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1QFY2011 Result Update | Real Estate
                                                                                                                       August 5, 2010



 Anant Raj Industries                                                                     BUY
                                                                                          CMP                                  Rs120
 Performance Highlights                                                                   Target Price                         Rs178
  Y/E March (Rs cr)           1QFY11      4QFY10         % qoq     1QFY10       % yoy     Investment Period             12 Months
  Net sales                        103          34        203.4       105        (1.5)
                                                                                         Stock Info
  EBITDA                            57          26        117.0         76      (25.2)
                                                                                         Sector                           Real Estate
  OPM margin (%)                   55.0       76.9    (2,191bp)       72.4   (1,741bp)
                                                                                         Market Cap (Rs cr)                     3,531
  PAT                               46          31         48.1         69      (33.5)
                                                                                         Beta                                     1.3
 Source: Company, Angel Research
                                                                                         52 Week High / Low                    164/99
 Anant Raj Industries’ (ARIL) 1QFY2011 results were in line with our expectations.       Avg. Daily Volume                 290,753
 ARIL’s net sales grew by 203.4% qoq (down 1.5% yoy) to Rs103cr. During the              Face Value (Rs)                            2
 quarter, ARIL changed its accounting method for booking revenue to gross-sales
                                                                                         BSE Sensex                            18,173
 method from net-of-costs method, which resulted in lower OPM (55%). Thus, PAT
                                                                                         Nifty                                  5,447
 grew by 48.1% qoq to Rs45.8cr. We maintain a Buy view on the stock.
                                                                                         Reuters Code                     ANRA.BO
 1QFY2011 revenue driven by new residential launches
                                                                                         Bloomberg Code                   ARCP@IN
 During 1QFY2011, ARIL launched two residential projects in NCR, Kapashera
 (0.28mn sq. ft.) and Manesar (1mn sq. ft.) for Rs5,000/sq. ft. and Rs2,500/sq. ft.,
 respectively. The Kapashera property has been entirely sold (112 flats) and ~50%        Shareholding Pattern (%)
 of the Manesar property (500 flats) has been sold out so far. During the quarter,       Promoters                               61.4
 ARIL booked Rs82cr of revenue from its Kapashera property.                              MF / Banks / Indian Fls                  5.8

 Change in accounting method and revenue mix impact margins                              FII / NRIs / OCBs                       29.0
                                                                                         Indian Public / Others                   3.8
 Historically, ARIL’s revenue has been driven by land/FSI sale and rental income,
 where it booked revenue on net sales basis, excluding land cost. In 1QFY2011,
 ARIL changed its accounting method to gross sales, resulting in lower OPM at            Abs. (%)                3m      1yr      3yr
 55%, from its high of 85–95%. We expect OPM to remain at the current level, with
                                                                                         Sensex                  6.3 14.3       20.0
 increasing share of residential projects.
                                                                                         Anant Raj             (2.5) (12.8)     (53.6)
 Outlook
 ARIL is trading at 42% discount to our one-year forward NAV, which gives a
 margin of safety, given its low-cost land bank situated at prime locations and a
 well-capitalised balance sheet. We maintain Buy on the stock with a Target Price
 of Rs178, which is at 15% discount to our one-year forward NAV.
 Key Financials (Consolidated)
  Y/E March (Rs cr)                       FY2009      FY2010      FY2011E    FY2012E
  Net Sales                                  251          286         491        995
  % chg                                    (58.5)        14.2        71.5       102.7
  Net Profit                                 207          238         209        434
  % chg                                    (52.5)        14.9       (12.1)      107.4
  EBITDA (%)                                88.0         90.3        52.7        58.2
  EPS (Rs)                                   6.6           7.6        6.6        13.8
  P/E (x)                                   18.2         15.8        18.0         8.7    Param Desai
  P/BV (x)                                   1.1           1.0        1.0         0.9    022 – 4040 3800 Ext: 310
  RoE (%)                                    6.7           6.9        5.6        10.6    paramv.desai@angeltrade.com

  RoCE (%)                                   6.5           6.7        6.0        12.2
                                                                                         Mihir Salot
  EV/Sales (x)                              12.4         11.1         6.8         3.9
                                                                                         022 – 4040 3800 Ext: 307
  EV/EBITDA (x)                             14.1         12.3        13.0         6.7    mihirr.salot@angeltrade.com
 Source: Company, Angel Research

Please refer to important disclosures at the end of this report                                                                     1
Anant Raj Industries |1QFY2011 Result Update




Exhibit 1: Quarterly performance
(Rs cr)                           1QFY11    4QFY10          % (qoq)     1QFY10           % (yoy)      FY2010        FY2009             % chg
Revenues                             103        34           203.4           105           (1.5)          286           251             14.2
Total expenditure                     47          8          491.4            29           60.8            28               30          (7.7)
EBIDTA                                57        26           117.0            76          (25.2)          259           221             17.2
EBIDTA margin (%)                   55.0      76.9      (2,191bp)            72.4     (1,741bp)          90.3          88.0           230bp
Depreciation                           4        (2)                            3            3.1            11                9          23.9
Interest                               1          5                            0                               5             0
Other income                           9        13           (25.7)           15          (39.3)           53               70         (23.8)
PBT                                   61        36            71.7            88          (30.4)          296           282               5.2
Tax                                   15          6          159.8            18          (14.4)           58               73         (20.8)
Tax rate (%)                        25.1      16.6                           20.4                        19.6          26.0
EO/Minority int.                      (0)         1                           (1)                          (0)              (1)
Adj PAT                               46        30            54.2            70          (34.5)          238           208             14.4
Adj. PAT margin (%)                 44.3      87.2                           66.7                        83.2          83.1
Reported PAT                        45.8      30.9            48.1           68.9         (33.5)          238           207             14.9
Number of shares (mn)               29.5      29.5                           29.5                        29.5          29.5
EPS (Rs)                             1.6       1.0                            2.3                         8.1           7.0
Source: Company, Angel Research




