Real Estate Sector Report - Jaypee Capital

Real Estate Sector
25 July 2011
Jaypee Research Desk
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Corporate Access & Events
Our Coverage Universe
Puravankara – Buy
CMP – `82; Target – `110
Sobha Developers– Buy
CMP – `276; Target – `325
Prestige Estates – Buy
CMP – `139; Target– `162
DLF Ltd – Neutral
CMP – `241; Target – `254
Orbit Corp – Buy
CMP – `43; Target –`65
Oberoi Realty– Buy
CMP – `242; Target –`304
Anant Raj– Buy
CMP – `86; Target – `106
Godrej Properties– Neutral
CMP – `815; Target TP – `730
Hitendra Gupta
hgupta@jaypeeindia.com
Contact No: -91 22 4354 2023
Real Estate: It’s Time to Buy Again
We believe this is the best time to invest in the real estate sector in view of the anticipated
peak in inflation, monetary tightening, slowing economic growth and mounting global
uncertainty. We initiate coverage on four real estate companies and have updated four
already under our coverage. Our top picks among the initiating coverage are Prestige
Estates, Sobha Developers and Puravankara; we are Neutral on DLF Ltd. And among the
existing coverage we are positive on Oberoi Realty, Orbit Corporation and Anant Raj
Industries, while we have a Neutral rating on Godrej Properties.
Our Recommendations: Among South-based developers, we prefer Prestige Estates and
Sobha Developers. Prestige is the largest South India player and is synonymous with the
Bengaluru real estate market. It has ~15msf of well-diversified projects in the pipeline to be
launched in the next 15 months. We think Prestige is likely to benefit hugely from the
commencement of more hotels and malls in FY12E/FY13E, which will increase its rental
incomes. We like Sobha on account of its formidable presence in the Bengaluru market, its
long-term relationship with the IT major, Infosys, for all its contractual work and its well-
diversified real estate business. We believe the company’s decision to foray into new, high-
growth markets like NCR and Pune will be value accretive and it also mitigates the risk of
being present in a single location. We are positive on Puravankara on the back of its new
launches in the affordable housing segment (Provident Housing) in Bengaluru and Chennai.
Among the Mumbai-based developers we like Oberoi Realty for its huge cash balance, low-
cost premium land-bank in Mumbai and growing annuity income. We are positive on Orbit
Corp. for its commendable position in the South-Mumbai redevelopment space and the
luxury products which it develops. We like Anant Raj for its steady lease rentals and
premium luxury project in the heart of Delhi. We are Neutral on DLF and Godrej Properties
as we believe current valuations price in most positives.
Performance Outlook and Valuations: We expect the commercial real estate segment to
perform better than the residential real estate segment. Our view is based on the recovery
in the IT/ITES sector, the hike in salaries across sectors (13%) and 15-18% hiring growth at
the top-4 IT/ITES companies. The uptick in demand in the residential segment will be
sluggish, as high inflation and high interest rates prevail. However, we are of the belief that
the RBI is likely to hike policy rates by another 50-75 basis points, to reach their peak at 8%
or 8.25%, and that they are unlikely to rise beyond that. Further, with the onset of the
festive season we anticipate home buyers will initiate their long-pending buying decisions.
We expect our coverage universe to post earnings growth of 14.4% CAGR over FY11-13E.
CMP NAV
Discount
to NAV Target Price
Upside/
Downside
EPS
CAGR
(`) (`/share) (%) (`) % FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E (%)
Puravankara Buy 82 158 30 110 35 11.7 8.4 1.0 0.9 0.6 0.7 8.8 11.1 33.2
Sobha Developers Buy 276 434 25 325 18 15.0 13.1 1.4 1.2 0.5 0.5 9.0 9.5 6.5
Prestige Estates Buy 139 215 25 162 16 20.5 15.7 2.0 1.8 0.5 0.5 9.8 11.6 32.1
DLF Neutral 241 318 20 254 6 24.8 20.7 1.4 1.3 0.7 0.6 5.7 6.5 9.7
Orbit Corp Buy 43 101 35 65 52 6.6 4.9 0.5 0.4 0.8 0.6 7.0 8.9 12.5
Oberoi Buy 242 380 20 304 26 13.6 9.9 2.1 1.7 0.0 0.0 15.3 17.5 24.8
Anant Raj Buy 86 132 20 106 22 19.2 14.9 0.7 0.7 0.0 0.0 3.6 4.5 0.9
Godrej Properties Neutral 815 812 10 730 -10 45.4 34.8 5.7 5.1 0.9 0.7 20.0 23.1 11.8
D/E (x) ROE (%)P/BV (x)P/E (x)
Company Rating

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TABLE OF CONTENTS
Highlights…………………………………………………………………………………………….. 5
Industry……………………………………………………………………………………………….. 9
Policy Rate Hikes Peak 50-75bps Away…………………………….......... 11
Inflation to Ease to 7% by End of 2012…………………………………..... 12
Residential Demand – Huge Potential……………………………………………… 13
Residential Demand Prices Surge On Limited Supply in City……… 13
Outstanding Housing Loan up 17.4% YoY………………………………… 14
Residential Sector on New Heights………………………………………….. 15
Residential Sector Outlook……………………………………………………….. 19
Commercial Segment………………………………………………………………………
Recovery in IT/ITES Sector………………………………………………………… 20
Hiring to Step-up; 13% Salary Hikes Across Sectors…………………… 21
Commercial Absorption up by 16% in Q4FY11………………………….. 22
Commercial Sector Outlook……………………………………………………… 23
Key Financials of Coverage Universe ………………………………………………… 25
Company Section
1) Puravankara Projects Limited………………………………………… 29
2) Sobha Developers ………………………………………………………… 41
3) Prestige Estates Limited………………………………………………… 53
4) DLF Limited……………………………………………………………………. 67
5) Orbit Corporation Limited……………………………………………… 77
6) Oberoi Realty Limited……………………………………………………. 87
7) Anant Raj Industries Limited…………………………………………. 97
8) Godrej Properties Limited……………………………………………… 107

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Key Highlights
Puravankara Projects Ltd (Buy, TP `110, CMP `82)
The company caters to the premium housing segment under the brand,
Purva, and has recently entered the affordable housing space under the
brand, Provident.
It is all geared up to launch 14.5msf in FY12 in its primary market of
Bengaluru and Chennai, boosting the revenues (29% CAGR) and net profits
(33% CAGR) during FY11-13E.
The low cost, premium land bank is largely paid for, and so less time and
risk is involved in executing the projects.
Follows a Joint Development business model, thereby ensuring less initial
cash outflow for land acquisitions, thus leading to higher return ratios.
Better financial disclosures.
Sobha Developers Ltd. (Buy, TP `325, CMP `276)
Best representative of the South India real estate market, with ~95% of its
land-bank based in South India, primarily in Bengaluru.
~`6.1bn positive net operating cash-flow to be generated in the next two
years.
Robust pipeline of ~11msf launches in FY12, likely to generate ~`67bn in
the next five to six years.
Steady contractual business.
Low cost, IT-centric land bank. Strong presence in the Bengaluru market,
which has been characterized by less volatility than other regions like
Mumbai and NCR.
Prestige Estates Limited (Buy, TP `162 , CMP `139)
The company has a formidable presence in South India and is synonymous
with the Bengaluru real estate market; this is manifested through a
showcase of more than 150 projects aggregating to ~44msf.
It is expected to launch 15msf of well-diversified projects in the next 12-15
months and a total ~62msf is currently under development and planning.
Rental annuity to grow to ~`2.36bn per annum by FY13E at ~26% CAGR
over FY11-13E.
Proven execution track record by delivering ~16msf in FY11.

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DLF Ltd. (Neutral, TP `254, CMP `241)
DLF is the largest real estate player in the country and is a best play in the
Indian real estate sector, as it has a pan-India presence, mainly
concentrated in the NCR region.
Lease rentals are expected to grow by 25.5% during FY11-12E to `17.31bn,
while leased assets should grow by 10.6% CAGR, during the same period.
DLF is expected to generate net positive operating cash flow of `102.67bn
in the next two years through its quicker monetization strategy. It intends
to launch 10msf of plotted developments in FY12E in Gurgaon, Indore,
Chandigarh and Lucknow.
Divestment targets have been substantially increased from `45bn
previously, to `100bn now, with a target of `60-70bn over the next two to
three years.
Net positive cash flow from operations (`102.67bn over FY11-13E) is likely
to bring down the company’s net debt-equity ratio from 0.86x in FY11 to
0.71x in FY12E and 0.57x in FY13E.
Orbit Corporation Limited (Buy, TP `65, CMP `43)
Orbit is a real estate construction and development company with primary
focus on redevelopment of existing properties. It specialises in developing,
designing and managing high-end residential and ‘build-to-suit’ commercial
properties.
The company will benefit hugely from the increased FSI (from 1.7x to 3x)
for redevelopments in South Mumbai.
Orbit has planned to launch three new projects in FY12E/13E, with a total
saleable area of 0.2msf in the South-Mumbai market. Total income is
estimated to grow 16% CAGR during FY11-13E, to `54.47bn.
Oberoi Realty Ltd (Buy, TP `304, CMP `242)
Oberoi is the best representative of Mumbai’s real estate market, as 93% of
its land-bank is based in Mumbai.
Negative net gearing (-34%) for FY12E;
Steady lease rentals of `1.24bn/`1.42bn in FY12E/13E;
Superior margins (~40%) and ROE (15-17%) profile.

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Anant Raj Industries Ltd. (Buy, TP `106, CMP `86)
A leading real estate company, which focuses on the Delhi-National Capital
Region (NCR) area.
Huge potential for revenue growth from 0.5msf luxury residential projects
at Huzh Khas and Bhagwandas Road.
High quality, inexpensive land banks in Delhi;
Lease rentals to cross ~`1bn in FY13E.
Comfortable net D/E levels, at 0.28x;
Revenue CAGR 21.5% and operating profit CAGR 14.9% over FY11-13E,
mainly because of new launches planned for FY12E/FY13E and increased
lease rentals.
Godrej Properties Ltd. (Neutral, TP `730, CMP `815)
A pan-India real estate player focused on the ’affordable housing’ segment,
with 83.64msf of saleable area across 11 cities in India.
Successful pan-India expansion through its JDA and outsourcing business
model.
Execution of ~88% of its saleable area is undertaken through its JDA model,
ensuring low initial capital outflow, higher margins and higher ROE.
Access to an unqualified 685 acres of quality land bank through its parent,
the Godrej Group.
MOU with the Godrej Group to develop 185 acres in the growing markets
of Mohali, Bengaluru and Hyderabad.
Monetization of the 500 acres of land bank in Vikhroli

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Key Comparables
Purav. Sobha Prestige DLF Orbit Oberoi Anant Raj God. Prop.
CMP (`) 82 276 139 241 43 242 86 815
M-Cap (` mn) 18,056 27,133 41,669 395,494 4,900 77,250 26,374 56,090
Target Price (`) 110 325 162 254 65 304 106 730
Revenues (` mn)
FY11 6,089 14,177 16,113 102,505 4,045 10,588 3,851 4,515
FY12E 7,692 15,028 17,289 103,655 4,748 13,509 4,814 6,242
FY13E 10,105 17,570 19,565 111,175 5,447 18,954 5,685 7,749
FY11-13E CAGR (%) 29 11 10 4 16 34 22 31
EBIDTA Margin (%)
FY11 23.8 21.0 24.2 39.3 54.1 54.5 60.0 23.3
FY12E 26.2 22.6 27.9 43.5 44.1 59.2 47.8 23.7
FY13E 27.1 21.4 29.9 45.0 46.4 59.9 52.7 24.9
Net Profit (` mn)
FY11 1,179 1,825 1,667 16,396 789 5,172 1,674 1,309
FY12E 1,497 1,800 2,224 16,437 748 5,867 1,418 1,253
FY13E 2,093 2,071 2,907 19,721 999 8,051 1,819 1,636
FY11-13E CAGR (%) 33 7 32 10 13 25 4 12
D/E (x)
FY11 0.7 0.7 0.5 0.9 1.1 0.0 0.3 1.0
FY12E 0.6 0.5 0.5 0.7 0.8 0.0 0.4 0.9
FY13E 0.7 0.5 0.5 0.6 0.6 0.0 0.3 0.7
P/BV (x)
FY11 1.1 1.5 2.2 1.6 0.5 2.4 0.7 6.2
FY12E 1.0 1.4 2.0 1.4 0.5 2.1 0.7 5.7
FY13E 0.9 1.2 1.8 1.3 0.4 1.7 0.7 5.1
ROE (%)
FY11 7.5 9.8 8.2 6.2 8.0 15.4 4.5 22.5
FY12E 8.8 9.0 9.8 5.7 7.0 15.3 3.6 20.0
FY13E 11.1 9.5 11.6 6.5 8.9 17.5 4.5 23.1

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INDUSTRY

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Policy Rate Hikes Peak, 50-75bps Away
The government’s accommodative polices during the downturn, led to a sustained
rise in commodity prices which, in turn, led to accelerated growth in the Wholesale
Price Index (WPI), which grew from a mere 1.45% in May 2009 to 10.36% in March
2010. This called for a rapid tightening of policies by the RBI. Since then, to bring
inflation within the comfort zone of 4.5-5%, RBI started increasing the policy rates.
RBI has then aggressively hiked interest rates, increasing the repo rate from 4.75%
in February 2010 to 7.5% currently. These rapid rate hikes were not too effective:
we highlight the HSBC June PMI figures (55.3) which were at a 9-month low, and
saw the weakest increase since November 2009.
The global scenario plays a critical role in influencing the RBI’s monetary policy and
so do corporate earnings. If the corporate earnings for the June quarter continue to
be robust, companies’ pricing power remains intact and inflation continues to rule,
so one can expect more rate hikes in FY12. However, we believe, as things stand
now, the policy rate may be hiked by another 50-75bps, reaching its peak at 8% or
8.25%, and is unlikely to rise beyond that.
Exhibit 1: RBI Repo Rate (%)
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
8.50
9.00
9.50
10.00
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Source: RBI, Jaypee Research

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Inflation to Ease to 7% by End of FY12
As pointed out above, the government’s accommodative policies to maintain the
growth momentum during the downturn gave way to a high-inflation situation in
India. Now, given that growth has been sustained quite well, inflation management
remains the only concern to be addressed. Calibrated rate hikes of 25bps since
March 2010 have failed to generate any measureable results in moderating
inflation. WPI numbers stand at ~9.4%, compared to ~10.4% in March 2010.
However, food inflation has seen some improvement as a result of the good
monsoon last year and the opening up of imports for some commodities.
We anticipate inflation will ease to 7% by the end of FY12, with global commodity
prices and an unfavourable monsoon being the key risks.
Exhibit 2: WPI Index % chg YoY
-2
0
2
4
6
8
10
12
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Exhibit 3: Primary Food Articles % chg YoY
0
5
10
15
20
25
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11

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Residential Demand – Huge Potential
The real estate sector in India is a large, hugely diversified sector, with many
verticals such as land, construction, development, etc. Real estate is a USD50 billion
industry, growing at 30% p.a. Further, the housing sector contributes 5% to India’s
GDP and its contribution is expected to increase to 6% in the next five years. The
Ministry of Housing and Urban Poverty Alleviation estimated a housing shortage of
26.53mn dwelling units for the Eleventh Five-Year Plan (2007-2012).
With the improving economy and the growing middle-class population, affordable
and premium affordable housing is in the greatest demand. As per the Mckinsey
Global Institute estimates, the number of households demanded by mid-income
group (MIG) segment is expected to grow by 12% annually, during 2005-2025. Even
demand from the high income group (HIG) is estimated to grow by 11% CAGR
during 2005-2025. All these put together emphasize the long-term growth for the
real estate sector in India.
Cushman & Wakefield (C&W) estimates the pan-India residential demand to be
4.25mn units, the demand for office space to be 240mn sq. ft, and demand for
retail space to be 55mn sq. ft for the period 2010-14. Out of the total residential
demand, the affordable segment is expected to contribute 70%, according to the
C&W reports.
Despite the global uncertainty, two economies, India and China, will continue to
grow at an annual rate of 8-10%. In fact, by 2020, India is expected to become the
third largest economy, after China and the US. It is anticipated that India will add
another 215 million people to its cities by 2025. This implies huge potential for
incremental demand for residential real estate in India.
NHB is owned by the Reserve Bank of India (RBI),
and under the mechanism to track the movement
of prices in the residential housing segment,
Residex Index was conceptualized.
Residential Prices Surge On Limited Supply in Cities
Residential prices across India’s top seven cities have surpassed June-2008 levels.
We attribute price increases mainly to the limited quality residential real-estate
supply in the city. This can be further substantiated by the recently released
National Housing Board’s (NHB) Residex Index data for the March 2011 quarter.
The data show residential prices in the top-seven cities have increased anywhere
between 2.5% and 37.5% in the last year, with Hyderabad having the lowest and
Bengaluru, the highest.
Prices in other key locations, like Mumbai and Delhi (NCR), have increased 30.6%
and 18.9%, respectively, in the last year. Prices in Chennai and Kolkata have also
risen by 32.9% and 27.9%, in the same period. Chennai has seen this level of pent-
up demand as it has the least supply of land available for property development,
among the metros. Further, the Chennai micro market is now seeing a change in
preference from a ground- or plot-oriented market previously, to multi-apartment
models now. Hence, due to the limited supply of multi-apartments/integrated
townships, the March 2011 prices have soared in Chennai by 32.9% YoY, and have
almost doubled (109.6%) since June 2008. For similar reasons, prices in Kolkata and

