Db 1

IPO Review
February 1, 2010
Rating matrix
DB Realty Limited
Rating : Avoid
Price band Rs 468 – Rs 486
Issue Details Another Mumbai-based player…
Issue opens January 29, 2010
Issue closes February 02, 2010 Incorporated in 2007, DB Realty Limited (DB Realty) is a real estate
developer focused in and around Mumbai. DB Realty has a land bank of
Issue size (Rs crore) Rs. 1500 crore 61 million (mn) sq ft (Ongoing projects – 19.5 mn sq ft, forthcoming– 19.3
No of shares on offer 3.1-3.2crore mn sq ft and upcoming– 22.2 mn sq ft). Approximately 85% of the land
- Fresh Issue to the public 3.1-3.2 crore bank is spread in and around Mumbai.
- Employee Reservation NA
Land bank spread in Mumbai
QIB ( 60% ) 1.85-1.92crore As on December 31, 2009 DB Realty has a land bank of 61 mn sq ft
Non Institutional ( 10% ) 0.31-0.32 crore (Ongoing projects – 19.5 mn sq ft, forthcoming – 19.3 mn sq ft and
Retail ( 30% ) 0.93-0.96 crore upcoming– 22.2 mn sq ft). Out of 61 mn sq ft, ~85% of the land bank
is spread in and around Mumbai in places such as Goregaon, Mira
Minimum lot size 14
Road, Dahisar, Kandivali, BKC and Andheri. Additionally, ~7% of the
Market cap (Post issue) (Rs. Crore) 11,385-11,765 land bank is spread in the southern part of the Mumbai where the
realisations are pretty high given the lack of scarcity of land in these
areas.
Objects of the Issue
Particulars Amount (Rs.
Crore) Parentage advantage
Construction & development cost for Rs. 1044.7 crore The families of the promoters have been in the real estate and related
certain of the projects businesses for decades and have developed several large projects in
Pre-payment of loan from IDFC Rs. 80 crore
and around Mumbai.

General corporate purposes & issue Rs.375.3crore
Concerns
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related expenses
Crisil has assigned the IPO grade of 2/5 indicating that the
fundamentals of the IPO are below average relative to the other listed
equity securities in India
Fact Sheet
Pre-Issue Post-Issue DB Realty has invested Rs 705.1 crore in unlisted entities related to
No of shares (In crore) 21.1 24.2-24.3 DB Realty. It has provided corporate guarantees, aggregating to ~Rs
2519 crore, in connection with certain debt facilities availed by such
Promoters (%) 73.7 64.0-64.3
entities, which are in excess of DB Realty’s net worth
Others (%) 0.0 0.0
Public (%) 26.3 35.7-36.0

Valuations
Financial Summary DB Realty is available at 3.9x P/BV at the lower price band of Rs 468 per
Rs. Crore FY08 FY09 H1 FY10 share and 4.0x P/BV at the higher price band of Rs 486 per share. While,
Sales 0.0 464.4 39.4 we like the quality of the land bank, we see better opportunities available
EBITDA -12.8 225.8 146.8
in the secondary markets at these levels of valuation. Hence, we
recommend investors AVOID the issue.
PAT -23.6 143.8 64.1
EPS ( post issue) -1.0 6.0 2.7
Exhibit 1: Key Financials
EBITDA margin (%) NA 48.6 37.2
Particular FY08 FY09 H1FY10
PAT margin (%) NA 31.0 16.2 Net sales 0.0 464.4 394.4
EBITDA -12.8 225.8 146.8
Margin (%) 48.6 37.2
Analyst’s name Reported PAT -23.6 143.8 64.1
Deepak Purswani Margin (%) 31.0 16.2
deepak.purswani@icicisecurities.com Post Issue Diluted EPS (Rs) -1.0 6.0 2.7
RoE(%) 18.7 11.5*
RoCE(%) 10.2 11.1*
Source: Company, ICICIdirect.com Research *Annualised