                                              Exhibit 2: Actual v/s Estimates
                                               Particulars (Rs cr)                                 Estimates       Actual         Variation (%)
                                               Net Sales*                                                60          103                  72.0
                                               Operating Profit                                          48           57                  18.3
                                               OPM (%)                                                 80.0         55.0            (2,498bp)
                                               Reported PAT                                              44           46                   4.3
                                              Source: Company, Angel Research; Note*Change in accounting method from Net sales to Gross
                                              sales resulting in lower OPM




August 5, 2010                                                                                                                              2
Anant Raj Industries |1QFY2011 Result Update



                 Improving visibility in rental income
                 ARIL’s rental revenue grew by 20.7% qoq to Rs18cr. The company earned Rs4.5cr
                 from the Manesar IT Park project, Rs8.1cr from three hotels, Rs1.2cr from Karol
                 Bagh Mall and Rs3.6cr from Jhandewalan and Faiz Road. Further, we expect
                 ARIL’s Manesar and Kirti Nagar properties to reach their peak occupancy levels in
                 6–9 months, as leasing activity improves. Management has indicated that its Kirti
                 Nagar property (0.75mn sq. ft.) has been pre-leased to the extent of 0.3mn sq. ft.
                 at Rs100/sq. ft. and expects tenants to move in by October 2010. Rentals at the
                 Kirti Nagar Mall have been renegotiated from Rs150/sq. ft., as indicated earlier by
                 the management.


                 Exhibit 3: Rental income to grow 4x to Rs201cr by FY2012E
                              250
                                                                                          201
                              200

                              150
                    (Rs cr)




                              100                                            86

                                                                49
                              50
                                     11             16
                                0
                                    FY2008         FY2009     FY2010      FY2011E       FY2012E


                 Source: Company, Angel Research



                     During the quarter, ARIL acquired 15.5 acres (FSI of 2) of land for Rs85cr
                     (Rs531/sq. ft.) at Gurgaon Sec 91. The company intends to launch it as a
                     mid-income residential project over the next six months. This is in line with the
                     company’s strategy to acquire land at a cheaper cost.




August 5, 2010                                                                                      3
Anant Raj Industries |1QFY2011 Result Update




Exhibit 4: Quarterly revenue trend                                                               Exhibit 5: Quarterly EBITDA trend
          120                                                                      200                      90                     91.7             92.4                                     100
                                                                                                            80    72.4
          100                                                 159.2                150                                                                            76.9
                                                                                                            70                                                                               80
          80                                                                       100                      60                                                                     55.0
                                                                                                                                                                                             60
                                                                                                            50




                                                                                                  (Rs cr)
(Rs cr)




                                                                                                                                                                                                   (%)
                                                                                          ()%)
          60                                                                       50                       40
                                                                                                                                                                                             40
                                               17.0                                                         30
          40                                                              (1.5) 0
                     (39.0)                                                                                 20                                                                               20
          20                        (44.3)                                         (50)                     10
                                                                                                             0                                                                               0
            0                                                                      (100)
                                                                                                                 1QFY10           2QFY10           3QFY10        4QFY10         1QFY11
                1QFY10     2QFY10        3QFY10       4QFY10          1QFY11
                         Revenue (LHS)             yoy change (RHS)                                                         EBITDA (LHS)                   EBITDA Margin (RHS)


Source: Company, Angel Research                                                                  Source: Company, Angel Research




                                                                                                 Exhibit 6: Quarterly profitability trend
                                                                                                            80                                                                               500
                                                                                                            70                                                          415.3                400
                                                                                                            60
                                                                                                                                                                                             300
                                                                                                            50
                                                                                                  (Rs cr)




                                                                                                                                                                                                   (%)
                                                                                                            40                                                                               200
                                                                                                            30
                                                                                                                                                                                             100
                                                                                                            20
                                                                                                                                          (43.9)           1.4                               0
                                                                                                            10           (54.8)                                           (33.5)
                                                                                                             0                                                                               (100)
                                                                                                                 1QFY10           2QFY10           3QFY10        4QFY10         1QFY11
                                                                                                                                   PAT (LHS)               yoy change (RHS)


                                                                                                 Source: Company, Angel Research




Exhibit 7: Peer valuation
Company          Reco.        Mcap CMP       TP Upside                   P/E (x)                 P/B (x) NAV Prem/(Disc) EV/EBITDA (x)                                   RoE (%)          CAGR #
                          (Rs cr)      (Rs) (Rs)       (%) FY11E FY12E FY11E FY12E                                         to NAV FY11E FY12E FY11E FY12E                            Sales       PAT
ARIL               Buy    3,531 120 178               48.8       18.0       8.7           1.0          0.9 210              (42.0)         13.0        6.7        5.6      10.6 123.8 41.2
DLF             Neutral 52,738 311             -          -      26.8     14.8            1.6          1.5 298                    4.3      16.9       11.0        6.2      10.5       41.4 53.1
HDIL               Buy    9,274 268 302               12.6       12.3       7.5           1.2          1.1 402              (33.3)         12.4        6.9       10.8      15.4       54.9 67.8
Source: Company, Angel Research; Note: # CAGR over FY2010-FY2012E




August 5, 2010                                                                                                                                                                                       4
Anant Raj Industries |1QFY2011 Result Update




                 Investment arguments

                 Land acquisition at discounted price

                 Almost all of ARIL's land bank (872 acres) is exclusively located in NCR, within
                 50km of Delhi, with approximately 525 acres in Delhi. This land bank has been
                 acquired at an historical average cost of Rs300/sq. ft., with recent transactions by
                 ARIL executed at Rs531/sq. ft., Rs450/sq. ft. and Rs130/sq. ft. in high-growth
                 areas such as Gurgaon, Manesar and Sonepat, respectively. ARIL's successful land
                 acquisition strategy is attributed to its acquisition through the allocation route from
                 DDA at significantly lower prices compared to prevailing rates and its focus on
                 being an NCR player, which helps in identifying areas with high economic
                 potential in Delhi.