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Pune, too, have surged by 85.1% and 46.5% since June 2008. These price jumps
explain why many large developers have been moving to these Tier-II and III
markets.
Prices in Delhi (NCR) rose by 18.9% YoY, while they have grown marginally, by 1.6%,
since June 2008. The region is characterized by a higher percentage of investors
(than end users) and prices are driven by brokers.
The Mumbai market, over June 2008-March 2011, has risen by 56.3% as per the
Residex Index. Prices in most of the market in Mumbai have surged in the last year:
North-East (Kalyan) ~52%; South-Central Mumbai (Matunga, Mahim) ~51%, South
Mumbai (Cuffe Parade, Malabar Hill) ~44%; New Mumbai (Vashi, Kharghar) ~36%;
Mumbai Extended Suburbs (Borivali, Goregaon) ~16% and Mumbai Suburbs
(Bandra, Andheri) ~17%.
Exhibit 4: National Housing Board – Residex Index Performance
Cities Q4FY11 Q4FY10 YoY (%) June'08 Change (%)
Hyderabad 83 81 2 96 -14
Chennai 218 164 33 104 110
Pune 148 124 19 101 47
Kolkata 211 165 28 114 85
Mumbai 175 134 31 112 56
Bengaluru 88 64 38 73 21
Delhi 126 106 19 124 2
Source: NHB, Jaypee Research
Outstanding Housing Loans up by 17.4% YoY in May 2011
Retail housing loans have witnessed double-digit growth since July 2010. They
further registered a three-year high by rising 17.4% in May 2011 to `3,584bn. This
performance was by far the best, compared to the single-digit growth registered
during November 2008 to June 2010. This growth has been witnessed amid the
skepticism in the market that demand for real estate has slowed down. Based on
this data we expect housing loans to be more robust, going forward.
Exhibit 5: Outstanding Housing Loan (` bn)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11

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Residential Sector at New Heights
In spite of the increasing belief that the steep appreciation in capital values
witnessed from January to June 2010 is unsustainable, most developers have
refrained from any correction, citing the increase in raw material cost and the high
cost of funds. As a result, capital values across most micro markets have largely
remained stable.
Prices in almost all the regions have either increased or remain stable in the last six
quarters. Also, prices in some of the prime locations (metros and Tier-I cities) have
surpassed their previous highs.
Mumbai
A resurgence in demand and positive outlook for overall economic growth in
H1FY10 led to significant appreciation in capital values in the Mumbai micro
market. However, with the increase in the interest rates and rapid increase in
capital values it was generally believed that prices across the Mumbai micro market
are unsustainable and likely to correct by 20-25%. However, the ground reality has
something else to say about the prices, as most developers refrained from any
correction, citing the increase in raw material costs and the high cost of funds.
Thus, holding on to prices led to stable prices across the Mumbai micro market.
However, North Mumbai (mid-range segment) saw price appreciation of almost 15-
20%, as there was limited supply of ready-to-move-in apartments, coupled with
buoyant demand for sub-`5mn apartments.
As per Jones Lang LaSalle (JLL), the prices in the high-end segment of North
Mumbai (including Bandra, Khar, Santacruz and Juhu) have increased the most,
6.7% in the last year, followed by South-Central Mumbai, where prices have
increased by 6.1%. South-Central Mumbai includes Altamount Road, Carmichael,
Malabar Hill, Nepeansea Road, Breach Candy and Peddar Road. Prices in this
market increased from `66,000psf in Q4FY10 to `70,000psf in Q4FY11.
Exhibit 6: Mumbai High-End Residential Capital Value (` psf)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11
South Mumbai South Central Central Mumbai
North Far North North East
Source: JLL, Jaypee Research
Exhibit 7: Mumbai Mid-Segment Residential Capital Value (` psf)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
South Mumbai South Central Central Mumbai
North Far North North East

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NCR (Delhi/Gurgaon)
End-user activity was prominent in mid-range properties, leading to prices
appreciation in residential real estate in Q4FY11. Prices in Gurgaon predominantly
increased due to the robust demand from end users. We feel demand is likely to be
steady for under construction and ready property in the medium term, resulting in
an increase in capital values in the prime locations. However, prices at suburban
locations are expected to be stable as there is a huge supply in the secondary
market, coupled with supply coming in from the new launches.
As per JLL, the prices in Delhi have increased 30% on average, in the last year.
Residential prices for high-end apartments in South-West Delhi (Shanti-Niketan,
Westend, Anand-Niketan and Vasant Vihar) have increased by 28.6% YoY from
Rs35,000psf to Rs45,000psf currently. However, prices in South-Central
(Rs35,000psf vs Rs25,000psf) and Central Delhi (Rs60,000psf vs Rs45,000psf) have
increased the most, by 37.3% and 33.3%, respectively.
In the mid-range segment, prices have surged the most in South-East Delhi 25.7%
(Rs22,000psf vs Rs17,500psf) while prices in Gurgaon increased by 21.4%
(Rs8,500psf vs Rs7,000psf) and Noida was flat over the period, at Rs5,600psf.
Exhibit 8: NCR High-End Residential Capital Value (` psf)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
SouthWest SouthEast SouthCentral
Central Gurgaon Noida
Exhibit 9: NCR Mid-Segment Residential Capital Value (` psf)
0
5,000
10,000
15,000
20,000
25,000
South East South Central Gurgaon Noida

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Bengaluru
The Bengaluru market is characterized by the end-user market and is also less
volatile than the Delhi (NCR) and Mumbai real estate markets. The Bengaluru
market is mostly linked to the prospects of the IT/ITES sector, as major IT/ITES
companies have a huge set-up in Bengaluru. Consequently, we believe demand for
residential houses is expected to be more robust, with the revival being witnessed
in the IT/ITES sector. Increases in salaries coupled with the increased head-count
targets of the large IT companies, are likely to bring back the home buyers in
Bengaluru.
Capital values across both high and mid segments have appreciated in the range of
5-23%, on a YoY basis. This was primarily due to improved clarity on the job
prospects of the IT/ITES employees, along with the availability of new apartments
at relatively affordable price points. This renewed confidence about employees’ job
prospects will lead to enhanced activity, as property buyers who have delayed their
purchases are likely to revisit their buying plans. We also expect a good response to
the new launches in the forthcoming festive season, as we believe confidence in
job prospects will be coupled with the view that interest rates are peaking.
As per JLL, prices in the mid-end housing segment are likely to further strengthen in
the medium term in the select micro markets of Sarjapur Road, ORR and HSR
Layout, having already increased the most by 22.9% YoY (increasing from
Rs3,500psf to Rs4,300psf). Central Bengaluru, constituting Lavelle Road, Palace
Road and Cunningham Road, has witnessed the highest increase among the high-
end projects: capital value rose by 17.3% YoY to Rs17,600psf.
Exhibit 10: Bengaluru High-End Segment Residential Capital Value (` psf)
3,000
5,000
7,000
9,000
11,000
13,000
15,000
17,000
19,000
Q3FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11
Cunningham Rd Koramangala, ORR Frazer/Benson/Richards
Whitefield Hebbal, Yelahanka
Exhibit 11: Bengaluru Mid-Segment Residential Capital Value (` psf)
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Cunningham Rd Marathalli, WF Sarjapur,ORR
Koramangala Hebbal/Yelahanka Jayanagar/JP Ngr

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Chennai
Home buyers in Chennai prefer property which is high quality and, more
importantly, which is near completion, even if it means a marginal increase in
prices. Chennai has witnessed higher price appreciation in the mid-segment
residential apartments than in the high-end residential apartments. In the mid-
segment, T. Nagar saw a price increase from Rs6,500psf in Q4FY10 to Rs10,500psf
currently, an increase of 61.5%. Similarly, under the mid-segment category, prices
on a YoY basis have increased by 27.8% and 7.1% in Nungambakkam and Anna
Nagar, respectively.
Premium residential pockets, like Kilpauk, Boat Club and Poes Garden, have
witnessed price appreciation of 22.2%, 9.5% and 5.3%, respectively, compared to
Q4FY10. This was mainly because of persistent demand for premium residential
space, limited availability of quality construction and high user and investor
confidence.
Prices are likely to remain stable during the next few quarters across most (mid-
segment) locations; however, prices in the premium locations are anticipated to
appreciate in the medium term for the reasons mentioned above. With a slew of
launches lined-up for the festive season, overall sales are expected to increase.
Exhibit 12: Chennai High-End segment Residential Capital Value (` psf)
0
5,000
10,000
15,000
20,000
25,000
Boat Club R.APuram Adyar PoesGarden
Nungambakkam AnnaNagar Kilpauk
Exhibit 13: Chennai Mid-Segment Residential Capital Value (` psf)
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
R.A. Puram PoesGarden T.Nagar
Nungambakkam AnnaNagar Kilpauk

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Outlook for the Residential Segment
We believe the demand for real estate is mostly dependent on the RBI’s stance on
policy rates. Further increases in the repo/reverse repo rates may force banks to
hike interest rates and would make access to finance expensive for both end-user
and developers. With salaries expected to rise 13% across sectors (according to
Mercer) and with the onset of the festive season, prices are likely to appreciate as
end-users tend to expedite their buying decisions during this period. This is
expected to lead to increased demand and higher conversion ratios. Thus, we
expect demand to pick up in the next two quarters.

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Recovery in IT/ITES Sector
The Indian IT/ITES sector is on a growth trajectory and it ranks third in the
Asia/Pacific region, according to Gatner’s recent report on India’s domestic IT
service market. The consultant expects revenues from the Indian IT services market
to increase by 18% to reach USD8.96bn in 2011, against USD7.6bn recorded in
2010. Further, it anticipates the domestic IT industry will grow to USD15bn by the
end of 2014, a 16.4% CAGR over 2011-14.
Moreover, with the increase in economic activity, hiring has surged across sectors
from the lows of FY09-10. In FY11, hiring at the top-four IT/ITES companies (TCS,
Infosys, Wipro and HCL Tech) in India was robust: it rose steeply, by 53.7%. For
FY12E/13E, we expect hiring at the top-four IT/ITES companies to be firm and
estimate it will grow by 15-18% CAGR. Salaries for the top-4 IT companies, too,
have risen sharply, by 22% in FY11 as against 7% witnessed in FY10. We believe
such hiring and salary increases will create demand for residential and commercial
real estate. The markets which will be the major beneficiaries of this IT/ITES sector
recovery will be Bengaluru, Pune and Chennai.
Exhibit 14: Net Additions in Top-Four IT Companies (Infosys, TCS, Wipro and HCL Tech)
22.9% 22.6%
0.2% -1.4%
53.7%
-10%
0%
10%
20%
30%
40%
50%
60%
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
FY06 FY07 FY08 FY09 FY10 FY11
Source: Company, Jaypee Research
Exhibit 15: Employee Cost for Top-Four IT Companies (Infosys, TCS, Wipro and HCL Tech)
153
245
315
403
431
527
49%
60%
29% 28%
7%
22%
0%
10%
20%
30%
40%
50%
60%
70%
0
100
200
300
400
500
600
FY06 FY07 FY08 FY09 FY10 FY11

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Hiring to Step Up; 13% Salary Hikes Across Sectors
According to the Mercer India Monitor 2011 report, Indian companies are expected
to hire aggressively and give salary hikes of 12.7% YoY.
The survey shows that HR managements are expecting improved business
performance on growing domestic demand. Employees across sectors can expect
an average 12.7% increase in wages in 2011, higher than the 11.8% hike in 2010.
The study expects the highest salary increase in the automobile sector at 14%,
followed by the consumer goods industry at 13.8%, and manufacturing at 13.4%.
Employees in the IT and telecom sectors are expected to receive a relatively lower
salary increase of 11.8%. Further, the survey states that the heads of organizations
can expect an 11.8% increase in salary, functional and business heads can expect
12%, management 12.6%, professionals 12.5%, and other staff 13.2%.
Exhibit 16: Average Salary Hike Estimates For 2011
14.0
13.8
12.6
11.8
13.4
12.8
12.7
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
Automobiles FMCG BFSI IT/ITES Manfg. Pharma Overall
Source: Industry Data, Jaypee Research

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Commercial Absorption Grew 16% in Q4FY11
Overall absorption of the commercial real estate segment in Q4FY11 grew by 15.8%
YoY from 7.2msf to 8.4msf, while it dropped by 26.1% QoQ, in spite of the robust
demand for commercial real estate in prominent IT hubs, i.e. Bengaluru,
Hyderabad, Chennai and Pune. Controlled supply of the commercial real estate
space will lead to a declining demand-supply gap and thus, rentals are anticipated
to be steady in FY12.
Exhibit 17:India Commercial Real Estate
5.9 4.8 5.0
7.2 6.8 7.7
11.3
8.4
12.6 12.1
15.7
12.1
9.2
5.9 7.0
10.5
25
27 28
25 25 25
23 24
0
5
10
15
20
25
30
0.0
5.0
10.0
15.0
20.0
Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11
Absorption (msf) New Supply (msf) Vacancy Rate (%)
Source: DTZ, Jaypee Research
Office Market Vacancy Continues to Decline
According to DTZ research, the planned new supply as a proportion of stock is
expected to decline gradually in India. The vacancy rate was alarmingly high during
2010, but it has now retreated below 20%. However, the change in vacancy rates
varied across markets with a few cities seeing further decline in vacancies during
the period, due to continuing supply rationalization.
Exhibit 18: Q2 to Q4 2011 Development Pipeline, % of Overall Stock and Q1 2011 Prime Vacancy Rate

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Commercial Sector Outlook
The pan-India demand for the commercial real estate sector is anticipated to be
196msf for 2009-13, as per the Cushman & Wakefield estimates. The overall
demand for commercial sector space has increased by 49.5% to 34.2msf in FY11
from 22.9msf in FY10. Bengaluru, for its IT/ITES industry, is expected to see a huge
demand of 34msf during 2009-13, accounting for 17.3% of the total demand for
commercial real estate. This will be followed by Delhi/NCR (25msf; 12.8%) and
Mumbai (24msf; 12.2%). Together, these three cities are anticipated to account for
~42% of the total demand.
Commercial real estate in India is rapidly growing on account of huge demand from
the IT/ITES sector. IT sector has been the major driver of the country’s economic
growth over the past few years. By 2020, the current size of the IT/ITES market in
India will have grown from the existing USD67bn to USD225bn.
This trend will fuel the growth of the Indian commercial real estate market, which
has already doubled from 22.8msf in 2005 to 40msf in 2011, and is expected to
increase to 43.5msf by 2012.
Exhibit 19: Commercial Real Estate – New Completions (msf), Net Absorption (msf) and Vacancy Rates (%)
22.8
28.8
32.9
42.5
41.6
58.2
31.3
43.5
22.3
28.8
32.0
33.1
19.6
22.9
34.2
42.6
8.0
6.0
5.0
10.0
16.0
25.4
23.6 23.5
0
5
10
15
20
25
30
0
10
20
30
40
50
60
70
2005 2006 2007 2008 2009 2010 2011 2012F
New Completions Net Absorption Vacancy (%)
Source :Industry, Jaypee Research

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Exhibit 20:Mumbai Commercial Real Estate
1.2 1.0 1.1
2.1 1.9 1.9 2.1
1.3
3.3 3.5 3.7 3.9 3.6
2.6
1.2
3.1
27 28 29
21 22 22
20
22
0
5
10
15
20
25
30
35
0.0
1.0
2.0
3.0
4.0
5.0
Exhibit 21:Delhi Commercial Real Estate
1.5
0.5 0.7
1.0 1.0
1.4
1.9
1.2
1.7
2.7
1.8
0.2
1.8
0.7
2.8
2.1
36
39 41
32 32 32 33 34
0
10
20
30
40
50
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Exhibit 22: Bengaluru Commercial Real Estate
1.1 1.2 1.4 1.6 1.9
2.2 2.4
1.71.5
2.2
3.8
1.7 1.7
0.1 0.8
1.5
22
25 26 26 26
23
21 20
0
5
10
15
20
25
30
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Exhibit 23:Chennai Commercial Real Estate
1.1
0.5 0.7 0.4 0.4
0.8
2.2
1.31.4
0.8
2.3 2.2
1.0 1.0
0.0 0.5
36 36
33
35 35 34
29
26
0
5
10
15
20
25
30
35
40
0.0
0.5
1.0
1.5
2.0
2.5
Exhibit 24:Pune Commercial Real Estate
0.5 0.5 0.4 1.1 0.8 0.7 0.9 0.5
3.7
1.6
2.1
1.1 1.0 0.4 1.0
1.5
27
29
35
26
24 24 24
26
0
5
10
15
20
25
30
35
40
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Exhibit 25:Hyderabad Commercial Real Estate
0.3
0.9
0.5
1.0
0.7 0.6
1.8 1.9
0.8
0.5
2.0
1.5
0.2
0.9 0.7 0.0
17 18
20
16 16 16
11
9
0
5
10
15
20
25
0.0
0.5
1.0
1.5
2.0
2.5

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Balance Sheet To Strengthen For Our Coverage Universe
The net debt-to-equity ratio has improved considerably in the last 15-18 months,
after reaching its peak in 2008. We expect companies under our coverage to
generate higher net positive operating cash, which is likely to improve the net D/E
ratio in FY12E/13E. Average net D/E for our universe, is expected to drop from
0.64x in FY11 to 0.48x in FY13E.
Oberoi Realty still stands out with its enviable position of negative gearing for
FY12E/FY13E. Oberoi and Anant Raj, along with the Bengaluru-based companies
(Prestige and Sobha) are better placed than the largest real estate company, DLF.
Exhibit 26: Net Debt-to-Equity
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
FY10 FY11 FY12E FY13E
Oberoi Godrej Anant Raj Orbit
Exhibit 27: Net Debt-to-Equity
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
Puravankara Prestige DLF Sobha
ROE Improving on the Back of Higher Profits
We expect net profits for our coverage universe to grow at 14.4% CAGR over FY11-
13E, and this improved profitability will lead to a rise in ROEs.
Exhibit 28: ROE (%)
0
5
10
15
20
25
30
Exhibit 29: ROE (%)
0
5
10
15
20
25

