomed 81 percent.

Following its recent rally of 40 percent over the past month, the stock is factoring in aggressive assumptions on reinvestment of $1 billion of equity funding beyond internal accruals and higher 3 times P/B multiple, Kotak said.

While the brokerage sees a strong case for investment in airports in India and the rest of Asia, the constraints on cash flows to reinvest limits its optimism. It called the stock valuations 'expensive'.

GMR Airports is at the end of a $2.5 billion capex into expanding capacities in Delhi and Hyderabad assets and setting up the greenfield airport in Goa. The same led to its leverage nearing 10 times levels.

"The same will ensure limited FCF over the next few years. We estimate the NPV of equity growth capital at $1.4 billion from internal accruals over the next 15 years. At 2 times P/B, the value creation from re-investment that we factor is a similar to $1.4 billion or 16 percent share of our Rs 54 per share SoTP," as per Kotak.

For justifying GMR Airports' prevailing price, the value of new asset wins at $4.4 billion, equivalent to 37 percent share of value, has been factored in, the brokerage said. "The $4.4 billion implied value of new asset wins is difficult to realise against the growth capital of $1.4 billion that we estimate. The same requires valuing internal accruals at higher 3 times P/BV multiple and another $1 billion of fresh funding. It also requires us to take the following calls that we find aggressive: competition remaining benign over the long term and new investors coming in at current stiff valuations," it said.

GMR Airports manage a significant portion of India's airport traffic, handling 26 percent of domestic and 33 percent of international passengers.