                 Residential projects to drive near-term visibility

                 ARIL recently launched two residential projects in NCR—Kapashera (0.28mn sq. ft.)
                 and Manesar (1mn sq. ft.) for Rs5,000/sq. ft. and Rs2,500/sq. ft., respectively.
                 Management has indicated that the entire property of Kapashera and ~50% of
                 Manesar property have been sold out so far. The Manesar property was acquired
                 at Rs450/sq. ft. in 2009. Going ahead, ARIL intends to launch its premium
                 residential project at Hauz Khas, Delhi, as it gets environmental clearance.
                 Management has guided for Rs500cr of revenue in FY2011E from the residential
                 segment. Further, we expect ARIL’s Manesar and Kirti Nagar properties to reach
                 their peak occupancy levels in 6–9 months as leasing activity improves. The
                 company will also have five hotels operational by FY2011E, with transfer of
                 occupancy risk to third party in return of fixed rentals. Consequently, we expect
                 ARIL to report rental income of Rs201cr in FY2012E as compared to Rs49cr
                 reported in FY2010.

                 Well-capitalised balance sheet

                 ARIL's land bank is fully paid and it has net cash balance of Rs190cr, with unpaid
                 land cost of Rs60cr. This augurs well for the company even in a downturn and
                 gives headroom to leverage at reasonable costs for the timely execution of
                 projects. Further, the recent issuance of 2cr warrants to promoters (Rs87/share) will
                 strengthen its cash balance by Rs130cr on conversion.




August 5, 2010                                                                                        5
Anant Raj Industries |1QFY2011 Result Update



                 Outlook and valuation

                 ARIL is trading at 42% discount to our one-year forward NAV (much higher
                 than its peers), which gives a margin of safety given its low-cost land bank
                 situated at prime locations and well-capitalised balance sheet. This can be
                 primarily attributed to the company’s higher exposure to commercial assets
                 (67%). However, we believe near-term revenue visibility will be driven by ARIL's
                 residential projects. Further, we expect rental income to grow 4x by FY2012E
                 to Rs200cr as Manesar and Kirti Nagar properties should reach their peak
                 occupancy levels in 6–9 months coupled with five hotels getting operational by
                 FY2011E, which will improve ARIL’s rental visibility. We maintain a Buy view on
                 the stock with a Target Price of Rs178, which is at 15% discount to our one-
                 year forward NAV.


                 Exhibit 8: Key Assumptions
                 Figures in mn sq. ft.                                      FY2011E     FY2012E
                 Residential sales                                              0.96        1.01
                 Leasing                                                         1.9         3.5
                 Commercial                                                     1.41        2.89
                 Hotel                                                          0.46        0.61
                 Retail                                                                     0.10
                 Pricing (%)
                 Residential                                                       5           5
                 Commercial                                                       (5)          5
                 Retail                                                           (5)          5
                 Source: Angel Research




August 5, 2010                                                                                 6
Anant Raj Industries |1QFY2011 Result Update




                 Profit & Loss Statement (Consolidated)
                 Y/E March (Rs cr)                     FY07     FY08     FY09    FY10 FY11E      FY12E
                 Net Sales                              208      604     251     286      491     995
                 Other operating income                     -        -       -       -       -        -
                 Total operating income                 208      604     251     286      491     995
                 % chg                                 266.1    190.2 (58.5)     14.2    71.5    102.7
                 Total Expenditure                      (31)     (42)    (30)    (28)    (232)   (416)
                 Construction costs                         -        -       -       -   (213)   (377)
                 Other Mfg costs                        (27)     (35)    (23)    (20)        -        -
                 Personnel                                (4)      (6)     (7)     (7)     (9)     (13)
                 Other operating cost                       -        -       -       -    (11)     (27)
                 EBITDA                                 177      562     221     259      259     579
                 % chg                                 342.0    217.6 (60.7)     17.2    (0.0)   123.9
                 (% of Net Sales)                       85.1     93.1    88.0    90.3    52.7     58.2
                 Depreciation& Amortisation               (8)      (8)     (9)   (11)     (18)     (26)
                 EBIT                                   169      554     212     248      240     553
                 % chg                                 355.2    227.4 (61.7)     16.9    (3.1)   130.3
                 (% of Net Sales)                       81.3     91.8    84.6    86.6    48.9     55.6
                 Interest & other Charges               (2.4)    (3.3)   (0.5)   (4.9)   (8.3)   (12.8)
                 Other Income                            4.3     29.3    70.1    53.4    43.8     31.2
                 (% of PBT)                              2.5      5.1    24.9    18.0    15.9      5.5
                 Recurring PBT                          171      580     282     296      276     571
                 % chg                                 363.6    239.0 (51.4)      5.2    (7.0)   107.4
                 Extraordinary Expense/(Inc.)               -        -       -       -       -        -
                 PBT (reported)                         171      580     282     296      276     571
                 Tax                                    (46)    (144)    (73)    (58)     (66)   (137)
                 (% of PBT)                             26.7     24.8    26.0    19.6    24.0     24.0
                 PAT (reported)                         125      436     208     238      209     434
                 Add: Share of earnings of associate     0.3         -       -       -       -        -
                 Less: Minority interest (MI)               -    (0.0)    0.2    (0.1)       -        -
                 Prior period items                     (0.0)     0.2    (1.3)   (0.1)       -        -
                 PAT after MI (reported)                126      436     207     238      209     434
                 ADJ. PAT                               126      436     207     238      209     434
                 % chg                                 347.5    246.9 (52.5)     14.9 (12.1)     107.4
                 (% of Net Sales)                       60.5     72.3    82.7    83.2    42.7     43.6
                 Basic EPS (Rs)                          4.6     13.8     6.6     7.6     6.6     13.8
                 Fully Diluted EPS (Rs)                  4.0     13.8     6.6     7.6     6.6     13.8
                 % chg                                 347.5    246.9 (52.5)     14.9 (12.1)     107.4