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Inexpensive Valuation
Almost all the companies under our coverage universe (except Godrej Properties,
DLF and Puravankara) are trading at inexpensive valuations in terms of FY13E P/BV.
The most inexpensive is Orbit Corp (0.44x) followed by Anant Raj (0.66x); Sobha
(1.25x); Prestige (1.66x) and Oberoi (1.68x). Godrej Properties, because of its asset-
light model, seems expensive at 23x FY13E P/BV.
Exhibit 30: P/BV (x)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Oberoi Anant Raj Orbit Godrej (RHS)
Exhibit 31: P/BV (x)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Margins to Improve for Our Universe
Margins for our coverage universe are likely to increase from 41.3% in FY11 to
44.1% in FY13E. This, we believe, will happen because of the change in product mix,
the higher proportion of plotted sales (DLF), the sales of premium luxury
apartments (Prestige, Sobha and Orbit) and increases in rental income (DLF, Oberoi
and Anant Raj).
Exhibit 32: Operating Margins (%)
58
28
78
32
54
23
60
54
59
24
48
44
60
25
53
46
0
10
20
30
40
50
60
70
80
90
Exhibit 33: Operating Margins (%)
33
22
47
21
24 24
39
21
26
28
44
23
27
30
45
21
0
5
10
15
20
25
30
35
40
45
50

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COMPANY SECTION

Puravankara Projects Limited
25 July 2011
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As on July 22,2011
Market Cap (`mn) 17,516
52 Week High/Low (`) 145/81
Book Value (FY12E) 80
Face Value (`) 5
Codes
BSE Code 532891
NSE Code PURVA
Bloomberg Code PVKP IN
Reuters Code PPRO.BO
Shareholding Pattern (%)
Jun’11 Mar’11 Dec’10
Promoters 89.9 89.9 89.9
FII 6.9 6.9 6.7
DII 1.7 1.7 1.8
Others 1.4 1.4 1.6
Share Price Performance
70
80
90
100
110
120
Jul-10 Oct-10 Jan-11 Apr-11 Jul-11
PVPK Sensex
Puravankara Projects Ltd (PVKP) has over three decades of experience in property
development and has emerged as one of the leading players in the South India real estate
market. The company caters to the premium housing segment under the brand, Purva,
and has recently entered the affordable housing space under the brand “Provident”. We
like the company based on the following parameters: a) a largely paid, low-cost land bank
requiring less time and risk to execute the projects; b) a well-integrated and diversified
real estate model, developing premium as well as low-cost, affordable houses; c) it also
follows a joint development (JDA) business model, which ensures less initial cash outflow
for land acquisitions, leading to higher return ratios; d) better financial disclosures; e) the
company is all geared up to launch 14.5msf in FY12 in its primary market of Bengaluru and
Chennai, which will boost revenues (29% CAGR) and net profits (33% CAGR) during FY11-
13E. We initiate coverage on PVKP with a Buy recommendation and a target price of `110.
At the current prices, the stock is trading at 11.7x and 8.4x its FY12E EPS of `7.0 and FY13E
EPS of `9.8, respectively
New Launches Set To Drive Sales Growth
PVKP is all geared up to aggressively launch 14.5msf in FY12 in its primary market of
Bengaluru and Chennai. It will be launching 8.5msf in its mid-to-premium residential space,
while 6msf will be launched under its affordable housing brand, Provident. Based on these
launches, we estimate revenues will grow by 28.8% annually, from `6.09bn in FY11 to
`10.11bn in FY13E.
Well Positioned to Benefit from the IT/ITES Recovery
After a lull of two years, the IT/ITES sector in the current fiscal has announced robust hiring
plans along with the increase in salaries for the existing employees. This is a good sign for
PVKP as the majority of its land bank is located in the IT/ITES-centric cities. The company
has vast land bank of 75msf (67% of total saleable area) in Bengaluru, a major hub for the
IT/ITES sector, followed by Kochi (10%), Chennai (13%) and Hyderabad (4%). We expect the
company’s sales volume to increase because of the recovery in the IT/ITES sector.
Affordable Housing: The Key Value Driver
PVKP has successfully forayed into the affordable housing segment and, to date, the
company has announced a total development of ~12msf in this segment. Currently, it has
two ongoing projects with a total developable area of 5.69msf. We estimate revenue from
affordable housing will grow from `2.31bn to `3.36bn over FY11-13E, growing at 20.7%
CAGR. While sales volume during the same period is expected to grow from 1.21msf to
1.65msf, an annual growth rate of 16.8% is anticipated.
Share Price Returns (%)
1M 6M 12M
Absolute -5 -22 -29
Relative -11 -21 -33
Hitendra Gupta
Contact No: -91 22 4354 2023
Finanical Summary (` Mn.)
Year Ended FY10 FY11 FY12E FY13E
Net Sales 4,829 4,829 6,089 7,692
EBITDA 1,639 1,639 1,524 2,099
EBITDA Margin (%) 33.3 23.8 26.2 27.1
Net Profit 1,453 1,453 1,179 1,497
PAT Margin (%) 29.4 18.1 18.3 19.5
EPS 3.4 5.5 7.0 9.8
PER (x) 24.1 14.8 11.7 8.4
PBV (x) 1.2 1.1 1.0 0.9
ROE (%) 9.8 7.5 8.8 11.1
Initiating Coverage CMP: `82 TARGET: `110 BUY

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Key Assumptions
Exhibit 96: Real Estate Business Assumptions
Y/E March FY10 FY11 FY12E FY13E
Residential
Area Sold (msf) 0.85 1.89 1.51 2.01
Sale Price (` psf) 3,133 3,248 3,481 3,230
Const. Cost (` psf) 1,350 1,400 1,450 1,475
Provident
Area Sold (msf) 1.63 1.21 1.63 1.65
Sale Price (` psf) 2,033 2,016 2,300 2,415
Const. Cost (` psf) 950 1,000 1,050 1,050
Source – Company, Jaypee Research
Exhibit 97: Calculation of WACC
Calculation of WACC
Pre-Tax Cost of Debt (%) 14.5
Tax Rate (%) 25.0
Cost of Debt (%) 10.9
Govt. Bond Yield (%) 8.0
Beta (x) 150.0
Market Risk Premium (%) 7.0
Cost of Equity (%) 18.5
Wt. Debt (%) 60.0
Wt. Equity (%) 40.0
WACC (%) 13.9
Exhibit 98: Sensitivity Analysis
1% Increase in the Avg. sale Price 1.2% Change in NAV
1% Increase in the Avg. Const. Cost -0.7% Change in NAV
1% Increase in Discount Rate -1.6% Change in NAV
Exhibit 99: NAV Break-Up
NAV Break-Up `/Share ` mn %
Puravankara 50 10,772 25
Provident 36 7,638 18
Commercial 3 556 1
Land Bank 114 24,349 56
Gross NAV 203 43,315 100
Less: Net Debt 45 9,687
Net NAV 158 33,628
Discount (%) 30
Target Price 110 23,540
CMP 82
Upside/(Downside) (%) 35

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Investment Rationale
14.5msf to be launched in Bengaluru and
Chennai in FY12
New Launches Set To Drive Sales Momentum
PVKP is all geared up to aggressively launch 14.5msf in FY12 in its primary market of
Bengaluru and Chennai. It will be launching 8.5msf in its mid-to-premium
residential space, while 6msf will be launched under its affordable housing brand,
Provident.
The company plans to launch one of its biggest projects, Windermere, at
Medavakkam in Chennai. The residential project has a total developable area of
4.95msf, which will be developed in three phases and it is expected to be
completed in the next five to six years. Further, the company is expected to launch
two more projects totalling 1.7msf in its primary market (Bengaluru): Mid-Town
(0.46msf) at KR Puram and Seasons (1.24msf) at CV Raman Nagar. Another project,
Purva Bluemonte, (1.84msf), at Trichy Road in Coimbatore, is also expected to be
launched in FY12E. Under Provident Housing, the company is all set to launch its
Venkatpura Project (6msf) in Bengaluru. This project will be completed in two
phases over 30-36 months. Based on these launches, we estimate revenues will
grow by 28.8% annually, from `6.09bn in FY11 to `10.11bn in FY13E.
Exhibit 100: New Launches in the Pipeline
Expected Launches Location Dev. Area (msf) JD Share (%) Sale. Area (msf)
KR Puram Bengaluru 0.5 73 0.4
CV Raman Nagar Bengaluru 1.2 59 0.7
Windermere Chennai 5.0 5.0
Trichy Road Coimbatore 1.8 1.8
Total 14.5 13.9
67% of the company’s land-bank is in
Bengaluru, a major hub for IT/ITES sector
Well Positioned to Benefit from the IT/ITES Recovery
After a lull of two years, the IT/ITES sector in the current fiscal has announced
robust hiring plans along with the increase in salaries for the existing employees.
This is a good sign for PVKP as the majority of its land bank is located in the IT/ITES-
centric cities. The company has vast land bank of 75msf (67% of total saleable area)
in Bengaluru, a major hub for the IT/ITES sector, followed by Kochi (10%), Chennai
(13%) and Hyderabad (4%). We expect the company’s sales volume to increase
because of the recovery in the IT/ITES sector.

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~6msf affordable housing project ongoing in
Chennai and Bengaluru
Affordable Housing: The Key Value Driver
The company has successfully forayed into the affordable housing segment through
its wholly owned subsidiary, Provident Housing Ltd. (priced from `1.5mn-3.5mn).
To date, the company has announced a total development of ~12msf in this
segment. Currently, it has two ongoing projects with a total developable area of
5.69msf: Cosmo City, Chennai (2.23msf) and Wellworth City, Bengaluru (3.46msf).
The company launched 3.09msf and was able to successfully sell over 84%
(2.66msf) with only ~56% of the construction work completed. The liquidity of the
sale units remains very high in this space and helps the company to have consistent
operational cash flows and to meet its working capital needs.
According to Cushman & Wakefield, out of the total residential demand, the
affordable segment is expected to contribute 70%. Hence, we believe the
affordable housing segment will be a major value driver for the company. We
estimate revenue from affordable housing will grow from `2.31bn to `3.36bn over
FY11-13E, registering annual growth of 20.7%. While sales volume during the same
period is expected to grow from 1.21msf to 1.65msf, the annual growth rate will be
16.8%.
Exhibit 101: Provident Housing
Provident Housing (100% Owned by PVPK)
Developable
Area (msf)
Area Launched
(msf) Rate (` psf)
Tot. Const.
Cost (` psf)
Sales Booked
as on Mar'11
(%)
Const.
Complted as on
Mar'11 (%)
Under-Construction
Wellworth City (Doddaballapur Rd, Bangalore) 3.46 1.41 2,300 1,325 76 66
Cosmos City (Pudupakkam, Chennai) 2.23 1.68 2,300 1,210 95 34
Total 5.69 3.09
Forth-Coming Projects
Venkatapura Bng 6.00 0.00
Inexpensive, Fully-Paid, High Quality Land Bank
As on 31st
March 2011, PVKP has a total land bank (saleable area) of 112msf.
Though it started its real estate development business from Mumbai (in 1986) it
has most of its operation in South India, predominantly in Bengaluru. Out of its
total saleable area of 112msf, 75msf i.e. 67%, is in Bengaluru. The land bank is fully
paid for with full ownership residing with the company. The land acquisition cost
works out to be ~`235psf, which is quite inexpensive, compared to the average
capital value of the Bengaluru market of `3500-`4500 psf.
The most important point regarding the higher quality of its land bank is that, all
the land resides within the city limits of the respective cities. Its land bank in the
city of Bengaluru is located primarily in IT-dominant areas (Hosur Road, Sarjapur
Road), and on the way to the new airport (Devanahalli and Yelahanka). Even in
other cities, PVKP has land bank in the prime locations for example, OMR in
Chennai; Marine Drive in Kochi and Trichy Road in Coimbatore.

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Exhibit 102: Land Bank
Banglore msf Chennai msf Kochi msf Coimbatore msf Kolkata msf
Venkatpura 6.00 Medavakkam 4.13 Kakkanad 0.96 Trichy Rd 1.84 Rajharat 0.82
Doddaballapur 3.46 Pudupakkam, 2.23 Marine Drive 0.77
Mallasandra, 2.54 OMR 1.35 Airport rd 0.39
Yelahanka 2.09 Guindy 0.35
JP Ngr 1.25
Sarjapur 1.24
CV Raman 1.24
KR Puram 0.46
Sanjay ngr 0.38
Total 18.66 8.06 2.12 1.84 0.82
Banglore
59%
Chennai
25%
Kochi
7%
Coimbatore
6%
Kolkata
3%
De-risking its business model by entering
affordable segment and also by entering
different location
Diversification: For a Sustainable Business Model
Puravankara has forayed into other cities in South India and has also expanded into
commercial property development to de-risk its single-region and single-type
(residential) business model. Moreover, it has also entered affordable housing
(through its 100% subsidiary, Provident Housing and Infrastructure Ltd). With 70%
demand for the affordable housing in India and the reduction in interest rates for
housing loans in the sub-`2mn bracket, this strategy seems to be a winning formula
for the company’s sustainable growth.
By launching residential projects in Kolkata, Chennai, Kochi and Mysore, PVKP has
insulated itself against any sustained slowdown in the Bengaluru market.
Furthermore, it has also expanded into overseas markets through the acquisition of
~1msf of land in Colombo, Sri-Lanka.
Exhibit 103: Land-bank break-up – 112msf
Bangalore
67%
Kochi
10%
Chennai
14%
Hyderabad
4%
Coimbatore
2%
Mysore
1%
Colombo
1%
Kolkatta
1%
Mangalore
0%

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Financial Disclosure: The confidence booster
Puravankara follows an excellent system of financial disclosures and provides an
audited balance sheet and cash flow statements on a quarterly basis. This kind of
disclosure is not very common for the listed real-estate companies. The company’s
transparent financial disclosures reflect its strong corporate governance and lend
confidence to its stake-holders.
Margins to Stabilize at 27%
Operating profit during FY11-13E is expected to grow to `2.85bn from `1.52bn,
registering an annual growth of 36.8%. An increase in low-cost, high-margin
Provident Housing projects helps the company to register a higher operating profit
margin. The operating profit margin is expected to improve by 330bps to 27.1% in
FY13E.
Exhibit 104: Operating Profit (` Mn); EBIDTA Margin (%)
2,219
1,369
1,639
1,524
2,099
2,850
36.9
29.8
33.3
23.8
26.2
27.1
0
5
10
15
20
25
30
35
40
0
500
1,000
1,500
2,000
2,500
3,000
FY08 FY09 FY10 FY11 FY12E FY13E
Marginal Decline in Net D/E Levels
PVKP has maintained a healthy balance sheet, with a net D/E of about 0.51x-0.58x
throughout the slowdown of FY08-10. We expect the company to generate
cumulative operating cash flows of `847mn during FY12-13E. This will help it to
reduce its net D/E marginally, from 0.67x in FY11 to 0.61x in FY13E.
Exhibit 105: Net D/E Ratio (x)
0.51
0.58
0.54
0.67
0.57
0.61
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80

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Concerns
Over dependence on the Bengaluru Region
69% of PVKP’s ongoing and future saleable area is based in Bengaluru, also known
as the IT hub of India. Any changes in the Bengaluru real estate, particularly any
changes in IT off-shoring policies, or a reduction in demand, etc., could have a
severe impact on the Bengaluru real estate market.
Change in the Global Capital Markets and the Economy in General
The real estate market is significantly affected by changes in government policies,
economic conditions, demographic trends, employment and income levels and
interest rate changes. Economic developments outside India have adversely
affected the property market in India in the past and may affect it similarly in the
future, too. Hence, changes in the global capital markets and the economy in
general, are a major concern for the company and the sector as a whole.
Increase in Interest Rate
Changes in interest rates have had a significant impact on real estate financing and
the demand for residential projects. Any rate hike will have an adverse impact on
the company’s revenues and profitability.
Delay in Acquisition of Land
PVKP’s inability to acquire or any delay in acquiring land for the projects for which it
has already paid a substantial amount, would adversely affect its finances.