ICICIdirect.com | Equity Research
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Company Background

Incorporated in 2007, DB Realty is a real estate development company
that is focused on residential, commercials, retail and other projects such
as mass housing and cluster redevelopment in and around Mumbai. The
company is jointly promoted by Vinod Goenka and Shahid Balwa, whose
families have been in the real estate business for more than 25 and 95
years, respectively. As on December 31, 2009, the promoters and
promoter group companies have collectively developed ~15.9 mn sq ft of
real estate development. This includes residential projects – developable
area of 15.3 mn sq ft and commercial & retail projects with developable
area of 0.6 mn sq ft.

In terms of land bank, the company currently has a land bank of 61 mn sq
ft, which is largely focused on the residential vertical in the Mumbai real
estate market. As on December 31, 2009, DB Realty has a land bank of 61
mn sq ft (Ongoing project – 19.5 mn sq ft, forthcoming – 19.3 mn sq ft
and upcoming– 22.2 mn sq ft).

Exhibit 2: Break-up of saleable are
Ongoing Forthcoming Upcoming Total
Mn sq ft % Mn sq ft % Mn sq ft % Mn sq ft %
Land bank of 61 mn sq ft (Ongoing -19.6 mn sq ft; Residential 6.9 35.7 12.9 66.8 20.8 93.5 40.6 66.6
forthcoming – 19.3 mn sq ft and upcoming -22.2 mn Commercial 1.6 8.2 0.2 1.0 0.4 1.6 2.1 3.5
sq ft) Retail 0.0 0.0 0.0 0.0 0.4 1.6 0.4 0.6
Mass Housing & cluster
Redevelopement 10.9 56.1 6.2 32.2 0.7 3.3 17.9 29.3
Total 19.5 100.0 19.3 100.0 22.2 100.0 61.0 100.0
Source: Company, ICICIdirect.com Research

Exhibit 3: Details of ongoing projects
Total
Saleable Expected estimated Cost
Area (in completion cost (Rs incurred
Project Name Type mn sq ft) Start date date cr) (Rs cr)

Orchid Zone, Dahisar Residential 1.58 Aug-09 Sep-12 625 193
Orchid Zone, Dahisar Retail 0.03 Aug-09 Sep-12
Orchid Woods,Goregaon Residential 0.88 Feb-07 Jun-11 542 404
Orchid Heights, Jacob Circle Residential 0.62 Nov-09 Mar-13 506 123
Orchid Suburbia, Kandivali Residential 0.49 Jan-09 Dec-11 471 280
Total 97.5% of the ongoing projects are in Mumbai
Mass Housing -
Mahul Nagar, Mahul,Mumabi TDR 8.70 Mar-07 Mar-11 854 643
Orchid Hills,Chandivali,Andheri Residential 0.52 Mar-09 Mar-13 878 50
Orchid Hills,Chandivali,Andheri TDR 2.24 Mar-09 Mar-13
Ascot Centre, Andheri Commercial 0.34 Feb-07 Dec-12 155 10
Orchid Turf View, Mahalaxmi Residential 1.48 Jan-10 Mar-13 675 74
Orchid Corporate Park, Andheri Commercial 1.25 Jan-10 Nov-12 472 101
Residential &
Orchid Centre, Yerawada, Pune Retail 0.47 Jan-09 Jun-12 135 4
Orchid Crown, Dadar Residential 0.90 Jan-10 Dec-12 567 7
Total 19.51 5882 1888