August 5, 2010                                                                                        7
Anant Raj Industries |1QFY2011 Result Update




                 Balance Sheet (Consolidated)
                 Y/E March (Rs cr)                 FY07    FY08   FY09   FY10 FY11E FY12E
                 SOURCES OF FUNDS
                 Equity Share Capital                48     59     59     59      63    63
                 Preference Capital                    -      -      -      -      -      -
                 Warrants/sh. appl. money             9      0     18     60      16    16
                 Reserves& Surplus                1,110 2,841 3,242 3,477       3,834 4,233
                 Shareholder’s Funds              1,167 2,901 3,319 3,595 3,913 4,312
                 Minority Interest                    0      0     69     86      86    86
                 Total Loans                        340     58    210    139     139   499
                 Deferred Tax Liability               2      2      3      1       1     1
                 Total Liabilities                1,509 2,961 3,600 3,821 4,139 4,897
                 APPLICATION OF FUNDS
                 Gross Block                      1,105 1,131 1,260 1,860       2,220 2,966
                 Less: Acc. Depreciation             34     37     45     54      72    98
                 Net Block                        1,071 1,094 1,215 1,806 2,148 2,868
                 Capital Work-in-Progress           200    386    762    746     746   746
                 Goodwill                              -   141    146    145     145   145
                 Investments                        112    149    309    295     295   295
                 Current Assets                     385 1,437 1,289 1,015       1,090 1,306
                    Cash                             63    605    626    489     338   199
                    Loans & Advances                301    444    411    274     302   332
                    Other                            21    388    253    252     450   776
                 Current liabilities                258    246    126    189     287   465
                 Net Current Assets                 126 1,191 1,163      826     803   841
                 Mis. Exp. not written off            1      1      5      3       3     3
                 Total Assets                     1,509 2,961 3,600 3,821 4,139 4,897




August 5, 2010                                                                            8
Anant Raj Industries |1QFY2011 Result Update




                 Cash Flow Statement (Consolidated)
                 Y/E March (Rs cr)                    FY07    FY08   FY09   FY10 FY11E FY12E
                 Profit before tax                     171    580    282     296     276     571
                 Depreciation                            9      8     10      12      18      26
                 Other Adjustments                      (1)    (8)   (60)    (44)      8      13
                 Chg in Wkg. cap.                      (59) (460)      7     201    (102)   (162)
                 Less: Other income                     23     (0)    (5)      2       0        -
                 Direct taxes paid                     (46) (144)    (74)    (60)    (66)   (137)
                 Cash Flow from Operations              97    (26)   160     408     135     311
                 Inc./ (Dec.) in Fixed Assets         (844) (173) (136)     (602)   (360)   (746)
                 Inc./ (Dec.) in Investments          (112)   (36) (160)      14        -       -
                 Inc./ (Dec.) in loans & adv.             -      -      -       -    (27)    (30)
                 Other income                         (152) (211) (207)       79        -       -
                 Cash Flow from Investing           (1,108) (420) (503)     (508)   (387)   (776)
                 Issue of Equity                       796 1,349     233      59     131        -
                 Inc./(Dec.) in loans                  302 (282)     152     (71)       -    360
                 Dividend Paid (Incl. Tax)             (30)   (76)   (21)    (21)    (21)    (22)
                 Others                                  3     (3)    (0)     (3)     (8)    (13)
                 Cash Flow from Financing            1,071    988    364     (36)    102     326
                 Inc./(Dec.) in Cash                    59    542     21    (136)   (151)   (139)
                 Opening Cash balances                   3     63    605     626     489     338
                 Closing Cash balances                  63    605    626     489     338     199




August 5, 2010                                                                                  9
Anant Raj Industries |1QFY2011 Result Update