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Recommendation
The company caters to the premium housing segment under the brand, Purva, and
has recently entered the affordable housing space under the brand, Provident. We
like the company based on the following parameters: a) a largely paid, low-cost
land bank requiring less time and risk to execute the projects; b) a well-integrated
and diversified real estate model, developing premium as well as low-cost,
affordable houses; c) it also follows the JDA business model, which ensures less
initial cash outflow for land acquisitions, leading to higher return ratios; d) better
financial disclosures; e) the company is geared up to launch 14.5msf in FY12 in its
primary market of Bengaluru and Chennai, which will boost revenues (29% CAGR)
and net profits (33% CAGR) during FY11-13E. We initiate coverage on PVKP with a
Buy recommendation and a target price of `110, based on 30% discount to its NAV
of `158. We expect earnings and revenue CAGR of 33.3% and 28.8%, respectively,
over FY11-13E and operating profit margin to be robust at 26-27%. At the current
prices, the stock trades at 12.1x and 8.6x its FY12E EPS of `7.0 and FY13E EPS of
`9.8, respectively.
Exhibit 106: NAV Break-up (` per share)
50
36
3
114
-45
158
-48
110
-100
-50
0
50
100
150
200
Pura. Provi. Comm. Land Bk Net Debt NAV Disc. Tgt. Price
Exhibit 107: One-Year Forward P/BV Band
0
50
100
150
200
250
300
350
400
Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11
0.7x
1.4x
2.1x
2.8x
3.5x
4.5x
Exhibit 108: PEPL P/BV vs BSE Realty P/BV
-80%
-60%
-40%
-20%
0%
20%
40%
60%
0
5
10
15
20
25
30
35
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
PE P/E - Disc/ Prem

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Financial Analysis
Revenues to Grow 29% During FY11-13E, Crossing `10bn in FY13E
We expect revenues to grow by 28.8% over FY11-13E to `10.11bn, backed by 32.2%
rise in the area for revenue recognition from 2.1msf in FY11 to 3.66msf in FY13E.
Increased construction activity will drive the company’s revenue growth. We expect
the following projects to be a major contributor to the revenues in next two years:
a) Mid-Town, KR Puram; b) Oceana, Kochi; c) Windermere, Chennai and d) Purva
Bulemonte, Coimbatore.
Exhibit 109: Revenue (` Mn)
5,791
4,494
4,829
6,089
7,692
10,105
0
2,000
4,000
6,000
8,000
10,000
12,000
Net Profit to Grow by 33%
Profit after tax (PAT) is to rise by 33.2% during FY11-13E from `1.18bn to `2.09bn.
Lower growth in net profit compared to operating profit (33.8%) can be attributed
mainly to the increase in the effective tax rate (25% vs 19% earlier), the increase in
the interest cost (58.8% CAGR FY11-13E) and in the depreciation cost (43.6% CAGR
FY11-13E). However, net profit margin is expected to rise to 19.5% vs 18.1%, an
increase of 146bps.
Exhibit 110: Net Profit (` Mn); PAT Margin (%)
2,401
1,444
1,453
1,179
1,497
2,093
40.1
31.4
29.4
18.1
18.3
19.5
0
5
10
15
20
25
30
35
40
45
0
500
1,000
1,500
2,000
2,500
3,000

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Improvement in the Return Ratios
A healthy operating profit and net profit margin is expected to lead to
improvement in the company’s return ratios. Return on equity (ROE) and return on
capital employed (ROCE) are expected to increase by 360bps and 370bps,
respectively, during FY11-13E. We expect ROE to increase to 11.1% in FY13E
compared to 7.5% in FY11, while ROCE during the same period is expected to
increase to 9.4% from 5.7% in FY11.
Exhibit 111: ROCE (%)
12.1
6.5
7.0
5.7
8.1
9.4
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Exhibit 112: ROE (%)
19.8
10.6
9.8
7.5
8.8
11.1
0.0
5.0
10.0
15.0
20.0
25.0

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Company Background
With over three decades of experience in property development, Puravankara
Projects Ltd (PVKP) has emerged as one of the leading players in the South India
real-estate market. While the group commenced its property development venture
from the Mumbai micro market, it is now largely focused on Bengaluru. The
company caters to the premium housing segment under the brand, Purva, and has
recently entered the affordable housing space under the brand, Provident. PVKP’s
operations run across major cities in South India, in Kolkata, Colombo (Sri Lanka)
and the U.A.E. PVKP has a total saleable land bank of 112msf as of March 2011,
with ~67% of it located in Bengaluru and ~87% of its ongoing projects are located in
Bengaluru and Chennai.
About Provident Housing
PVKP has entered into a joint venture (JV) with Homex, Mexico to undertake
projects in the low-cost housing segment. The JV has been named Provident
Housing Ltd. and is a 100% subsidiary of PVKP. Provident has launched an
affordable housing scheme in Bengaluru and Chennai which has had a strong
customer response (selling ~2.7msf out of 3.09msf). The company plans to replicate
a similar model and reach out to other Tier-II cities like Mysore, Kochi, and
Coimbatore, where demand is quite robust for these kinds of projects. It aims to
deliver over 60,000 homes in the affordable housing segment in the next six to
seven years.
Joint Venture with Keppel Land
PVKP is the first Indian real estate player to receive FDI (by the automatic route)
through its 49% JV with Singapore-based Keppel Land Limited. Currently, this JV
runs across a developable area of 7.85msf, building two large residential projects in
Bengaluru and Kolkata. PVKP is to benefit from Keppel’s expertise in developing
world class, integrated townships.

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FINANICAL STAEMENT
Income Statement (` Mn.) FY10 FY11 FY12E FY13E Basic Ratios (`) FY10 FY11 FY12E FY13E
Revenues 4,829 6,089 7,692 10,105 EPS 3.4 5.5 7.0 9.8
Cost of Const. 2,608 3,841 4,684 6,060 Growth (%) 0.6 62.3 26.9 39.8
Total Expenditure 3,190 4,565 5,594 7,255 Cash EPS 6.9 5.6 7.1 9.9
EBDITA 1,639 1,524 2,099 2,850 Book Value 69.6 73.9 79.7 88.3
Deprecation 12 12 22 26 DPS 1.0 1.0 1.0 1.0
Interest 29 41 131 103 Payout (%) 14.7 18.1 20.0 20.0
PBT 1,598 1,470 1,946 2,721
Tax 298 280 499 698 Valuation Ratios
PAT 1,453 1,179 1,497 2,093 P/E 24.1 14.8 11.7 8.4
Cash P/E 11.9 14.7 11.5 8.3
Balance Sheet P/ BV 1.2 1.1 1.0 0.9
Liabilities EV/Sales 5.1 4.5 3.4 2.8
Share Capital 1,067 1,067 1,067 1,067 EV/EBDITA 14.9 17.7 12.4 9.7
Networth 14,852 15,764 17,012 18,856 ROE (%) 9.8 7.5 8.8 11.1
Secured Loans 8,726 11,209 10,206 12,110 RoCE (%) 7.0 5.7 8.1 9.4
Unsecured Loans 85 379 370 370
Defrd. Tax Liability 9 3 3 3 Margin (%)
Total Liabilities 23,671 27,354 27,591 31,338 EBDITA 33.3 23.8 26.2 27.1
Assets EBIT 33.1 23.6 25.9 26.9
Fixed Assets (Net) 362 427 512 584 PBT 35.7 22.7 24.8 26.5
Investments 1,191 1,189 1,239 1,309 PAT 29.4 18.1 18.3 19.5
Properties held for Dev. 13,528 11,605 9,986 8,567
Current Assets Turnover Ratios
a) Inventories 227 284 306 596
b) Sundry Debtors 1,112 1,144 1,313 3,114 Asset T/o 13.2 13.0 13.9 16.1
c) Cash & Bank 782 999 889 1,027 Total Asset T/o 0.2 0.2 0.3 0.3
d) Properties under Dev. 6,802 11,623 14,070 14,561 Inventory T/o 14.1 16.1 18.3 12.2
e) Properties held for Sale 852 706 604 1,550 Debtors T/o 4.3 5.2 5.8 3.2
f) Loans & Advances 2,883 3,287 3,806 4,555
Current Liabilities 3,786 3,649 4,870 4,246 Leverage Ratios
Net Current Assets 281 295 299 315 D/E % 59.3 73.5 62.2 66.2
Total Assets 23,672 27,354 27,591 31,338 Int. Cov. Ratio (x) 56.9 36.9 15.8 27.4
Net D/E 54.1 67.2 56.9 60.7
Cash Flow Growth Ratio (%)
CF before WC Changes 3,453 2,912 5,435 7,276 Sales 8 25 26 31
Cash from operations 828 (2,152) 1,482 (635) Expenses 2 43 23 30
Net Cash from Oper. 555 (2,432) 983 (1,333) EBDITA 20 (7) 38 36
Cash from Invstment 503 1,708 1,748 1,394 Interest Cost 43 221 (21) (138)
Cash from Financing (544) 694 (2,842) 77 PBT 21 (8) 32 40
Net Change 514 (30) (110) 138 Tax 1,048 (6) 78 40
Op. Cash 268 782 999 889 PAT 1 (19) 27 40
Cl. Cash 782 999 889 1,027 Cash EPS 1 (19) 27 40

Sobha Developers Limited
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As on July 22,2011
52 Week High/Low (`) 404/185
Book Value (FY12E) (`) 204
Face Value (`) 10
Codes
BSE Code 532784
NSE Code SOBHA
Bloomberg Code SOBHA IN
Reuters Code SOBHA.BO
Promoters 60.6 60.6 60.6
FII 31.9 30.2 29.7
DII 2.9 4.6 5.4
Others 4.7 4.6 4.4
50
60
70
80
90
100
110
120
130
Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11
Sobha Sensex
Simply Sobha
Sobha is one of the best representatives of the South India real estate market, with ~95%
of its land bank based in South India, primarily in Bengaluru. We are positive on SDL on
the following parameters: a) strong presence in the Bengaluru market, which has been
characterized with less volatility than other regions like Mumbai and NCR; b) ~`6.1bn
positive net operating cash flow to be generated in the next two years; c) a robust
pipeline of ~11msf of launches in FY12, anticipated to generate ~`67bn in the next five to
six years; d) a steady contractual business; and e) a low-cost IT-centric land bank. We
believe its D/E is likely to come down to 0.42x in FY13E, because its land monetization
and operating cash flows have increased. We initiate coverage on Sobha with a BUY and
a 12-month target price of `325. At the current price, the stock trades at FY12E and FY13E
P/E of 15x and 13.1x and P/BV of 1.4x and 1.2x, respectively.
Net D/E to Decline to 0.42x in FY13E
The company is estimated to generate ~`6bn in net operating cash flow during FY12E-13E.
We believe net D/E is likely come down to 0.42x in FY13E from current 0.64x levels. Sobha
has an inventory of `8.14bn (2.77msf unsold area) and `5.6bn unbilled revenues from its
ongoing contractual projects.
`66.6bn Revenues From New Launches in the Next Five to Six Years
The company is all set to launch ~11msf in FY12E; 4.17msf at existing and 6.99msf at new
locations (Gurgaon 5.84msf; Chennai 0.93msf and Mysore 0.22msf). These launches are
likely to drive SDL’s sales momentum and we estimate `66.6bn revenues are to be made
from these in the next five to six years.
Sturdy Cash Flow from Contractual Business
Sobha has unbilled revenue of `5.6bn from the 38 ongoing projects, with a total saleable
area of 7.4msf, while `3.07bn is the estimated value for its forthcoming 19 projects, with a
total saleable area of 4.05msf. Contractual business works on a cost-plus basis, and hence,
the margins are capped. It also provides consistent cash flows for the company.
Revenues to Grow by 11%; Operating Profit by 10% Over FY11-13E
New launches are expected to lead the company’s revenue momentum. Revenues are
estimated to be `15.03bn and`17.57bn in FY12E and FY13E, a CAGR of 11%. While
operating profit is anticipated to grow by 10.3%, to `3.82bn, from `3.14bn, currently.
Attractive Valuation
Sobha trades at FY11E and FY12E P/E of 15x and 13.1x, and FY12E P/BV of 1.4x. Our target
NAV estimate is `31.90bn or `325/share. Initiate with BUY.
1M 6M 12M
Absolute 15 0 -16
Relative 8 2 -20
Hitendra Gupta
Contact No: -91 22 4354 2023
Net Sales 10,887 14,177 15,028 17,570
EBITDA 2,425 3,143 3,466 3,824
EBITDA Margin (%) 21.3 21.0 22.6 21.4
Net Profit 1,367 1,825 1,800 2,071
PAT Margin (%) 11.8 12.0 11.5 11.3
EPS 13.9 18.6 18.4 21.1
PER (x) 19.8 14.8 15.0 13.1
PBV (x) 1.6 1.5 1.4 1.2
ROE (%) 8.0 9.8 9.0 9.5

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Key Assumptions
Exisiting Location FY10 FY11 FY12E FY13E
Area Sold (msf) 2.08 2.78 2.80 2.80
Sale Price (` psf) 3,002 3,182 3,783 4,475
Const. Cost (` psf) 1,600 1,800 2,000 2,100
New Location FY10 FY11 FY12E FY13E
Area Sold (msf) 0.00 0.00 0.43 0.64
Sale Price (` psf) 5,408 5,184
Const. Cost (` psf) 2,000 2,100
Exhibit 128: Contractual Business Assumptions
Contractual Business Total FY12E FY13E FY14E
Ongoing Projects (Unbilled Value ` mn) 5,600 3,360 2,240
Percentage Completion (%) 60 40
Est. Value of Forthcoming Projects (` mn) 3,070 153.5 1,842.0 1,074.5
Percentage Completion (%) 5 60 35
Total Contractual Revenue (` mn) 8,670 3,514 4,082 1,075
Calculation of WACC
Tax Rate (%) 25.0
Beta (x) 1.3
Wt. Debt (%) 50.0
Wt. Equity (%) 50.0
WACC (%) 13.6
Resi 94 9,178 18
Contractual 30 2,982 6
Land Bank 402 39,454 76
Gross NAV 526 51,614 100
Net NAV 434 42,536
Discount (%) 25
Target Price 325 31901.9
CMP 276

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~`6bn net positive cash flow to be generated
in next couple of years…
…leading to drop in the D/E ratio
Generating Positive Cash Flows Since FY09
The company has been generating net positive cash flows since FY09, this has
helped it to reduce its net debt-to-equity ratio from 1.73x in FY09 to 0.64x in FY11.
The company has `8.14bn outstanding from the 2.77msf unsold area out of the
5.98msf area launched up to FY11. Also, it has ~`5.6bn unbilled value on ongoing
contractual projects. All together, we estimate the company will generate further
net positive cash flows of ~`6.08bn in the next couple of years.
Exhibit 132: Net Operating Cash Flows (` Mn)
-10,565
1,963
3,278
4,144
2,517
1,595
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
New launches to drive sales …..
…. estimate it to generate revenues of
`66.6bn in the next five to six years.
New Launches Expected to Generate `66.6bn Revenues in Next 5-6 Years
The company is expected to launch 11.16msf in FY12E. Existing locations (4.17msf)
comprise Bengaluru (3.22msf), Pune (0.35msf), Coimbatore (0.25msf) and Thrissur
(0.25msf), while new locations (6.99msf) include Gurgaon (5.84msf), Chennai
(0.93msf) and Mysore (0.22msf). We expect these new launches to drive SDL’s sales
momentum and we estimate them to generate revenues of `66.6bn in the next five
to six years.
Exhibit 133: FY12 Launches at Existing Location
Exisitng Location
SBA
(msf)
Avg. Realz.
(Rs/sft)
Rev.
(Rs mn)
Bangalore 3.32 4,000 13,280
Pune 0.35 3,500 1,225
Coimbatore 0.25 3,000 750
Thrissur 0.25 3,500 875
Total 4.17 16,130
Exhibit 134: FY12 Launches at New Location
New Location
SBA
(msf)
Avg. Realz.
(Rs/sft)
Rev.
(Rs mn)
Gurgaon 5.84 8,000 46,720
Chennai 0.93 3,500 3,255
Mysore 0.22 2,300 506
Total 6.99 50,481

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Sobha won contractual orders valued at
~`1.32bn, other than Infosys, during
H2FY11.
Contractual Business: A steady Cash-Flow Generator
Sobha has emerged as one of the most reputed contractors for commercial and
industrial structures, especially for the South India market. Infosys has been its key
client and accounts for almost 88% of Sobha’s completed contractual revenues.
However, of the ongoing projects, Infosys constitutes only 78% of the total, thereby
reducing the company’s over-dependence on a single client.
Contractual business works on a cost-plus margin of about 15-16%. Although the
margins are lower in contractual business than in real-estate business (where
margins are in the range of 30-35%), the contractual segment serves as a steady
source of cash flow for the company, which, in turn, helps to fund its construction
costs and keep in check the company’s debt levels.
To date, the company has completed 191 projects aggregating to 24.27msf.
Further, Sobha has unbilled revenue of `5.6bn from the 38 ongoing projects, with a
total saleable area of 7.4msf, while `3.07bn is the estimated value for its
forthcoming 19 projects with a total saleable area of 4.05msf.
Exhibit 135: Completed Contractual Projects
Exhibit 136: Ongoing Contractual Projects
Low Cost, IT-Centric Land Bank
SDL has a total 2,715 acres of land bank which is well spread across major IT/ITES
centers across India. Out of the total saleable area of 228msf, ~79% (180msf) is
located in IT/ITES-centric regions like Bengaluru, Pune, Mysore, Chennai and Kochi.
Further, the acquisition cost of these land banks, including the FSI cost is quite
inexpensive at `310psf, compared to the existing average capital value in these
regions of `3,500-4,500psf. In our view, SDL is to set benefit from the increase in
the salaries in the IT/ITES sector. We estimate a sales volume of 3.44msf in FY13E
from 2.78msf in FY11, growing 23.9% annually.