Page 2

Exhibit 4: Details about forthcoming project
Total
Orchid Hills Park,Goregaon Residential 1.67 Aug-10 Jul-13 683 2
Orchid Hills Park,Goregaon TDR 6.21 Aug-10 Jul-13
Orchid Garden, Dahisar Residential 2.19 Jul-10 Jun-12 461 15
Total 65.2% of forthcoming project are in Mumbai
Orchid West View, Malad Residential 0.66 Apr-10 Mar-13 260 15
Orchid View, Mumbai Central Residential 0.69 Apr-10 Mar-13 476 16
Orchid Park, Bacchuwadi Residential 0.64 Sep-10 Mar-13 267 27
Orchid Skyz, Byculla Residential 0.30 Sep-10 Aug-13 244 1
DB Tower, BKC Residential 0.01 Apr-10 Mar-13 582 309
DB Tower, BKC Commercial 0.19 Apr-10 Mar-13
Orchid Town, Pimpari Residential 6.72 Aug-09 Sep-12 2137 53
Total 19.3 5110 438


Exhibit 5: Details about upcoming project
Total
Orchid Acre, Mira Road Residential 17.93 Apr-10 Dec-13 2910 105
Total 92.4% of upcoming projects are in Mumbai
Orchid Enclave II, Mumbai Central Residential 0.69 Jul-10 Dec-12 272 20
Orchid Apartments, Mankhurd Residential 0.43 Mar-11 Feb-15 447 560
Orchid Apartments, Mankhurd TDR 0.73 Mar-11 Feb-15
Orchid Splendour, Byculla Residential 0.42 Apr-10 Mar-13 170 21
Orchid Central, Mumbai Central Residential 0.34 Jul-10 Dec-12 121 16
Orchid Lawn, Sangamwadi, Pune Residential 0.99 Jan-11 Dec-16 951 39
Orchid Lawn, Sangamwadi, Pune Commercial 0.35 Jan-11 Dec-16
Orchid Lawn, Sangamwadi, Pune Retail 0.35 Jan-11 Dec-16
Total 22.2 4,869 760



Page 3

Investment Rationale
Land bank spread in island city of Mumbai
DB Realty is largely focused on the Mumbai real estate market. Out
of 61 mn sq ft, 85% of the total land is spread in Mumbai. The
company is looking to focus only on the Mumbai real estate market.
The land bank is spread in areas such as Goregaon, Mira Road,
Dahisar, Kandivali and BKC & Andheri. Importantly, approximately
7% of the total land bank is spread in southern parts of Mumbai
where the realisations are pretty high given the scarcity of the land.

Exhibit 6: Area wise break-up of land bank (%)

120.0
97.5
100.0 92.4
85.3
80.0 65.2
60.0
34.8
40.0
14.7
20.0 7.6
2.5
0.0
Ongoing Forthcoming Upcoming Total

Mumbai Pune


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The promoter’s family has been in the real estate DB Realty benefits from its promoter’s background in the real estate
business for a long time development industry. The families of Vinod K Goenka and Shahid
Balwa have been in the real estate and related businesses for more
than 25 years and 95 years, respectively, and have developed
several large projects in and around Mumbai.

May participate in redevelopment space in Mumbai
May enter into block redevelopment in Mumbai DB Realty may look for redevelopment space in southern parts of
Mumbai in future for block redevelopment under DCR 33(9). These
projects typically have FSI as high as 4x while realisations are pretty
high in southern parts of Mumbai. However, these projects are long
gestation projects with initial two years involved in negotiations with
tenants and getting regulatory approvals.

Page 4

Key concerns
Crisil rates IPO grade of 2/5
Crisil has assigned the IPO a grade of 2/5. This grade indicates that
the fundamentals of the IPO are below average relative to other
listed equity securities in India. The grading reflects the fact that DB
Realty lacks operating history in real estate development.

Corporate guarantees provided for subsidiaries
DB Realty has provided corporate guarantees of As on September 30,2009, DB Realty has invested Rs 705.1 crore in
subsidiaries, which are in excess of its net worth unlisted entities related to DB Realty and provided corporate
guarantees, aggregating to ~Rs 2519 crore, in connection with
certain debt facilities availed by such entities, which are in excess of
DB Realty’s net worth. These corporate guarantees constitute about
68.7% of the total debt sanctioned to such entities.