                 Key Ratios
                 Y/E March                   FY07    FY08     FY09     FY10    FY11E    FY12E
                 Valuation Ratio (x)
                 P/E (on FDEPS)              28.3      8.6     18.2    15.8     18.0      8.7
                 P/CEPS                      23.2      8.5     17.5    15.1     16.6      8.2
                 P/BV                          3.2     1.3      1.1     1.0      1.0      0.9
                 Dividend yield (%)            0.8     1.2      0.5     0.5      0.5      0.8
                 EV/Sales                    18.3      4.9     12.4    11.1     12.0      6.2
                 EV/EBITDA                   21.5      5.3     14.1    12.3     12.9      6.6
                 EV / Total Assets             2.5     1.0      0.9     0.8      0.8      0.8
                 Per Share Data (Rs)
                 EPS (Basic)                   4.6    13.8      6.6     7.6      6.6     13.8
                 EPS (fully diluted)           4.0    13.8      6.6     7.6      6.6     13.8
                 Cash EPS                      4.9    14.1      6.9     7.9      7.2     14.6
                 DPS                           0.9     1.4      0.6     0.6      0.6      1.0
                 Book Value                    37       92     105     114      124      137
                 DuPont Analysis
                 EBIT margin                 81.3     91.8     84.6    86.6     48.9     55.6
                 Tax retention ratio         73.3     75.2     74.0    80.4     76.0     76.0
                 Asset turnover (x)          14.4     25.6      8.4     8.6      7.3     13.2
                 ROIC (Post-tax)               8.6    17.7      5.3     6.0      2.7      5.6
                 Cost of Debt (Post Tax)       0.9     1.3      0.3     2.3      4.6      3.0
                 Leverage (x)                  0.2    (0.1)    (0.2)   (0.1)    (0.1)     0.0
                 Operating ROE               10.3     16.6      4.5     5.6      2.9      5.6
                 Returns (%)
                 ROCE (Pre-tax)              18.8     24.8      6.5     6.7      6.0     12.2
                 Angel ROIC (Pre-tax)        25.4     40.3     12.1    11.0      9.0     16.5
                 ROE                         17.9     21.5      6.7     6.9      5.6     10.6
                 Turnover ratios (x)
                 Asset Turnover (GB)            0        1        0       0        0       0
                 Inventory / Sales (days)      14       26       66      16       87     110
                 Receivables (days)            46       97     401     306      211      157
                 Payables (days)               82       97     180     517      114       93
                 Wrk. Cap (ex-cash, days)        -        -        -       -        -       -
                 Solvency ratios (x)
                 Net debt to equity            0.2    (0.2)    (0.1)   (0.1)    (0.1)     0.1
                 Net debt to EBITDA            1.6    (1.0)    (1.9)   (1.4)    (0.8)     0.5
                 Int. coverage (EBIT/int)    69.1    166.4    451.7    50.7     28.8     43.3




August 5, 2010                                                                             10
Anant Raj Industries |1QFY2011 Result Update




  Research Team Tel: 022 - 4040 3800               E-mail: research@angeltrade.com                   Website: www.angeltrade.com

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 Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,
 compliance, or other reasons that prevent us from doing so.
 This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
 redistributed or passed on, directly or indirectly.

 Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or
 other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in
 the past.

 Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
 connection with the use of this information.

 Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please
 refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and
 its affiliates may have investment positions in the stocks recommended in this report.




 Disclosure of Interest Statement (Company name)                           Anant Raj Industries
 1. Analyst ownership of the stock                                                 No
 2. Angel and its Group companies ownership of the stock                           No
 3. Angel and its Group companies' Directors ownership of the stock               Yes
 4. Broking relationship with company covered                                      No

 Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors.



 Ratings (Returns) :             Buy (> 15%)                      Accumulate (5% to 15%)                 Neutral (-5 to 5%)
                                 Reduce (-5% to 15%)              Sell (< -15%)


August 5, 2010                                                                                                                            11

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1QFY2011 Results Update: Buy | Anant Raj Industries