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Exhibit 137: Land Bank Details
Average delivery run-rate for last five years
~6msf
Unparalleled Execution Record
SDL has an unparalleled execution record in real-estate business. It has delivered
13.94msf over a period of 11 years up to 2006, since its inception in 1995.
However, in the next five years it completed and handed over 28.74msf, more than
double the execution it had done in the first 11 years. In the last five years, the
company has been able to maintain a 6msf annual run-rate in its real-estate
business.
Even in its contractual business, the company has a very decent execution record,
completing 191 projects aggregating to 24.27msf.
Of the ongoing projects, SDL is currently executing 23 real-estate projects of
6.99msf and 38 contractual projects of 7.42msf, totalling 62 projects and 14.41msf.
We estimate revenues from the existing ongoing and new projects to be `14.12bn
and `16.63bn, in FY12E and FY13E, respectively.
Exhibit 138: Completed Projects Till March-11
71
191
262
18.4 24.3
42.7
0
50
100
150
200
250
300
Real Estate Contractual Total
Nos msf
Exhibit 139: Ongoing Projects Till March-11
23
38
61
7.0 7.4
14.4
0
10
20
30
40
50
60
70
Real Estate Contractual Total
Nos msf

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Moving Up the Value Chain
With the experience gained from developing various kinds of real-estate projects,
Sobha has successfully backward integrated its whole business. It has in-house
facilities for building interiors, metal glazing and concrete products. These
businesses not only increase Sobha margins, but also provide the company with
better control over the quality.
Exhibit 140: SDL Subsidiaries Revenue Contributions (` Mn)
Revenues (Rs Mn) FY10 FY11
Interiors and Furnishing Div. 508 557
Glazing & Metal Div. 653 625
Concrete Product Div. 150 161
Improving Net D/E
We expect the company to generate cumulative operating cash flow of `6.08bn in
the next two years; this will help it to reduce its net D/E from 0.64x in FY11 to 0.42x
by FY13E. Thus, we believe the company is in a better position to fund its future
growth.
1.77 1.74
0.80
0.64
0.50
0.42
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0

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EBIDTA Margins Steady at 21%
EBIDTA margins are expected to be steady at 21% levels during FY11-13E, as a)
contractual business works on a cost-plus basis, earning 15% margins and b)
property development business earns ~30-35% margins. Operating profit during
FY11-13E is estimated to grow by 10.3% annually, from `3.14bn to `3.82bn.
3,656
2,868
2,425
3,143
3,466
3,824
25.2
27.7
21.3 21.0
22.6
21.4
0
5
10
15
20
25
30
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Concerns
Over-Dependence on the Bengaluru Region
The Bengaluru real estate market is very much driven by IT/ITES sector growth.
Sobha has ~40% of its land bank located in this region; hence, any slowdown in the
IT/ITES sector would impact Sobha adversely.
Foraying into Other Micro Markets
The company has moved out of its comfort zone of the South India real-estate
market and has now entered other high-growth markets like Gurgaon, in NCR. It
plans to launch ~5.8msf of integrated township. We believe NCR is a completely
different market and works on a completely different model to Bengaluru. There
are risk overhangs on Sobha in terms of execution as well as project sales.

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Recommendation
Sobha is one of the best representatives of the South India real estate market, with
~95% of its land bank based in South India, primarily in Bengaluru. We are positive
on SDL on the following parameters: a) strong presence in the Bengaluru market,
which has been characterized with less volatility than other regions like Mumbai
and NCR; b) ~`6.1bn positive net operating cash flow to be generated in the next
two years; c) a robust pipeline of ~11msf of launches in FY12, anticipated to
generate ~`67bn in the next five to six years; d) a steady contractual business; and
e) a low-cost IT-centric land bank. We believe its D/E is likely to come down to
0.42x in FY13E, because its land monetization and operating cash flows have
increased. We initiate coverage on Sobha Developers Ltd with a Buy
recommendation and a target price of `325, based on 25% discount to its NAV of
`434. We expect revenue and earnings CAGR of 11.3% and 6.5% respectively, over
FY11-13E, and the operating profit margin will remain robust at 21-22%. At the
current price, the stock trades at FY12E and FY13E P/E of 15x and 13.1x and P/BV of
1.4x and 1.2x, respectively.
Exhibit 143: Segmental NAV Break-up
94
30
402
-93
434
-109
325
-150
-50
50
150
250
350
450
550
Resi Contracts LandBank Net
Debt
NAV Disc. Target
Exhibit 144: One-Year Forward P/BV Band
0
100
200
300
400
500
600
700
0.5x
1x
1.5x
2x
2.5x
3x
Exhibit 145: SDL P/BV vs BSE Realty P/BV
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
0
1
2
3
4
5
6
7
8
9
10
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
P/BV P/BV - Disc/ Prem

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Financial Analysis
Revenues to Grow 11% During FY11-13E
We expect revenues to grow by 11.3% over FY11-13E to `17.57bn, backed by 9.9%
growth in revenues from property development and 12.9% growth in the
contractual revenues. We estimate revenues from the property development to
increase from `10.39bn in FY11 to `12.55bn in FY13E and the area sold to be
3.23msf and 3.44msf in FY12E and FY13E, respectively. Contractual revenues are
expected to grow from `3.20bn in FY11 to `4.08bn in FY13E.
Exhibit 146: Revenues (` Mn)
18,407
12,614
10,887
14,177
15,028
17,570
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Net Profit Growth to Decline
We expect the company to pay full taxes (33.7%) from FY12 onwards as the
majority of Sobha’s projects which enjoy benefits under section 80IB of the Income
Tax Act have ended. Hence, we estimate net profit to fall by 1.3% in FY12E to
`1.80bn, before increasing to `2.07bn, a growth of 15% YoY in FY13E. Net profit
margin is expected to decrease by 70bps from 12% in FY11 to 11.3% in FY13E. We
expect this margin to be sustainable over the long term..
Exhibit 147: Net Profit (` Mn); PAT Margin (%)
2,283
1,097
1,367
1,825
1,800
2,071
15.6
9.5
11.8 12.0 11.5
11.3
0
2
4
6
8
10
12
14
16
18
0
500
1,000
1,500
2,000
2,500

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Stabilizing Return Ratios
ROE is expected to fall in FY12E to 9.0% against 9.8% in FY11E on account of the
increase in effective tax rates, before stabilizing at 9.5% in FY13E. However, ROCE
during the same period is estimated to rise continuously from 9.3% in FY11 to
10.4% in FY12E and 11% in FY13E, as it is not affected by the change in tax rates.
12.0
8.4
6.6
9.3
10.4
11.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
23.1
10.1
8.0
9.8
9.0 9.5
0.0
5.0
10.0
15.0
20.0
25.0

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Company Background
Sobha Developers was incorporated in 1995, and is a `15bn company and one of
the leading real-estate development and construction companies in South India. It
adds another feather to its cap by being the only player with a backward integrated
real-estate business model. Sobha focuses on residential and contractual projects.
To date, Sobha has made its mark in 20 cities and 12 states across India. It has a
total saleable area of 228msf with a strong presence in Benagluru (38%), Kochi
(21%), Chennai (17%), and Hosur (16%). So far, Sobha has completed 71 real-estate
projects aggregating to 18.41msf. It has 23 ongoing real-estate projects aggregating
to 6.99msf and 15 forthcoming projects with a total saleable area of 12msf.
Besides being a real-estate company, it is also in the contractual business executing
civil contracts for various companies ranging from IT to finance. Infosys is one of
Sobha’s key clients, contributing 88% of the total contractual revenues. However,
recently, Sobha has added new marquee clients including Dell, HP, Timken, MICO,
Bayer, HCL, ITC, Biocon, Bosch, GMT, and Hotel Leela Ventures. Sobha has
completed 191 contractual projects covering about 42.68msf of area. It has 38
ongoing contractual projects aggregating to 7.42msf at various stages of
construction.
Exhibit 150: SDL’s Presence Across India

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FINANICAL STAEMENT
Total Income 10,887 14,177 15,028 17,570 EPS 13.9 18.6 18.4 21.1
Cost of Const. 6,191 8,142 8,724 10,600 Growth (%) -7.4% 33.5% -1.3% 15.0%
Deprecation 323 278 292 310 DPS 2.5 3.0 3.0 3.0
Interest 499 429 460 392 Payout (%) 17.9 16.1 10.0 10.0
PBT 1,603 2,436 2,714 3,122
Tax 236 611 913 1,051 Valuation Ratios
PAT 1,367 1,825 1,800 2,071 P/E 19.8 14.8 15.0 13.1
Cash P/E 16.0 12.9 12.9 11.4
Balance Sheet FY10 FY11 FY12E FY13E P/ BV 1.6 1.5 1.4 1.2
Equity Capital 981 981 981 981 EV/EBDITA 8.4 5.4 4.6 4.1
Pref. Capital 0 0 0 0 ROE (%) 8.0 9.8 9.0 9.5
Networth 17,085 18,566 20,023 21,751 RoCE (%) 6.6 9.3 10.4 11.0
Loans 14,540 12,110 10,610 10,160
Total Liabilities 31,625 30,676 30,633 31,911 Margin (%)
Assets EBDITA 21.3 21.0 22.6 21.4
Fixed Assets (Net) 1,429 1,373 1,280 1,170 EBIT 18.4 19.1 20.6 19.6
Capital WIP 632 668 768 868 PBT 13.9 16.2 17.6 17.3
Investments 429 516 526 536 PAT 11.8 12.0 11.5 11.3
Current Assets
a) Inventories 10,174 9,726 9,661 11,298 Turnover Ratios
b) Sundry Debtors 4,166 3,914 4,011 4,310
c) Cash & Bank 800 275 572 1,082 Asset T/o 5.4 7.1 7.3 8.6
d) Other Current Assets 0 0 0 0 Inventory T/o 0.8 1.1 1.2 1.2
e) Loans & Advances 20,093 21,517 20,540 19,933 Debtors T/o 2.7 3.7 3.7 4.1
Current Liabilities 6,150 7,387 6,799 7,360 Creditors T/o 2.5 2.5 2.9 3.0
Net Current Assets 29,083 28,045 27,985 29,263
Total Assets 31,625 30,676 30,633 31,911 Leverage Ratios
D/E % 85.1 65.2 53.0 46.7
Cash Flow FY10 FY11 FY12E FY13E Net D/E % 80.4 63.7 50.1 41.7
CF before WC Changes 2,284 2,971 3,073 3,414 Int. Cov. Ratio (x) 4.2 6.7 6.9 9.0
Cash from operations 3,388 4,442 3,430 2,646 Growth Ratio (%)
Net Cash from Oper. 3,278 4,144 2,517 1,595 Sales -13.7 30.2 6.0 16.9
Cash from Invstment (124) (219) 82 100 Expenses -13.2 30.4 4.8 18.9
Cash from Financing (2,564) (4,450) (2,303) (1,185) EBDITA -15.5 29.6 10.3 10.3
Net Change 590 (525) 296 510 Interest Cost -52.6 -13.9 7.1 -14.7
Op. Cash 211 800 275 572 PBT 10.1 52.0 11.4 15.0
Cl. Cash 800 275 572 1,082 PAT 24.6 33.5 -1.3 15.0

Prestige Estates Projects Limited
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As on July 22,2011
52 Week High/Low (`) 232/104
Face Value (`) 10
Codes
BSE Code 533274
NSE Code PRESTIGE
Bloomberg Code PEPL IN
Reuters Code PREG.BO
Mar’11 Dec’10 Sep’10
Promoters 80.1 80.1 80.1
FII 17.9 17.9 18.1
DII 1.1 1.1 1.4
Others 1.9 1.9 0.5
40
50
60
70
80
90
100
110
120
Oct-10 Dec-10 Feb-11 Apr-11 Jun-11
Prestige Sensex
SOUTH INDIA’S “PRESTIGE”
Prestige Estates Projects Limited (Prestige) has a formidable presence in South
India and is synonymous with the Bengaluru real estate market; this is manifested
through a showcase of more than 150 projects aggregating to ~44msf. We are
positive on Prestige broadly, on the following parameters: a) 15msf of well-
diversified projects expected to launch in the next 12-15 months and a total of
~62msf currently under development and planning; b) an asset-light business
model due to JDA model; c) rental annuity expected to grow to ~`2.36bn p.a. by
FY13E, at ~26% CAGR over FY11-13E; d) a diversified project portfolio across various
segments like residential, commercial, retail, hospitality, etc. e) a proven execution
track record, delivering ~16msf in FY11; f) good brand recognition and goodwill
because of high-quality constructions; g) superior margins of 28-30%, and trading at
FY12E P/E and P/BV of 18.1 and 1.8X respectively. We Initiate coverage on Prestige
with a Buy recommendation and price target of `162. At the current price, the
stock trades at FY12E and FY13E P/E of 20.5x and 15.7x and P/BV of 2x and 1.8x,
respectively.
Burgeoning Rental Annuity
The total lease assets are expected to grow at 23.1% CAGR during FY11-13E, from
2.85msf currently to 4.32msf in FY13E. The company’s current lease income of
`1.5bn per annum is likely to grow to `2.36bn by FY13E.
New Launches to Steer Bookings in FY12-13E
Prestige has planned to launch 15msf across 11 projects in the next 12-15 months.
Until last year, it had focused mainly on luxury (high-end) projects. However, it has
now changed its focus and plans to diversify across the real-estate verticals, from
high-end to mid-range residential projects. We expect revenues from White
Meadows, Prestige Golfshire, Prestige Southridge, Prestige Neptune Court Yard,
Prestige Palladium, etc. to start contributing revenues in FY12-13.
A High Proportion of Joint Development in Total Land Bank
At present, 65% of the land is acquired by Joint Development, and so the company
executes more projects with less capital, reducing the use of funds and protecting its
margins.
Superior ROEs
Prestige is likely to post superior ROEs in FY12E and FY13E at 9.8% and 11.6%,
respectively. This is mainly because it has started some high-margin projects.
1M 6M 9M
Absolute 13 -3 -27
Relative 6 -1 -20
Hitendra Gupta
Contact No: -91 22 4354 2023
Net Sales 10,860 16,113 17,289 19,565
EBITDA 2,852 4,421 5,002 6,001
EBITDA Margin (%) 21.8 24.2 27.9 29.9
Net Profit 1,474 1,667 2,224 2,907
PAT Margin (%) 6.6 6.4 11.6 13.9
EPS 5.6 5.1 6.8 8.9
PER (x) 24.8 27.4 20.5 15.7
PBV (x) 4.8 2.2 2.0 1.8
ROE (%) 19.3 8.2 9.8 11.6

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Key Assumptions
Real Estate Business FY11 FY12E FY13E
Area Sold (msf) 1.86 3.55 3.20
Sale Price (` psf) 6,300 6,615 6,946
Const. Cost (` psf) 2,200 2,310 2,426
Exhibit 35: Rental Assets Assumptions
Rental Assets FY11 FY12E FY13E
Commercial Lease Assets
Area (msf) 2.47 3.08 3.25
Rentals (` psfpm) 36 35 40
Retail Lease Assets
Area (msf) 0.38 0.38 1.07
Rentals (` psfpm) 87 91 61
Exhibit 36: Hospitality Business Assumptions
Hospitality FY11 FY12E FY13E
Total No of Rooms 257 257 631
OR (%) 77 82 61
ARR (`/night) 4,646 4,851 4,095
Calculation of WACC
Tax Rate (%) 25.0
Beta (x) 1.2
Wt. Debt (%) 40.0
Wt. Equity (%) 60.0
WACC (%) 14.0
1% Increase in the Avg. sale Price 1% Change in NAV
NAV Break-Up `/Share ` mn % NAV Break-Up `/Share
Residential 118 38,615 50 Less: Net Debt 20
Rentals 34 11,160 14 Net NAV 215
Land Bank 79 25,939 34 Discount (%) 25
Hotels 3 973 1 Target Price 162
Property Management 2 720 1 CMP 127
Gross NAV 236 77,406 100 Upside/(Downside) (%) 16

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15msf across 11 projects to be launched in
next 12-15months
New Launches to Steer Bookings in FY12-13E
Prestige has planned to launch 15msf across 11 projects in the next 12-15
months. Until last year it had focused mainly on luxury (high-end) projects.
However, it has now changed its focus and plans to launch projects across the
real estate verticals, from high-end to mid-range residential projects. We
expect revenues from White Meadows, Prestige Golfshire, Prestige
Southridge, Prestige Neptune Court Yard, Prestige Palladium, etc. to start
contributing revenues in FY12-13. Backed by these new launches, we
estimate residential revenues at `14.05bn and`15.26bn in FY12E and 13E.
Exhibit 40: Planned Launches FY12/13
Project Name Location Model
Total
Area
(msf)
Prestige
(msf)
Rate
(` psf) Stake (%)
Launch
Date
Sunnyside Bangalore Resi 0.85 0.85 4,000 100 FY12
Bellavista Chennai Resi 5.04 3.02 4,200 60 FY12
Tranquility Bangalore Resi 4.78 4.78 3,500 100 FY12
Jacobs Land Bangalore Resi 1.10 0.81 6,500 74 FY12
Mayberry Bangalore Resi 0.48 0.28 4,500 45 FY12
Park View Bangalore Resi 0.80 0.52 4,500 65 FY12
Hilcrest Ooty Resi 0.08 0.04 7,000 50 FY12
Khoday Trade Tower Bangalore Comm 0.54 0.24 6,000 45 FY12
Forum Thomsun Bangalore Comm 0.20 0.05 12,000 25 FY12
Khoday Platinum Bangalore Comm 0.51 0.23 6,000 45 FY12
As of March 2011, the company had unbilled revenues of `22.3bn from its
12.55msf sales achieved and `49bn locked in the inventories. We expect the
inventories to be fully realized in the next two years.
Exhibit 41: Residential Revenues (` mn)
8,062
13,849
14,047
15,259
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000

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Rental annuity to grow by 26.5% CAGR
during FY11-13E
Burgeoning Rental Annuity
The company currently has a very strong rental asset portfolio with total area
under lease of 5.68msf (Prestige’s share is 3.77msf). For the year ending
March 2011, the company had a rental income of `1.5bn, primarily derived
from three retail malls and office space in Cessna Business Park.
The company derives rental income from two major verticals: a) Commercial
(office spaces) and b) Retail (malls). We expect its total lease asset portfolio
to grow at 23.1% annually, to 4.32msf in FY13E, from 2.85msf currently.
Further, we estimate annuity rentals will grow by 26.5% annually, from
`1.48bn in FY11 to `2.36bn in FY13E.
Exhibit 42: Lease Revenues (` mn); Leased Assets (msf)
1,477
1,697
2,365
2.85
3.46
4.32
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0
500
1,000
1,500
2,000
2,500
FY11 FY12E FY13E
Commercial leased asset to add 2.2msf by
FY15
Commercial Rental Portfolio: 2.2msf to be added by FY15
The company had a 2.47msf rent-generating commercial rental portfolio, as
of March 2011, contributing `1.08bn. Furthermore, Prestige is expected to
add another 2.20msf by FY15 and is estimated to generate `1.06bn annually.
During the next two years, we expect 0.78msf of commercial rental asset to
be added, taking the total leased asset tally to 3.25msf. Rentals from the
commercial assets are estimated to increase by 20.8% CAGR during FY11-13E
to `1.58bn.
Exhibit 43: Existing Commercial Leased Assets
Existing Assets
Prestige Share
(msf)
Rent
(` psfpm)
Rental
(` mn p.a.)
Prestige Est. 1.60 38 720.0
West Palm 0.17 25 50.9
Prestige Valley View 0.00 126 6.4
ICBI India 0.04 42 20.1
Cessna Business Park 0.66 36 283.0
Total Existing 2.47 36 1,080.4