Higher concentration on Mumbai real estate market
DB Realty’s land bank is highly concentrated in and around Mumbai.
In the current land bank of 61 mn sq ft, ~85% of the land bank is
spread in and around Mumbai. Any slowdown in the Mumbai real
estate market could impact its financial significantly.


Page 5

Financials
Financials impacted by recent slowdown
Since the company was incorporated in 2007, there is limited
financial history of the company. In FY09, the company’s revenues
stood at Rs 464.4 crore and net profit stood at Rs 143.8 crore. In
H1FY10, the company’s revenues stood at Rs 394.4 crore while net
profit stood at Rs 64.1 crore.

Valuations
Avoid the issue. There are better opportunities DB Realty is available at 3.9x P/BV at the lower price band of Rs 468 per
available in the secondary market
share and 4.0x P/BV at the higher price band of Rs 486 per share. While
we like the quality of the land bank, we see better opportunities available
in the secondary markets at these levels of valuation. Hence, we
recommend investors AVOID the issue.

Exhibit 7: Valuation table
Mkt cap (Rs Land bank (
cr) EV (Rs cr) mn sq ft) Mkt cap/ sq ft EV/sq ft P/BV
DB Realty @Rs468 11,385 12,072 61 1,866 1,979 3.9
DB Realty @Rs486 11,765 12,452 61 1,929 2,041 4.0
DLF 56,632 71,012 430 1,317 1,651 2.2
Unitech 17,732 22,975 328* 541 700 1.7
HDIL 11,433 14,574 196 582 742 1.7
Godrej Properties 3,337 3,608 50 667 722 4.3



Page 6

Financial Summary

Exhibit 1: Profit and Loss Account
Net sales 0.0 464.4 394.4
Total expenditure 12.8 238.6 247.6
EBITDA -12.8 225.8 146.8
Other income 6.3 6.8 4.8
Interest 15.4 74.7 70.1
Depreciation 1.6 7.4 4.6
Profit Before Tax -23.5 150.5 77.0
Taxes 0.1 6.7 12.9
PAT -23.6 143.8 64.1
OPM (%) 48.6 37.2
NPM (%) 31.0 16.2
Outstanding shares 0.9 0.9 21.1
EPS (Rs) -25.2 157.7 3.0
Diluted EPS (post issue) -1.0 6.0 2.7
Source: Company

Exhibit 2: Balance Sheet
Share capital 9.4 9.1 211.2
Reserves & Surplus 718.6 801.5 1200.3
Net Worth 728.0 810.6 1411.6
Minority Interest 55.4 55.3 55.4
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Secured Loans 222.7 2011-08-15536.1
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Unsecured Loans 380.4 714.9 215.3
Deferred Tax Liability 0.0 0.4 0.4
Current Liabilities & provisions 438.2 342.1 452.2
Total Liabilities 1824.6 2444.1 2670.8
Net Block 14.3 20.8 18.5
Capital WIP 0.5 1.5 1.0
Investment 178.5 0.2 25.4
Inventories 533.8 1057.8 1172.6
Sundry Debtors 9.1 42.6 86.6
Cash & bank balance 103.7 76.9 64.3
Loans & Advances 984.8 1244.2 1302.1
Other current assets 0.0 0.0 0.4
Total assets 1824.6 2444.1 2670.8
Source: Company

Page 7

RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the
notional target price is defined as the analysts' valuation for a stock.

Strong Buy: 20% or more;
Buy: Between 10% and 20%;
Add: Up to 10%;
Reduce: Up to -10%
Sell: -10% or more;

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,
ICICI Securities Limited,
7th Floor , Akruti Centre Point,
MIDC Main Road, Marol Naka,
Andheri (East)
Mumbai – 400 093

research@icicidirect.com

ANALYST CERTIFICATION
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this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

Disclosures:
ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking,2011-08-15 03:39:26 EDT. and financing group. We along with affiliates are leading
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although its accuracy and completeness cannot be guaranteed.

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