  • 1. 1QFY2011 Result Update | Real Estate August 5, 2010 Anant Raj Industries BUY CMP Rs120 Performance Highlights Target Price Rs178 Y/E March (Rs cr) 1QFY11 4QFY10 % qoq 1QFY10 % yoy Investment Period 12 Months Net sales 103 34 203.4 105 (1.5) Stock Info EBITDA 57 26 117.0 76 (25.2) Sector Real Estate OPM margin (%) 55.0 76.9 (2,191bp) 72.4 (1,741bp) Market Cap (Rs cr) 3,531 PAT 46 31 48.1 69 (33.5) Beta 1.3 Source: Company, Angel Research 52 Week High / Low 164/99 Anant Raj Industries’ (ARIL) 1QFY2011 results were in line with our expectations. Avg. Daily Volume 290,753 ARIL’s net sales grew by 203.4% qoq (down 1.5% yoy) to Rs103cr. During the Face Value (Rs) 2 quarter, ARIL changed its accounting method for booking revenue to gross-sales BSE Sensex 18,173 method from net-of-costs method, which resulted in lower OPM (55%). Thus, PAT Nifty 5,447 grew by 48.1% qoq to Rs45.8cr. We maintain a Buy view on the stock. Reuters Code ANRA.BO 1QFY2011 revenue driven by new residential launches Bloomberg Code ARCP@IN During 1QFY2011, ARIL launched two residential projects in NCR, Kapashera (0.28mn sq. ft.) and Manesar (1mn sq. ft.) for Rs5,000/sq. ft. and Rs2,500/sq. ft., respectively. The Kapashera property has been entirely sold (112 flats) and ~50% Shareholding Pattern (%) of the Manesar property (500 flats) has been sold out so far. During the quarter, Promoters 61.4 ARIL booked Rs82cr of revenue from its Kapashera property. MF / Banks / Indian Fls 5.8 Change in accounting method and revenue mix impact margins FII / NRIs / OCBs 29.0 Indian Public / Others 3.8 Historically, ARIL’s revenue has been driven by land/FSI sale and rental income, where it booked revenue on net sales basis, excluding land cost. In 1QFY2011, ARIL changed its accounting method to gross sales, resulting in lower OPM at Abs. (%) 3m 1yr 3yr 55%, from its high of 85–95%. We expect OPM to remain at the current level, with Sensex 6.3 14.3 20.0 increasing share of residential projects. Anant Raj (2.5) (12.8) (53.6) Outlook ARIL is trading at 42% discount to our one-year forward NAV, which gives a margin of safety, given its low-cost land bank situated at prime locations and a well-capitalised balance sheet. We maintain Buy on the stock with a Target Price of Rs178, which is at 15% discount to our one-year forward NAV. Key Financials (Consolidated) Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E Net Sales 251 286 491 995 % chg (58.5) 14.2 71.5 102.7 Net Profit 207 238 209 434 % chg (52.5) 14.9 (12.1) 107.4 EBITDA (%) 88.0 90.3 52.7 58.2 EPS (Rs) 6.6 7.6 6.6 13.8 P/E (x) 18.2 15.8 18.0 8.7 Param Desai P/BV (x) 1.1 1.0 1.0 0.9 022 – 4040 3800 Ext: 310 RoE (%) 6.7 6.9 5.6 10.6 paramv.desai@angeltrade.com RoCE (%) 6.5 6.7 6.0 12.2 Mihir Salot EV/Sales (x) 12.4 11.1 6.8 3.9 022 – 4040 3800 Ext: 307 EV/EBITDA (x) 14.1 12.3 13.0 6.7 mihirr.salot@angeltrade.com Source: Company, Angel Research Please refer to important disclosures at the end of this report 1
  • 2. Anant Raj Industries |1QFY2011 Result Update Exhibit 1: Quarterly performance (Rs cr) 1QFY11 4QFY10 % (qoq) 1QFY10 % (yoy) FY2010 FY2009 % chg Revenues 103 34 203.4 105 (1.5) 286 251 14.2 Total expenditure 47 8 491.4 29 60.8 28 30 (7.7) EBIDTA 57 26 117.0 76 (25.2) 259 221 17.2 EBIDTA margin (%) 55.0 76.9 (2,191bp) 72.4 (1,741bp) 90.3 88.0 230bp Depreciation 4 (2) 3 3.1 11 9 23.9 Interest 1 5 0 5 0 Other income 9 13 (25.7) 15 (39.3) 53 70 (23.8) PBT 61 36 71.7 88 (30.4) 296 282 5.2 Tax 15 6 159.8 18 (14.4) 58 73 (20.8) Tax rate (%) 25.1 16.6 20.4 19.6 26.0 EO/Minority int. (0) 1 (1) (0) (1) Adj PAT 46 30 54.2 70 (34.5) 238 208 14.4 Adj. PAT margin (%) 44.3 87.2 66.7 83.2 83.1 Reported PAT 45.8 30.9 48.1 68.9 (33.5) 238 207 14.9 Number of shares (mn) 29.5 29.5 29.5 29.5 29.5 EPS (Rs) 1.6 1.0 2.3 8.1 7.0 Source: Company, Angel Research Exhibit 2: Actual v/s Estimates Particulars (Rs cr) Estimates Actual Variation (%) Net Sales* 60 103 72.0 Operating Profit 48 57 18.3 OPM (%) 80.0 55.0 (2,498bp) Reported PAT 44 46 4.3 Source: Company, Angel Research; Note*Change in accounting method from Net sales to Gross sales resulting in lower OPM August 5, 2010 2
  • 3. Anant Raj Industries |1QFY2011 Result Update Improving visibility in rental income ARIL’s rental revenue grew by 20.7% qoq to Rs18cr. The company earned Rs4.5cr from the Manesar IT Park project, Rs8.1cr from three hotels, Rs1.2cr from Karol Bagh Mall and Rs3.6cr from Jhandewalan and Faiz Road. Further, we expect ARIL’s Manesar and Kirti Nagar properties to reach their peak occupancy levels in 6–9 months, as leasing activity improves. Management has indicated that its Kirti Nagar property (0.75mn sq. ft.) has been pre-leased to the extent of 0.3mn sq. ft. at Rs100/sq. ft. and expects tenants to move in by October 2010. Rentals at the Kirti Nagar Mall have been renegotiated from Rs150/sq. ft., as indicated earlier by the management. Exhibit 3: Rental income to grow 4x to Rs201cr by FY2012E 250 201 200 150 (Rs cr) 100 86 49 50 11 16 0 FY2008 FY2009 FY2010 FY2011E FY2012E Source: Company, Angel Research During the quarter, ARIL acquired 15.5 acres (FSI of 2) of land for Rs85cr (Rs531/sq. ft.) at Gurgaon Sec 91. The company intends to launch it as a mid-income residential project over the next six months. This is in line with the company’s strategy to acquire land at a cheaper cost. August 5, 2010 3