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Exhibit 44: Existing Commercial Leased Assets
Upcoming
PEPL
Share
Rent
Rs/sf/m
Rental
(Rs.Mn)
p.a.
Rentals
Starting
from
Cessna Business Park (B5-B6) 0.39 40 187.2 Q3FY12
Exora Business Park - B1 0.22 40 105.6 Q3FY12
Forum Vijaya - Comm 0.17 60 122.4 Q2FY13
Cessna Business Park (B7-B11) 0.60 40 288.0 Q3FY14
Graphite Whitefield 0.33 32 126.7 Q4FY14
Total Upcoming 2.20 40 1,062.9
1.31msf of retail rental asset to be added
during FY11-13E
Retail Lease Annuity to Grow the Most: 41% CAGR FY11-13E
The company currently has three operational malls with a total area under
lease (PRESTIGE share) of 0.38msf, generating an annual rental of `396.6mn.
Moreover, Prestige is expected to add another 1.65msf by FY15, estimated to
generate annual rentals to the tune of `1.17bn. We expect the company to
add another 1.31msf of retail rental asset during FY11-13E, taking the total
retail leased asset to 1.69msf. Retail annuity rentals are estimated to increase
to `789.6mn in FY13E, a growth of 62.2% during FY11-13E.
Exhibit 45: Existing Retail Leased Assets
Existing Assets
Prestige Share
(msf)
Rent
(` psfpm)
Rental
(` mn p.a.)
Forum Mall, Koramangala 0.24 88 252.0
UB City 0.04 114 54.6
Forum Value Mall, Whitefield 0.10 75 90.0
Total Existing 0.38 87 396.6
Exhibit 46: Upcoming Retail Leased Assets
Upcoming
Prestige Share
(msf)
Rent
(` psfpm)
Rental
(` mn p.a.)
Rentals
Starting
Forum Vijaya Chennai 0.35 70 294.0 Q1FY13
Forum Sujana, Hyd 0.17 65 132.6 Q4FY13
Forum Mangalore 0.17 55 112.2 Q4FY13
Forum Shanthiniketan 0.24 55 158.4 FY14
Forum Thomsun Cochin 0.24 55 158.4 FY14
Graphite Whitefield 0.25 55 165.0 FY14
Mysore Mall 0.23 55 151.8 FY15
Total Upcoming 1.65 59 1,172.4

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Hotel inventory to double to 631 by FY13
Hotel Room Inventory to Double by FY13
The company is currently building two hotels: a) FVM Serviced Apartments
(168 rooms) and b) Hotel Aloft (206 Rooms), which is expected to commence
commercial operations by the end of FY13. With these, the total room
inventory is expected to double to 631 from the current inventory of 257
rooms.
The hospitality business is estimated to contribute revenues of `374.9mn and
`381.2mn in FY12E and FY13E, respectively. However, it is anticipated to
contribute `1.77bn to the revenues once all the upcoming hotel projects are
completed.
Exhibit 47: Operational Hotels
Existing Assets
Prestige Share
(%)
Rooms
(nos)
ARR
(`/night)
Revenue
(` mn p.a.)
Angsana Resort 57.5 79 8,000 79.6
Oakwood Serviced Appts 57.5 178 9,000 235.4
Total 257 314.9
Exhibit 48: Upcoming Hotels
Upcoming Hotels
Prestige Share
(%)
Rooms
(nos)
ARR
(`/night)
Revenue
(` mn p.a.)
Starts
from
FVM Service Apts 35 168 6,000 63.1 Q1FY13
Aloft Hotel 60 206 6,500 182.1 Q3FY13
Hilton Hotel 100 320 12,000 734.0 Jan'15
Marriot Resort 100 307 7,000 386.3 Jul'15
Golfshire Club 100 25.0
Forum Thomsun -Hotel 25 67.1
Total Upcoming 1,001 1,457.6

25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Superior Double-Digit ROE
The ROE, after declining in FY11 to 8.2% due to dilution (IPO), is expected to
rise back to its pre-IPO double-digit levels. Improved profitability and a higher
increase in net profits over FY11-13E, will therefore lead to higher ROE from
8.2% in FY11 to 10.2% in FY12E and 11.5% in FY13E.
7.6
8.8 9.0
12.5
13.5
14.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Exhibit 50: ROE (%)
13.1 12.5
19.3
8.2
10.2
11.5
0.0
5.0
10.0
15.0
20.0
25.0
Positive Operating Cash Leading to Decline in D/E
The company’s net operating cash flow turned positive in FY11 (`2.15bn), and
we expect Prestige to further generate operating cash of `7.84bn in the next
two years, mainly because of higher lease rentals (`1.88bn in FY12E) and
superior execution on ongoing projects. We expect the net D/E ratio to be
steady at ~0.3x levels during FY12E-13E.
1.64
1.57
1.87
0.34 0.30 0.30
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00

25 July 2011
www.jaypeeindia.com
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Service offerings
Execution
Concerns
Over-dependence on the Bengaluru Region
Of Prestige’s ~63msf saleable area, 75% is in Bengaluru, and demand in this
market is driven by the IT/ITES sector. Hence, any slowdown in the IT/ITES
sector would adversely impact our revenue estimates for Prestige.
Execution Risk
The company has planned to launch ~11msf in FY12, which is quite huge
compared to the ~44msf completed by the company since its inception. This
exposes PRESTIGE to execution risk.
Regulatory Changes for SEZs
SEZs in India were given tax benefits to encourage exports and employment.
However, with the end of the 2008 recession, the government started
increasing the MAT levels. This has led to deferment of many commercial
real-estate (SEZ) projects. Commercial real estate contributes ~11% to
Prestige’s NAV. Any changes in the taxes imposed by the government would
have a negative impact on the company.

25 July 2011
www.jaypeeindia.com
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Service offerings
Execution
Recommendation
Prestige Estates Projects Limited (Prestige) has a formidable presence in
South India and is synonymous with the Bengaluru real real-estate market.
We are positive on PRESTIGE broadly, on the following parameters: a) 15msf
of well-diversified projects expected to launch in the next 12-15 months and
a total of ~62msf currently under development and planning; b) an asset-light
business model due to JDA model; c) rental annuity expected to grow to
~`2.36bn p.a. by FY13E, at ~26% CAGR over FY11-13E; d) a diversified project
portfolio across various segments like residential, commercial, retail,
hospitality, etc. e) a proven execution track record, delivering ~16msf in FY11;
f) good brand recognition and goodwill because of high-quality constructions.
We Initiate coverage on Prestige with a Buy recommendation and price
target of `162, based on 25% discount to its NAV of `215. We expect
earnings and revenue CAGR of 32.1% and 10.2%, respectively, over FY11-13E
and the operating profit margin to be robust at 28-29%. At the current price,
the stock trades at FY12E and FY13E P/E of 20.5x and 15.7x and P/BV of 2x
and 1.8x, respectively.
118
34
5
79
-20
215
-54
162
-100
-50
0
50
100
150
200
250
300
Resi. Rentals Hotels +
Others
Land
Bank
Net Debt Gross
NAV
Discount Target
Exhibit 53: One Year Forward P/BV Band
0
50
100
150
200
250
300
350
400
450
500
Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11
1.75x
2.75x
3.75x
4.75x
5.75x
6.75x
Exhibit 54: Prestige P/BV vs BSE Realty P/BV
-20%
-10%
0%
10%
20%
30%
40%
50%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Price to BV P/BV Disc/ Prem

25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Financial Analysis
Revenues to Grow 10% During FY11-13E
We expect revenues to grow by 10.3% over FY11-13E to `19.57bn, backed by
25.6% growth in rental revenues (`2.37bn in FY13E vs `1.48bn in FY11) and
5% annual growth in residential and commercial property revenues.
Revenues from the hospitality business are estimated at `389.2mn
and`593mn in FY12E and FY13E, respectively.
Exhibit 55: Revenues (` mn)
9,893
8,510
10,860
16,113
17,464
19,608
0
5,000
10,000
15,000
20,000
25,000
Margins to Improve by 560bps
The company’s margins are likely to improve by 560bps over FY11-13E. This
would mainly be because of a change in the product-mix, an increase in lease
rentals and completion of the large, low-margin ‘Shantiniketan’ project.
Operating profit is estimated to grow by 16.5% CAGR during FY11-13E, to
`6bn in FY13E. Operating margins are expected to be 29.8% in FY13E from
the current 24.2% levels.
Exhibit 56: Operating Profit (` mn); EBIDTA Margin (%)
1,514
2,118
2,852
4,421
5,126
5,990
14.0
28.8
21.8
24.2
28.3
29.8
0
5
10
15
20
25
30
35
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000

25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Net Profit Margin to Go Up by 740bps
Robust sales and the increases in rentals are expected to improve the
company’s profitability. We estimate net profit will grow by 31.9% during
FY11-13E, to `2.90bn from `1.67bn. Rentals as a percentage of total sales are
expected to increase from 10% in FY11 to 14% in FY13E. Thus, net profit
margin is expected to grow by 740bps, from 6.4% in FY11 to 13.8% in FY13E.
Exhibit 57: Net Profit (` mn); PAT Margin (%)
659
773
1,474
1,667
2,307
2,899
4.0
13.1
6.6 6.4
11.9
13.8
0
2
4
6
8
10
12
14
16
0
500
1,000
1,500
2,000
2,500
3,000
3,500

25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Company Background
Prestige Estates Projects Ltd (Prestige) was set up in 1986 and grew swiftly to
become the leading property developer in Bengaluru. Since then, it has made
a distinctive mark on Bengaluru’s skyline, and on its people as a leading real
estate developer. In its quest to deliver projects with perfection and
excellence, Prestige became a `10bn conglomerate.
Prestige has completed 157 real estate projects across asset classes in the
Residential, Commercial, Retail and Hospitality categories. It has executed
~44msf across all segments. The company has pioneered one-of-a-kind
developments such as Forum Mall, UB City and Shantiniketan, by
transforming locations into landmarks. It has developed a number of
landmark properties in Bengaluru, and has received a number of awards for
quality products, including FIABCI awards.
Prestige has entered into a joint venture with CapitaLand (a Singapore-listed
real-estate company) to develop and manage retail malls, and with Red Fort
Capital (Real Estate Fund) to develop commercial complexes and townships.
Prestige has developed homes for the large populace residing in the South
and its constructions are also host some of the biggest MNCs in the IT/ITES,
banking and finance, retail and hospitality sectors. With 61.4msf of
developments, Prestige is a real-estate powerhouse in the southern market.
Exhibit 58: Land Bank – Location Wise

25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
FINANICAL STAEMENT
Total Income 10,860 16,113 17,289 19,565 EPS 5.6 5.1 6.8 8.9
Cost of Const. 7,033 10,479 11,010 12,239 Growth (%) -90.9% -9.5% 33.4% 30.7%
Deprecation 491 606 633 689 DPS 0.0 1.2 1.2 1.2
Interest 783 1,234 1,016 931 Payout (%) 0.0 23.6 17.7 13.5
PBT 1,577 2,581 3,352 4,382
Tax 283 914 1,128 1,475 Valuation Ratios
PAT 1,474 1,667 2,224 2,907 P/E 24.8 27.4 20.5 15.7
Cash P/E 18.6 20.1 16.0 12.7
Equity Capital 2,625 3,281 3,281 3,281 EV/EBDITA 15.0 8.5 7.3 6.1
Reserves & Surplus 5,013 17,156 19,326 21,772 ROE (%) 19.3 8.2 9.8 11.6
Networth 7,638 20,437 22,607 25,053 RoCE (%) 9.0 12.5 13.1 14.6
Loans 16,015 10,119 10,619 11,419
Assets EBDITA 21.8 24.2 27.9 29.9
Capital WIP 2,054 1,049 1,799 2,549 PBT 9.4 12.3 18.2 21.5
Investments 1,609 7,103 7,103 7,103 PAT 6.6 6.4 11.6 13.9
Current Assets
b) Sundry Debtors 3,628 10,113 10,967 10,599
c) Cash & Bank 1,729 3,112 3,917 3,840 Asset T/o 0.8 2.9 2.1 1.8
d) Loans & Advances 6,408 8,070 8,517 9,671 Inventory T/o 0.6 1.4 1.8 2.0
Current Liabilities 11,893 11,734 12,023 12,304 Debtors T/o 2.8 1.5 1.6 1.8
D/E (%) 209.7 49.5 47.0 45.6
Cash Flow FY10 FY11 FY12E FY13E Net D/E (%) 187.0 34.3 29.6 30.3
Cash from operations -3,070 2,150 5,660 4,783 Growth Ratio (%)
Net Cash from Oper. -3,209 2,150 4,532 3,309 Sales 27.6 48.4 7.3 13.2
Cash from Invstment -834 -1,054 -2,817 -2,861 Expenses 25.3 46.0 5.1 10.4
Cash from Financing 4,363 -1,096 -910 -525 EBDITA 34.7 55.0 13.1 20.0
Net Change 320 1,383 805 -78 Interest Cost 13.6 57.7 -17.7 -8.4
Op. Cash 1,410 1,729 3,112 3,917 PBT 53.2 63.4 29.9 30.7
Cl. Cash 1,729 3,112 3,917 3,840 PAT 83.0 28.7 33.4 30.7

DLF Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
As on July 22,2011
52 Week High/Low (`) 397/206
Face Value (`) 2
Codes
BSE Code 532868
NSE Code DLF
Bloomberg Code DLFU IN
Reuters Code DLF.BO
Promoters 78.6 78.6 78.6
FII 15.7 15.6 15.8
DII 0.1 0.1 0.4
Others 5.6 5.7 5.2
50
60
70
80
90
100
110
120
130
Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11
DLF Sensex
DLF is the largest real estate player in the country and is synonymous with the
Indian real estate sector. We like the following aspects of the company : a) a pan-
India presence mostly concentrated in the NCR region; b) steady cash-flow from
~22.5msf of rent-yielding assets; c) its focus on quicker land bank monetization; d)
increased net operating cash flow (`104.50bn) leading to a decline in net debt-
equity to 0.57x in FY13E; e) an increase in its divestment target to `100bn from
`45bn previously, with a target of `60-70bn in the next two to three years; f) a
strategy to protect margins by incorporating a cost escalation clause in agreements;
and g) higher margins, leading to stronger return ratios. Thus, we initiate coverage
on DLF Ltd with a Neutral rating and a price target of `254. At the current price, the
stock trades at 24.8x and 20.7x its FY12E EPS `9.7 and FY13E EPS of `11.6,
respectively. On P/BV it trades at 1.4x/1.3x its FY12E and FY13E book value of
`169.6 and`178.9, respectively.
Focus on Quicker Monetization
DLF has changed its focus from long-gestation real-estate development projects to
short-duration and high-cash plot sales. It intends to launch 10msf of plotted
development in FY12E in Indore, Gurgaon, Chandigarh and Lucknow. Thus, we
estimate DLF will generate net positive operating cash flow of `102.67bn in the next
two years, through its quicker monetization strategy.
Leasing Income Set to Increase by ~26% During FY11-13E
The current lease income of `11bn is likely to increase to `17.31bn by FY13E, a CAGR
of 25.5%. Leased assets are likely to increase to ~27.5msf in FY13E from ~22.5msf
currently. The company is aiming to become a debt-free company in the next two to
three years and has a strategy to reduce its capital expenditure on new leased assets.
Divestment of Non-Core Assets
DLF sold non-core assets worth `12.7bn in FY11, aggregating to `30.7bn, up to
March-2011. The company has announced a plan to dispose of its non-core assets. It
has substantially increased its previous divestment target of `45bn to `100bn, with a
target of `60-70bn over the next two to three years.
Net Gearing to Improve
We expect that the improving cash flow from operations (`102.67bn between FY11-
13E) will reduce the company’s debt levels and bring down the company’s net debt-
equity from 0.86x in FY11 to 0.71x in FY12E and 0.57x in FY13E.
1M 6M 12M
Absolute 14 -5 -24
Relative 8 -3 -28
Hitendra Gupta
Contact No: -91 22 4354 2023
Net Sales 78,509 102,505 103,655 111,175
EBITDA 39,254 44,426 48,405 53,490
EBITDA Margin (%) 47.1 39.3 43.5 45.0
Net Profit 17,198 16,396 16,437 19,721
PAT Margin (%) 17.2 10.0 10.8 12.8
EPS 10.1 9.7 9.7 11.6
PER (x) 23.7 24.9 24.8 20.7
PBV (x) 1.5 1.6 1.4 1.3
ROE (%) 6.5 6.2 5.7 6.5
Initiating Coverage CMP: `240 TARGET: `254 NEUTRAL

DLF Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Key Assumptions
Exhibit 151:Real Estate Business Assumptions
Real Estate
Area Sold (msf) 12.5 10.2 11.0 10.0
Sale Price (` psf) 5,702 6,517 6,273 7,298
Exhibit 152: Rental Business Assumptions
Lease Assets
Cum. Lease Assets (msf) 19.41 22.48 24.98 27.48
Incremental Lease Assets (msf) 1.98 4.00 2.50 2.50
Avg. Rentals (` psfpm) 43 41 50 53
Exhibit 153:Calculation of WACC
Calculation of WACC
Tax Rate (%) 25.0
Beta (x) 1.2
Wt. Debt (%) 40.0
Wt. Equity (%) 60.0
WACC (%) 13.6
Exhibit 154:Sensitivity Analysis
Exhibit 155:NAV Break-Up
Resi. 135 228,526 31
Land Bank Value 220 373,837 50
Lease Assets 50 85,357 11
Other Assets 33 55,442 7
Gross NAV 438 743,162 100
Net NAV 318 539,522
Discount (%) 20
Target Price 254
CMP 241

DLF Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
10msf plotted development expected to be
launched in FY12
Focus on Quicker Monetization
The company has changed its focus from long-gestation real-estate
development projects to short-duration and high-cash plot sales. It intends to
launch 10msf of plotted development in FY12E in Indore, Gurgaon,
Chandigarh and Lucknow. Consequently, the product mix is expected to be
skewed towards plotted development in FY12-13. Plotted developments are
expected to achieve better margins as the cost involved in providing the basic
infrastructure (water, electricity, road, sewage, etc) is quite low, compared to
the cost involved in constructing an apartment. Further, plotted
developments can be monetized quicker as they require fewer approvals
than those required for residential and commercial complexes.
Thus we estimate that DLF will generate net positive operating cash flow of
`102.67bn in the next two years, through its quicker monetization strategy.
Exhibit 156:Net Operating Cash Flow (` mn)
-17,809
1,743
21,090
26,030
46,395
58,110
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Divestment targets increased to `100bn,
with a target of `60-70bn over the next two
to three years
Divestment of Non-Core Assets
The company has announced a plan to dispose of all of its non-core assets. It
has substantially increased its divestment target from `45bn previously to
`100bn, with a target of `60-70bn over the next two to three years. DLF has
been able to sell non-core assets worth `30.70bn up to March 2011 (`12.7bn
in FY11). We have not factored in any cash coming from the sale of non-core
assets in our projections, as the amount is very hard to predict. Thus, we
have allowed for a potential upside if any of the non-core assets are divested.