  • 4. Anant Raj Industries |1QFY2011 Result Update Exhibit 4: Quarterly revenue trend Exhibit 5: Quarterly EBITDA trend 120 200 90 91.7 92.4 100 80 72.4 100 159.2 150 76.9 70 80 80 100 60 55.0 60 50 (Rs cr) (Rs cr) (%) ()%) 60 50 40 40 17.0 30 40 (1.5) 0 (39.0) 20 20 20 (44.3) (50) 10 0 0 0 (100) 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 Revenue (LHS) yoy change (RHS) EBITDA (LHS) EBITDA Margin (RHS) Source: Company, Angel Research Source: Company, Angel Research Exhibit 6: Quarterly profitability trend 80 500 70 415.3 400 60 300 50 (Rs cr) (%) 40 200 30 100 20 (43.9) 1.4 0 10 (54.8) (33.5) 0 (100) 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 PAT (LHS) yoy change (RHS) Source: Company, Angel Research Exhibit 7: Peer valuation Company Reco. Mcap CMP TP Upside P/E (x) P/B (x) NAV Prem/(Disc) EV/EBITDA (x) RoE (%) CAGR # (Rs cr) (Rs) (Rs) (%) FY11E FY12E FY11E FY12E to NAV FY11E FY12E FY11E FY12E Sales PAT ARIL Buy 3,531 120 178 48.8 18.0 8.7 1.0 0.9 210 (42.0) 13.0 6.7 5.6 10.6 123.8 41.2 DLF Neutral 52,738 311 - - 26.8 14.8 1.6 1.5 298 4.3 16.9 11.0 6.2 10.5 41.4 53.1 HDIL Buy 9,274 268 302 12.6 12.3 7.5 1.2 1.1 402 (33.3) 12.4 6.9 10.8 15.4 54.9 67.8 Source: Company, Angel Research; Note: # CAGR over FY2010-FY2012E August 5, 2010 4
  • 5. Anant Raj Industries |1QFY2011 Result Update Investment arguments Land acquisition at discounted price Almost all of ARIL's land bank (872 acres) is exclusively located in NCR, within 50km of Delhi, with approximately 525 acres in Delhi. This land bank has been acquired at an historical average cost of Rs300/sq. ft., with recent transactions by ARIL executed at Rs531/sq. ft., Rs450/sq. ft. and Rs130/sq. ft. in high-growth areas such as Gurgaon, Manesar and Sonepat, respectively. ARIL's successful land acquisition strategy is attributed to its acquisition through the allocation route from DDA at significantly lower prices compared to prevailing rates and its focus on being an NCR player, which helps in identifying areas with high economic potential in Delhi. Residential projects to drive near-term visibility ARIL recently launched two residential projects in NCR—Kapashera (0.28mn sq. ft.) and Manesar (1mn sq. ft.) for Rs5,000/sq. ft. and Rs2,500/sq. ft., respectively. Management has indicated that the entire property of Kapashera and ~50% of Manesar property have been sold out so far. The Manesar property was acquired at Rs450/sq. ft. in 2009. Going ahead, ARIL intends to launch its premium residential project at Hauz Khas, Delhi, as it gets environmental clearance. Management has guided for Rs500cr of revenue in FY2011E from the residential segment. Further, we expect ARIL’s Manesar and Kirti Nagar properties to reach their peak occupancy levels in 6–9 months as leasing activity improves. The company will also have five hotels operational by FY2011E, with transfer of occupancy risk to third party in return of fixed rentals. Consequently, we expect ARIL to report rental income of Rs201cr in FY2012E as compared to Rs49cr reported in FY2010. Well-capitalised balance sheet ARIL's land bank is fully paid and it has net cash balance of Rs190cr, with unpaid land cost of Rs60cr. This augurs well for the company even in a downturn and gives headroom to leverage at reasonable costs for the timely execution of projects. Further, the recent issuance of 2cr warrants to promoters (Rs87/share) will strengthen its cash balance by Rs130cr on conversion. August 5, 2010 5
  • 6. Anant Raj Industries |1QFY2011 Result Update Outlook and valuation ARIL is trading at 42% discount to our one-year forward NAV (much higher than its peers), which gives a margin of safety given its low-cost land bank situated at prime locations and well-capitalised balance sheet. This can be primarily attributed to the company’s higher exposure to commercial assets (67%). However, we believe near-term revenue visibility will be driven by ARIL's residential projects. Further, we expect rental income to grow 4x by FY2012E to Rs200cr as Manesar and Kirti Nagar properties should reach their peak occupancy levels in 6–9 months coupled with five hotels getting operational by FY2011E, which will improve ARIL’s rental visibility. We maintain a Buy view on the stock with a Target Price of Rs178, which is at 15% discount to our one- year forward NAV. Exhibit 8: Key Assumptions Figures in mn sq. ft. FY2011E FY2012E Residential sales 0.96 1.01 Leasing 1.9 3.5 Commercial 1.41 2.89 Hotel 0.46 0.61 Retail 0.10 Pricing (%) Residential 5 5 Commercial (5) 5 Retail (5) 5 Source: Angel Research August 5, 2010 6