DLF Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Leasing income will post a CAGR of 25.5%
between FY11 and FY13E
Leasing Income Set to Increase
The company has very huge rent-yielding assets: as of March 2011,
cumulative leased assets stood at 22.48msf, generating `11bn as rental
income. Further, it expects to lease 2.5-3msf in FY12E. Going forward, we
expect the company to lease ~5msf in the next two years, taking the total
leased assets to 27.48msf by the end of FY13E.
We estimate DLF leasing income will post a CAGR of 25.5% between FY11 and
FY13E to `14.98bn and `17.31bn in FY12E and FY13E, respectively.
Following its longer-term strategy to be debt free, the company, during next
two years, intends to reduce its capital expenditure on new leased assets. At
the same time, it is determined to increase the productivity of its existing
leased assets. It is now focusing on reducing the vacancies as well as
increasing the rentals at its existing properties.
Exhibit 157:Leasing Income (` mn); Leased Assets (msf)
9,910
11,000
14,988
17,312
19.4
22.5
25.0
27.5
0
5
10
15
20
25
30
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Improvement in Net Gearing
We expect the improving cash flow from operations (`102.67bn between
FY11-13E) to reduce the company’s debt levels and bring down the
company’s net debt-equity from 0.86x in FY11 to 0.71x in FY12E and 0.57x in
FY13E.
Exhibit 158:Net D/E Ratio (x)
0.51
0.63
0.84 0.86
0.71
0.57
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00

DLF Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Strategies to Protect Margins
Over the last two years the economy has witnessed an unprecedented
increase in commodity prices, leading to high inflation and high interest rates.
In addition to these macro-economic issues, the real estate industry has also
been impacted by the shortage of labor for construction activity. During FY11,
DLF saw prices increase from 10-30% in cement, steel, labor costs, and so on,
which led to a one-time reset of budgeted cost of `4.75bn. Consequently, its
margin shrank. Thus, in order to protect its margin DLF has formed a policy to
include escalation clauses in the customer agreements. This will help it to
counter any cost over-runs resulting from inflationary pressure.
Furthermore, a higher proportion of high-margin plotted development sales
is anticipated to expand the company’s OPM during the next two years. We
estimate OPM will rise to 45% in FY13E, compared to 39.3% in FY11, an
expansion of 575bps. Operating profit from FY11-13E is estimated to grow by
10.4% to `54.13bn.
Exhibit 159: Operating Profit (` mn); EBIDTA Margin (%)
99,528
59,932
39,254
44,426
48,405
53,490
67.2
55.7
47.1
39.3
43.5 45.0
0
10
20
30
40
50
60
70
80
0
20,000
40,000
60,000
80,000
100,000
120,000
Concerns
Venturing into New Regions
The company has lined up launches in new geographies and any delay in
execution would adversely affect the company’s revenues.
Demand Slowdown for Commercial Real Estate
Commercial real estate contributes substantially to the company’s total
revenues. Thus, any drop in commercial real estate absorption would affect
DLF’s revenue and, therefore, its profitability.

DLF Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Recommendation
DLF is the largest real estate player in the country and is synonymous with
the Indian real estate sector. We like the following aspects of the company: a)
a pan-India presence mostly concentrated in the NCR region; b) steady cash-
flow from ~22.5msf of rent-yielding assets; c) its focus on quicker land bank
monetization; d) increased net operating cash flow (`104.50bn), leading to a
decline in net debt-equity to 0.57x in FY13E; e) an increase in its divestment
target to `100bn from `45bn previously, with a target of `60-70bn in the
next two to three years; f) its strategy to protect margins by incorporating a
cost escalation clause in agreements; and g) higher margins, leading to
stronger return ratios.
We initiate coverage on DLF Ltd with a Neutral rating and a price target of
`254. At the current price, the stock trades at 24.8x and 20.7x it’s FY12 EPS
`9.7 and FY13E EPS of `11.6, respectively. On P/BV it trades at 1.4x and 1.3x
its FY12E and FY13E book value of `169.6 and `178.9, respectively.
135
220
50
33
-120
318
-64
254
-150
-50
50
150
250
350
450
Resi Land
Bank
Rentals Other
Assets
Net
Debt
Net NAV Disc. Target
0
100
200
300
400
500
600
700
800
900
1,000
1x
2x
3x
4x
5x
6x
Exhibit 162: DLF P/BV vs BSE Realty P/BV
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0
5
10
15
20
25
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11

DLF Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Financial Analysis
Total Income to Be Flat During FY11-13E
Residential revenues during FY11-13E are estimated to grow by 4.7% to
`72.98bn, mainly because of increased low-value plotted development sales.
However, during the same period, we anticipate rental income will grow
29.9% annually, to `18.57bn in FY13E, mainly because of the increase in the
rent-yielding assets, which is estimated to be 29.48msf in FY13E, a 14.5%
growth during FY11-13E. We expect total revenues to be `103.65bn and
`111.18bn in FY12E and FY13E, respectively.
Exhibit 163: Total Revenues (` mn)
146,843
104,386
78,509
102,505
103,655
111,175
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
PAT to Grow by 11% During FY11-13E to ~`20bn
We estimate PAT will grow by 11% during FY11-13E to `19.72bn, though it is
still down by 74% from its peak of FY08. Further, net profit margin is
expected to improve by 300bps because of changes in the product-mix,
which is now more skewed towards high-margin plotted developments.
Exhibit 164: Net Profit (` mn); PAT Margin (%)
78,120
44,696
17,198
16,396
16,437
19,721
52.4
41.0
17.2
10.0
10.8 12.8
0
10
20
30
40
50
60
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000

DLF Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
Return Ratios to Surpass FY10 Levels
With the improvement in profitability, DLF is expected to surpass its FY10
ROE and ROCE (return) ratios. We estimate ROCE will improve from 7.1% in
FY10 to 9.4% in FY13E, while ROE is expected to rise from 6.2% to 6.5%
during FY11 and FY13E, respectively.
Exhibit 165: ROCE (x)
7.1
7.5
8.3
9.4
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Exhibit 166: ROE (x)
6.5
6.2
5.7
6.5
5.2
5.4
5.6
5.8
6.0
6.2
6.4
6.6
Company Background
DLF is a huge name in the Indian real estate space. The company was
established back in 1946 and is the largest real estate company in India in
terms of market cap, revenues, earnings and developable area. The
company’s primary business is in developing residential, commercial and
retail properties. It has 399msf of planned projects with 56msf of projects
under construction.
DLF follows a unique business model with earnings coming from
development and rentals. Its exposure across businesses, segments and
geographies, mitigates the cyclicality in the market. It has also forayed into
infrastructure, SEZ and hotel businesses.
DLF has two types of business: the development business, which includes
homes and residential complexes. This business, at present, has 302msf of
development potential with 40msf of projects under construction. The other
business is its annuity business, which consists of offices and retail. The
company has land resource of 86msf for office and retail development, with
16msf of projects under construction.

DLF Limited
25 July 2011
www.jaypeeindia.com
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Service offerings
Execution
FINANICAL STAEMENT
Total Income 78,509 102,505 103,655 111,175 EPS 10.1 9.7 9.7 11.6
Cost of Const. 26,714 42,999 39,115 41,953 Growth (%) -61.5% -4.7% 0.3% 20.0%
Deprecation 3,262 6,307 6,671 7,005 DPS 2.1 2.0 2.0 2.0
Interest 11,100 17,056 19,818 20,190 Payout (%) 21.2 20.6 20.7 17.2
PBT 24,892 21,063 21,916 26,295
Tax 7,810 4,594 5,479 6,574 Valuation Ratios
PAT 17,198 16,396 16,437 19,721 P/E 23.7 24.9 24.8 20.7
Cash P/E 20.0 18.0 17.7 15.3
Reserves & Surplus 244,060 241,820 266,432 282,182 ROE (%) 6.5 6.2 5.7 6.5
Networth 265,558 263,318 287,930 303,679 RoCE (%) 7.1 7.5 8.3 9.4
Loans 236,110 239,900 214,903 188,903
Assets EBDITA 47.1 39.3 43.5 45.0
Fixed Assets (incld. CWIP) 263,460 281,841 288,341 293,841 EBIT 42.7 32.7 36.7 38.3
Goodwill 13,730 13,840 13,840 13,840 PBT 27.8 14.8 16.4 19.1
Investments 13,110 9,958 9,958 9,958 PAT 17.2 10.0 10.8 12.8
Current Assets
b) Sundry Debtors 19,460 17,257 14,735 14,367
d) Loans & Advances 77,000 72,712 70,407 75,515 Inventory T/o 0.3 0.4 0.4 0.4
Current Liabilities 88,840 131,014 137,881 153,128 Debtors T/o 3.8 5.5 6.6 7.3
D/E (%) 88.9 91.1 74.6 62.2
Cash Flow FY10 FY11 FY12E FY13E Net D/E (%) 84.5 86.0 70.7 57.0
Net Cash from Oper. 21,090 26,030 46,395 58,110 Sales -24.8 30.6 1.1 7.3
Cash from Invstment 41,660 41,520 -633 793 Expenses -11.7 48.0 -4.9 4.4
Cash from Financing -60,490 -63,460 -50,683 -52,483 EBDITA -34.5 13.2 9.0 10.5
Net Change 2,260 4,090 -4,921 6,420 Interest Cost 100.1 53.7 16.2 1.9
Op. Cash 10,962 13,222 17,312 12,390 PBT -52.1 -15.4 4.0 20.0
Cl. Cash 11,778 13,467 11,263 15,763 PAT -62.2 -3.6 -0.2 20.0

Orbit Corporation Limited
25 July 2011
www.jaypeeindia.com
www.jaypeeusa.com
Service offerings
Execution
As on July 22,2011
Face Value (`) 10
Codes
BSE Code 532837
NSE Code ORBITCORP
Bloomberg Code ORB IN
Reuters Code ORCP.BO
Promoters 47.0 47.0 43.5
FII 12.0 13.9 15.2
DII 2.1 2.6 3.6
Others 38.9 36.6 37.7
Share Price Performance[
20
40
60
80
100
120
140
Jul-10 Oct-10 Jan-11 Apr-11 Jul-11
OCL Sensex
CRÈME DE LA CRÈME
Orbit Corporation (OCL) is a real-estate construction and development company with
primary focus on redevelopment of existing properties. It specializes in developing,
designing, and managing high-end residential and ‘build-to-suit’ commercial properties.
We are upbeat about the company mainly on account of a) its strong presence in the
South Mumbai redevelopment space; b) the huge benefits from the increased FSI (from
1.7x to 3x) for redevelopment in South Mumbai; c) the premium Orbit commands on its
properties over its peers in the same location because of its quality construction; d) its
strengthening portfolio in the Island City of Mumbai.
We recommend Buy on Orbit with a 12-month target price of `65. At the current price,
the stock trades at FY12E and FY13E P/E of 6.6x and 4.9x and P/BV of 0.5x and 0.4x,
respectively.
Strong Project Pipeline to Lift Revenues in FY12-13E
The Company has very strong projects lined -up to be launched in the next 2-3two to three
years in South Mumbai. It has planned to launch three new projects in FY12E/-13E, having
with a total saleable area of 0.2msf in the South-Mumbai market. Total income is estimated
to grow 16% CAGR during FY11-13E to `54.47bn.
Strengthening its Portfolio in the Island City
Company Orbit is currently negotiating for the acquisition of three more properties viz. :
Kilachand House (50% acquired), Orbit Magnum and Orbit Mid-Town, with a total saleable
area of 1.75msf. We estimate these three properties to will generate total revenue of `59-
67bn in the next 4-5next four to five years for the company.
South Mumbai Projects Accrue 72% of NAV
The South South-Mumbai market is one of the key micro- markets for the company
wherein, in which it has projects in Nepean Sea Road, Nana Chowk and Gamdevi, which
together contributes ~72% (`13.63bn) to the GNAV.
Redevelopment Possess Offers a Huge Opportunity
MHADA has identified more than 19,642 dilapidated and cessed buildings in Mumbai, of
which ~33% are in the South Mumbai, which is a strategic area for Orbit. Further, with the
increased FSI from 1.7-2x to 3x for all the redevelopment projects thereby increasing
increases the redevelopment potential by 33%.
1M 6M 12M
Absolute 13 -32 -70
Relative 6 -30 -73
Hitendra Gupta
Contact No: -91 22 4354 2023
Net Sales 4,936 4,045 4,748 5,447
EBITDA 1,613 2,214 2,121 2,558
EBITDA Margin (%) 31.8 54.1 44.1 46.4
Net Profit 960 789 748 999
PAT Margin (%) 18.4 18.4 14.9 17.5
EPS 8.4 6.9 6.6 8.8
PER (x) 5.1 6.2 6.6 4.9
PBV (x) 0.3 0.5 0.5 0.4
ROE (%) 11.3 8.0 7.0 8.9
Company Update CMP: `43 TARGET: `65 BUY

25 July 2011
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Service offerings
Execution
Key Assumptions
Y/E March FY11 FY12E FY13E
Residentail
Area Sold (msf) 0.29 0.16 0.29
Sale Price (` psf) 18,499 23,551 24,756
Const. Cost (` psf) 12,542 10,354 9,138
Calculation of WACC
Tax Rate (%) 25.0
Beta (x) 1.5
Wt. Debt (%) 50.0
Wt. Equity (%) 50.0
WACC (%) 14.9
1% Increase in the Avg. Sale Price 1.6% Change in NAV
Gross NAV 167 19,027 100
Net NAV 101 11,479
Discount (%) 35
Target Price 65
CMP 43

25 July 2011
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Service offerings
Execution
Revenue CAGR 16% during FY11-13E
Strong Project Pipeline to Lift Revenues in FY12-13E
Orbit has very strong projects lined up to be launched in the next two to three
years in South Mumbai. It has planned to launch three new projects in FY12E-13E,
with a total saleable area of 0.2msf in the South-Mumbai market. We expect
revenue recognition from these three new projects and from four existing projects
to kick in during FY12E-13E. Total income is estimated to grow 16% CAGR during
FY11-13E to `54.47bn.
Of the ongoing 1.28msf, the company, as on 31st
March 2011, had achieved sales of
`22.97bn and has total outstanding receivables of `10.78bn.
Exhibit 63: Ongoing Projects
Eternia (LP)
2%
WTC(BKC)
25%
Arya (NS)
6%
Haven(NS)
5%
Residency1
(AD)
22%
Terraces (LP)
22%
Grand(LP)
6%
OceanParque
(NS)
3%
Villa Orb-
Annex (NS)
3%
Laburnum
(GD)
4%
Enclave (NC)
2%
Exhibit 64: OCL’s Revenues (` Mn)
4,222
2,867
4,936
4,045
4,748
5,447
0
1,000
2,000
3,000
4,000
5,000
6,000