  • 7. Anant Raj Industries |1QFY2011 Result Update Profit & Loss Statement (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E Net Sales 208 604 251 286 491 995 Other operating income - - - - - - Total operating income 208 604 251 286 491 995 % chg 266.1 190.2 (58.5) 14.2 71.5 102.7 Total Expenditure (31) (42) (30) (28) (232) (416) Construction costs - - - - (213) (377) Other Mfg costs (27) (35) (23) (20) - - Personnel (4) (6) (7) (7) (9) (13) Other operating cost - - - - (11) (27) EBITDA 177 562 221 259 259 579 % chg 342.0 217.6 (60.7) 17.2 (0.0) 123.9 (% of Net Sales) 85.1 93.1 88.0 90.3 52.7 58.2 Depreciation& Amortisation (8) (8) (9) (11) (18) (26) EBIT 169 554 212 248 240 553 % chg 355.2 227.4 (61.7) 16.9 (3.1) 130.3 (% of Net Sales) 81.3 91.8 84.6 86.6 48.9 55.6 Interest & other Charges (2.4) (3.3) (0.5) (4.9) (8.3) (12.8) Other Income 4.3 29.3 70.1 53.4 43.8 31.2 (% of PBT) 2.5 5.1 24.9 18.0 15.9 5.5 Recurring PBT 171 580 282 296 276 571 % chg 363.6 239.0 (51.4) 5.2 (7.0) 107.4 Extraordinary Expense/(Inc.) - - - - - - PBT (reported) 171 580 282 296 276 571 Tax (46) (144) (73) (58) (66) (137) (% of PBT) 26.7 24.8 26.0 19.6 24.0 24.0 PAT (reported) 125 436 208 238 209 434 Add: Share of earnings of associate 0.3 - - - - - Less: Minority interest (MI) - (0.0) 0.2 (0.1) - - Prior period items (0.0) 0.2 (1.3) (0.1) - - PAT after MI (reported) 126 436 207 238 209 434 ADJ. PAT 126 436 207 238 209 434 % chg 347.5 246.9 (52.5) 14.9 (12.1) 107.4 (% of Net Sales) 60.5 72.3 82.7 83.2 42.7 43.6 Basic EPS (Rs) 4.6 13.8 6.6 7.6 6.6 13.8 Fully Diluted EPS (Rs) 4.0 13.8 6.6 7.6 6.6 13.8 % chg 347.5 246.9 (52.5) 14.9 (12.1) 107.4 August 5, 2010 7
  • 8. Anant Raj Industries |1QFY2011 Result Update Balance Sheet (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E SOURCES OF FUNDS Equity Share Capital 48 59 59 59 63 63 Preference Capital - - - - - - Warrants/sh. appl. money 9 0 18 60 16 16 Reserves& Surplus 1,110 2,841 3,242 3,477 3,834 4,233 Shareholder’s Funds 1,167 2,901 3,319 3,595 3,913 4,312 Minority Interest 0 0 69 86 86 86 Total Loans 340 58 210 139 139 499 Deferred Tax Liability 2 2 3 1 1 1 Total Liabilities 1,509 2,961 3,600 3,821 4,139 4,897 APPLICATION OF FUNDS Gross Block 1,105 1,131 1,260 1,860 2,220 2,966 Less: Acc. Depreciation 34 37 45 54 72 98 Net Block 1,071 1,094 1,215 1,806 2,148 2,868 Capital Work-in-Progress 200 386 762 746 746 746 Goodwill - 141 146 145 145 145 Investments 112 149 309 295 295 295 Current Assets 385 1,437 1,289 1,015 1,090 1,306 Cash 63 605 626 489 338 199 Loans & Advances 301 444 411 274 302 332 Other 21 388 253 252 450 776 Current liabilities 258 246 126 189 287 465 Net Current Assets 126 1,191 1,163 826 803 841 Mis. Exp. not written off 1 1 5 3 3 3 Total Assets 1,509 2,961 3,600 3,821 4,139 4,897 August 5, 2010 8
  • 9. Anant Raj Industries |1QFY2011 Result Update Cash Flow Statement (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E Profit before tax 171 580 282 296 276 571 Depreciation 9 8 10 12 18 26 Other Adjustments (1) (8) (60) (44) 8 13 Chg in Wkg. cap. (59) (460) 7 201 (102) (162) Less: Other income 23 (0) (5) 2 0 - Direct taxes paid (46) (144) (74) (60) (66) (137) Cash Flow from Operations 97 (26) 160 408 135 311 Inc./ (Dec.) in Fixed Assets (844) (173) (136) (602) (360) (746) Inc./ (Dec.) in Investments (112) (36) (160) 14 - - Inc./ (Dec.) in loans & adv. - - - - (27) (30) Other income (152) (211) (207) 79 - - Cash Flow from Investing (1,108) (420) (503) (508) (387) (776) Issue of Equity 796 1,349 233 59 131 - Inc./(Dec.) in loans 302 (282) 152 (71) - 360 Dividend Paid (Incl. Tax) (30) (76) (21) (21) (21) (22) Others 3 (3) (0) (3) (8) (13) Cash Flow from Financing 1,071 988 364 (36) 102 326 Inc./(Dec.) in Cash 59 542 21 (136) (151) (139) Opening Cash balances 3 63 605 626 489 338 Closing Cash balances 63 605 626 489 338 199 August 5, 2010 9
  • 10. Anant Raj Industries |1QFY2011 Result Update Key Ratios Y/E March FY07 FY08 FY09 FY10 FY11E FY12E Valuation Ratio (x) P/E (on FDEPS) 28.3 8.6 18.2 15.8 18.0 8.7 P/CEPS 23.2 8.5 17.5 15.1 16.6 8.2 P/BV 3.2 1.3 1.1 1.0 1.0 0.9 Dividend yield (%) 0.8 1.2 0.5 0.5 0.5 0.8 EV/Sales 18.3 4.9 12.4 11.1 12.0 6.2 EV/EBITDA 21.5 5.3 14.1 12.3 12.9 6.6 EV / Total Assets 2.5 1.0 0.9 0.8 0.8 0.8 Per Share Data (Rs) EPS (Basic) 4.6 13.8 6.6 7.6 6.6 13.8 EPS (fully diluted) 4.0 13.8 6.6 7.6 6.6 13.8 Cash EPS 4.9 14.1 6.9 7.9 7.2 14.6 DPS 0.9 1.4 0.6 0.6 0.6 1.0 Book Value 37 92 105 114 124 137 DuPont Analysis EBIT margin 81.3 91.8 84.6 86.6 48.9 55.6 Tax retention ratio 73.3 75.2 74.0 80.4 76.0 76.0 Asset turnover (x) 14.4 25.6 8.4 8.6 7.3 13.2 ROIC (Post-tax) 8.6 17.7 5.3 6.0 2.7 5.6 Cost of Debt (Post Tax) 0.9 1.3 0.3 2.3 4.6 3.0 Leverage (x) 0.2 (0.1) (0.2) (0.1) (0.1) 0.0 Operating ROE 10.3 16.6 4.5 5.6 2.9 5.6 Returns (%) ROCE (Pre-tax) 18.8 24.8 6.5 6.7 6.0 12.2 Angel ROIC (Pre-tax) 25.4 40.3 12.1 11.0 9.0 16.5 ROE 17.9 21.5 6.7 6.9 5.6 10.6 Turnover ratios (x) Asset Turnover (GB) 0 1 0 0 0 0 Inventory / Sales (days) 14 26 66 16 87 110 Receivables (days) 46 97 401 306 211 157 Payables (days) 82 97 180 517 114 93 Wrk. Cap (ex-cash, days) - - - - - - Solvency ratios (x) Net debt to equity 0.2 (0.2) (0.1) (0.1) (0.1) 0.1 Net debt to EBITDA 1.6 (1.0) (1.9) (1.4) (0.8) 0.5 Int. coverage (EBIT/int) 69.1 166.4 451.7 50.7 28.8 43.3 August 5, 2010 10
  • 11. Anant Raj Industries |1QFY2011 Result Update Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report. Disclosure of Interest Statement (Company name) Anant Raj Industries 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies' Directors ownership of the stock Yes 4. Broking relationship with company covered No Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors. Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%) August 5, 2010 11