25 July 2011
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Service offerings
Execution
19,642 dilapidated and cessed buildings in
Mumbai… huge opportunity for
redevelopment
Redevelopment Offers a Huge Opportunity
Maharashtra Housing & Area Development Authority (MHADA) has identified more
than 19,642 dilapidated and cessed buildings in Mumbai. Of these, ~33% (6,386
buildings) are in the South-Mumbai region, which is a strategic area for Orbit.
Further, the BMC has increased the FSI from 1.7-2x to 3x for all the redevelopment
projects for dilapidated buildings in the South-Mumbai region. Hence, the potential
market for redevelopment has increased by 33% to ~85msf (6,386 buildings x
13,300sq.ft), compared to the previous ~64msf (6,386 buildings x 10,000 sq. ft,
which was the actual average saleable area during 2001-04). Orbit, being the
focused player in this segment, is likely to benefit from this opportunity.
Exhibit 65: No of Old and Dilapidated Buildings
Category Year of Construction No of Buildings
A Before 1940 16,502
B Between 1940-1950 1,489
C Between 1951-1969 1,651
Total 19,642
Exhibit 66: Opportunities for Redevelopment in South Mumbai
Under Constr. NOC Recd.
A 936 9 5 8 914
D 2747 71 53 73 2550
F&G North 2056 212 93 75 1676
F&G South 1336 35 31 24 1246
Total 7075 327 182 180 6386
Under ProcessDialipated
buildings
Redevloped
Scope for
Redevelopment
Ward
South-Mumbai Projects Accrue 72% of NAV
Orbit is ubiquitously present in the South-Mumbai real-estate market. It accrues
almost 72% of its total value from this micro market. Most of its projects are in the
Nepean Sea Road area, where average realizations are in the range of `50,000-
80,000psf. South Mumbai is one of the company’s key micro markets, in which it
has projects in Nepean Sea Road, Nana Chowk and Gamdevi, which together
contribute `13.63bn to the GNAV.
Exhibit 67: NAV Break-up by Area
Mandwah
9%
S.Central
9%
South
72%
Suburb
10%

25 July 2011
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Execution
More acquisition in the South Mumbai
market..
Strengthening its Portfolio
Along with its ongoing projects in the South Mumbai region, the company is
acquiring more land in the city, and thereby strengthening its portfolio in the city.
Orbit is currently negotiating the acquisition of three more properties: Kilachand
House (50% acquired), Orbit Magnum and Orbit Mid-Town, with a total saleable
area of 1.75msf. The company has forayed into a cluster development by taking up
the Lalbaugh project, Orbit Mid-Town. The company has achieved a considerable
acquisition in all these projects and we expect it to break ground within the next
two to three years.
We estimate these three properties will generate total revenue of `59-67bn in the
next four to five years for the company.
Exhibit 68: New Additions to Orbit’s Portfolio
Projects
Saleable
Area (msf) Location
Price Range
(Rs/sft)
Potential
Revenues
(Rs. Bn)
Kilachand House 0.55 Napeansea Rd 55-60K 30-33
Orbit Magnum 0.30 Napeansea Rd 54-60K 16-18
Orbit Midtowm 0.90 Lalbaugh 15-18K 13-16
Total 1.75 59-67
Gearing Ratio Set to Improve: `6bn Operating Cash-Flow in Next Two Years
Orbit is estimated to generate net cash of ~`6bn in the next two years, because of
higher revenue recognition from the ongoing projects (Orbit Haven, Orbit Terraces,
Orbit Residency, Villa Orb Annex and Orbit Grand). We expect the company to
reduce its debt and bring down its net D/E from ~1x in FY11 to 0.55x by FY13E.
71.3
75.8
67.2
99.4
70.9
54.9
0.0
20.0
40.0
60.0
80.0
100.0
120.0

25 July 2011
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Service offerings
Execution
EBIDTA Margin to Decline in FY12E and Improve in FY13E
We expect Orbit’s EBIDTA margin to decline by 1000bps in FY12E to 44.1% because
of a major change in its product-mix (low-margin projects are expected to start
contributing revenues). In FY13E, the revenue contribution from high-margin
South-Mumbai-based projects is expected to increase. Consequently, the margins
are expected to improve by 230bps to 46.4%.
2,225
936
1,613
2,214
2,121
2,558
52.1
31.9 31.8
54.1
44.1
46.4
0
10
20
30
40
50
60
0
500
1,000
1,500
2,000
2,500
3,000
Net Profit Margin Expansion in FY13E Leading to Higher ROEs
Orbit’s net profit margin is estimated to improve by 260bps in FY13E to 17.5%.
Consequently, the company’s ROE is estimated to improve from 7% in FY12E to
8.9% in FY13E. Net profits during FY11-13E are estimated to grow by 12.5%
annually, to `999mn.
Exhibit 71: Revenues (` Mn); Net Profit Margin (%)
1,667
377
960
789
748
999
38.7
12.2
18.4
18.4
14.9
17.5
0
5
10
15
20
25
30
35
40
45
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Exhibit 72: ROE (%)
6.9
11.3
8.0
7.0
8.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
FY09 FY10 FY11 FY12E FY13E

25 July 2011
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Service offerings
Execution
Concerns
Over-Dependence on the Mumbai Metropolitan Region
Orbit is a Mumbai-focused real-estate player and has not diversified into other
geographical regions in India. Hence, it is prone to any change in the Mumbai real-
estate market. So any unfavorable change in the regulations of the municipal
authority would impact the company drastically.
Delay in Acquisition of Land
Orbit’s inability to acquire or delay in acquiring land for the projects for which it has
already paid a substantial amount would adversely affect the company’s finances
Limited Supply of Re-Development Projects
A favorable redevelopment policy and increased demand in the residential and
commercial spaces has attracted new players to the redevelopment arena. Any
increase in the competition or a limited supply of redevelopment projects would
have an adverse impact on the company.
Change in Applicable FSI
Any change in the applicable FSI for either dilapidated buildings or for car parking
areas, would have adverse impact on our projections. This is because the majority
of Orbit’s projects are located in the South-Mumbai region, where FSI norms for
car-parking and dilapidated buildings have recently been amended. Any
unfavorable change could make these projects unfeasible.

25 July 2011
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www.jaypeeusa.com
Service offerings
Execution
Recommendation
Orbit Corporation (OCL) is a real-estate construction and development company
with primary focus on redevelopment of existing properties. It specializes in
developing, designing, and managing high-end residential and ‘build-to-suit’
commercial properties. We are upbeat about the company mainly on account of a)
its strong presence in the South Mumbai redevelopment space; b) the huge
benefits from the increased FSI (from 1.7x to 3x) for redevelopment in South
Mumbai; c) the premium Orbit commands on its properties over its peers in the
same location because of its quality construction; d) its strengthening portfolio in
the Island City of Mumbai.
At current prices the stock trades at 6.6x and 4.9x its FY12E EPS of `6.6 and FY13E
EPS of `8.8, respectively. We recommend Buy on Orbit with a 12-month target
price of `65.
167
-66
101
-35
65
-100
-50
0
50
100
150
200
GNAV Net
Debt
Net NAV Disc. Target
0
50
100
150
200
250
300
0.25x
0.5x
0.75x
1x
1.25x
1.5x
Exhibit 75: OCL P/BV vs BSE Realty P/BV
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
0
2
4
6
8
10
12
14
16
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Price to BV P/BV - Disc/ Prem

25 July 2011
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Service offerings
Execution
Company Background
Orbit Corporation Ltd (Orbit) is in the business of constructing and developing real-
estate projects. It has created a niche for itself redeveloping old and dilapidated
buildings in the Island City of Mumbai. In year 2000, the company actively entered
the real-estate development business with exclusive focus on the Island City.
Though the company’s main business is the redevelopment of existing properties, it
has also constructed a few commercial properties. The group has delivered
approximately 2mn sq. ft (msf). It had a total saleable area of 7.15msf as on 31st
March 2011.
Currently, the company is developing residential projects in prime locations like
Napean Sea Road, Lower Parel, Nana Chowk, Gamdevi and Lalbaugh. Other than
these prime locations, Orbit is also present in suburban regions of the Mumbai
Metropolitan Region, i.e. Andheri, Bandra-Kurla Complex, Santacruz and Mandwa.
Exhibit 76: Land Bank 7.15msf
Completed
, 0.09
High
Maturity, 1.29
Launched in
CY, 0.91
Pipeline <
1yr, 1.00
Pipeline < 1/2
yrs, 1.38
Theme Projects
- Mandwa, 2.48

25 July 2011
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Service offerings
Execution
FINANICAL STATEMENT
Total Income 4,936 4,045 4,748 5,447 EPS 8.4 6.9 6.6 8.8
Cost of Const. 1,324 3,580 4,083 4,652 Growth (%) 154.7 -17.8 -5.2 33.5
Inc./(Dec.) in Stock 811 -2,392 -2,536 -3,030 Cash EPS 18.2 7.4 6.8 9.0
Total Expenditure 3,323 1,831 2,627 2,889 Book Value 154.9 86.0 93.4 98.8
EBDITA 1,613 2,214 2,121 2,558 DPS 2.5 1.0 1.0 1.0
Deprecation 42 54 26 31 Payout (%) 14.1 14.4 15.2 11.4
Interest 539 1,020 1,026 1,100
PBT 1,032 1,140 1,069 1,427 Valuation Ratios
Tax 72 351 321 428 P/E 5.1 6.2 6.6 4.9
PAT 960 789 748 999 Cash P/E 2.4 5.8 6.3 4.8
P/ BV 0.3 0.5 0.5 0.4
Balance Sheet FY10 FY11 FY12E FY13E EV/Sales 1.6 3.7 2.6 2.0
Liabilities EV/EBDITA 4.9 6.6 5.8 4.3
Share Capital* 550 1,140 1,140 1,140 ROE (%) 11.3 8.0 7.0 8.9
Warrants O/S 95 0 0 0 RoCE (%) 14.7 16.0 16.6 20.0
Networth 8,518 9,799 10,645 11,265
Secured Loans 5,990 10,363 8,259 7,010 Margin (%)
Unsecured Loans 107 0 0 0 EBDITA 31.8 54.1 44.1 46.4
Total Liabilities 14,615 20,162 18,904 18,274 EBIT 30.9 52.8 43.6 45.9
Assets PBT 19.9 27.2 21.7 25.5
Fixed Assets (Net) 206 340 414 483 PAT 18.4 18.4 14.9 17.5
Capital WIP 27 0 0 0
Investments 124 58 58 58 Turnover Ratios
Current Assets
a) Inventories 3,631 7,876 10,407 13,431 Asset T/o 20.9 11.7 11.4 11.2
b) Debtors 4,630 4,932 3,772 4,029 Total Asset T/o 0.3 0.2 0.2 0.3
c) Cash & Bank 374 627 712 825 Inventory T/o 0.9 0.2 0.3 0.2
d) Loans & Adv. 8,429 7,916 7,174 3,538 Debtors T/o 1.1 0.8 1.2 1.3
Curr.Liab. & Prov. 2,259 1,301 3,097 3,555
Net Current Assets 14,806 20,299 18,967 18,268 Leverage Ratios
Total Assets 14,615 20,162 18,904 18,274 D/E (x) 0.7 1.1 0.8 0.6
Net D/E (x) 0.7 1.0 0.7 0.5
Cash Flow FY10 FY11 FY12E FY13E Int. Cov. Ratio (x) 2.9 2.1 2.0 2.3
CF before WC Changes 1,601 3,553 2,555 2,262 Growth Ratio (%)
Cash from operations -2,863 -1,439 3,722 3,074 Sales 71.8 -18.1 17.8 14.7
Net Cash from Oper. -3,039 -504 3,402 2,646 Expenses 72.1 -44.9 43.5 10.0
Cash from Invstment -158 -61 -74 -69 EBDITA 72.4 37.2 -4.2 20.6
Cash from Financing 3,563 708 -3,244 -2,463 Interest Cost 89.1 0.6 7.2 -63.6
Net Change 367 143 84 114 PBT 82.8 10.4 -6.3 33.5
Op. Cash 7 485 628 712 PAT 154.7 -17.8 -5.2 33.5
Cl. Cash 374 628 712 825 Cash EPS 61.1 -18.8 -8.2 33.1

Oberoi Realty Limited
25 July 2011
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Service offerings
Execution
As on July 22,2011
52 Week High/Low (`) 306/210
Book Value (FY12E) 117
Face Value (`) 10
Codes
BSE Code 533273
NSE Code OBEROIRLTY
Bloomberg Code OBER IN
Reuters Code OEBO.BO
June’11 Mar’11 Dec’10
Promoters 78.5 78.5 78.5
FII 9.5 9.6 9.4
DII 1.0 1.0 1.0
Others 10.9 11.0 11.1
70
80
90
100
110
Oct-10 Dec-10 Mar-11 May-11 Jul-11
Oberoi Sensex
THE ENVIABLE
Oberoi Realty Ltd (Oberoi) is the best representative of Mumbai’s real estate market, with
93% of its land-bank based in Mumbai. We liked the company based on the following
parameters: a) negative net gearing (-34%) for FY12E; b) steady lease rentals `1.24bn and
`1.42bn in FY12E and FY13E; c) inexpensive land bank in a prime suburban Mumbai
market d) robust revenue and cashflow visibility; e) superior margins and ROE profile; f)
clear land titles; and g) a huge brand equity in the Mumbai real estate market. We
recommend investors Buy Oberoi with a one-year price target of `304, an upside
potential of 26%. We have arrived at our target price based on a 20% discount to the NAV
of `380/share. At current prices, the stock trades at 13.6x and 9.9x its FY12 EPS `17.9 and
FY13E EPS of `24.5, respectively. We have not ascribed any value to the Juhu hotel project
due to the pending litigation.
Mumbai Focus on Inexpensive Land Bank
Oberoi has a premium land bank in the lucrative Mumbai micro market with an average
acquisition cost of `250 per sq. ft. Oberoi, during 1999-2005, acquired 127.2 acres (saleable
17.5msf) of land in Goregoan, Andheri and Mulund for a total of `4.34bn. The current
average realizations in these micro markets are at `10,000, `12,000 and `8,000/sq. ft,
respectively. The land cost accounts for less than 5% of the current selling prices.
Negative Net Debt Company
The company has an enviable balance sheet with zero debt and huge cash balances. It has a
net D/E of -0.34x and -0.3x for FY12E and FY13E, respectively. This comfortable financial
position gives Oberoi the opportunity to invest in lucrative projects.
Assured Cash Flow From Leased Assets
Oberoi leases its commercial and retail properties, assuring a steady and continuous cash
flow. Current lease income of `1.13bn (from 0.78msf) is likely to increase to `1.42bn by
FY13E. By assuring cash flows to the company, rentals therefore facilitate efficient
management of its working capital.
Inexpensive Valuation
The stock is trading at 13.6x and 9.9x its FY12E and FY13E earnings and 2.1x and 1.7x P/BV.
We believe valuation is quite inexpensive considering a) Oberoi’s enviable balance sheet, b)
its low-cost premium land bank, c) its strong goodwill and d) its robust project pipeline.
1M 6M 9M
Absolute 6 -2 -14
Relative 0 0 -9
Hitendra Gupta
Contact No: -91 22 4354 2023
Net Sales 7,898 10,588 13,509 18,954
EBITDA 4,733 6,398 8,194 11,656
EBITDA Margin (%) 58.0 54.5 59.2 59.9
Net Profit 4,425 5,172 5,867 8,051
PAT Margin (%) 54.0 42.9 41.9 40.9
EPS 15.3 15.8 17.9 24.5
PER (x) 15.8 15.4 13.6 9.9
PBV (x) 3.8 2.4 2.1 1.7
ROE (%) 23.9 15.4 15.3 17.5

25 July 2011
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Service offerings
Execution
Key Assumptions
Residentail FY11 FY12E FY13E
Area Sold (msf) 0.70 0.96 1.82
Sale Price (` psf) 13,122 12,409 16,104
Exhibit 78: Rental Business Assumptions
Lease Assets FY11 FY12E FY13E
Leased Asset (msf) 0.78 0.84 0.95
Avg. Rentals (` psfpm) 120 123 124
Exhibit 79: Hospitality Business Assumptions
Hospitality FY11 FY12E FY13E
Total No of Rooms 269 269 269
OR (%) 54 65 70
ARR (`/night) 7,356 8,000 8,000
Calculation of WACC
Tax Rate (%) 25.0
Beta (x) 1.1
Wt. Debt (%) 10.0
Wt. Equity (%) 90.0
WACC (%) 15.1
1% Increase in the Avg. Sale Price 0.9% Change in NAV
NAV Break-Up `/Share ` mn % NAV Break-Up `/Share
Resi 276 90,453 81 Less: Net Debt -40
Lease 36 11,923 11 Net NAV 380
Hotels 10 3,237 3 Discount (%) 20
Social Infra 19 6,186 6 Target Price 304
Gross NAV 341 111,799 100 CMP 242

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~6.7msf to be launched during next two
years…..
….leading to a growth of 43.7% CAGR of
residential revenues
Large Projects Due for Launch in FY12-13E
We expect Oberoi to launch four new projects, with a total saleable area of ~6.7msf
during FY11-13E. FY12 will see launches of Oberoi Exquisite III, Goregaon (~2msf);
Oasis Residential, Worli (1.5msf) and Oberoi Exotica Phase I (1.6msf). Oberoi
Exotica Phase II (1.6msf) is expected to be launched in FY13. Driven by these
launches, we expect new sales volumes to increase from 0.7msf in FY11 to 1.82msf
in FY13E, a CAGR of 61.4%.
We expect residential revenues to grow by 43.7% CAGR over FY11-13E as new
projects start contributing. Residential revenues are estimated to grow to `16.24bn
in FY13E from `7.87bn in FY11.
Exhibit 83: Oberoi Residential Revenues (` Mn)
7,868
11,148
16,237
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
FY11 FY12E FY13E
Overall, with new projects starting to contribute in the next two years, we expect
the company to grow its top line by a CAGR of 33.8% over FY11-13E from `10.59bn
in FY11 to `18.95bn in FY13E.
Exhibit 84: Oberoi Total Revenues (` Mn)
5,586
4,550
7,898
10,588
13,509
18,954
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000

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Lease rentals to grow from `1.12bn in FY11
to `1.42bn in FY13E, a CAGR of 12.5%.
Rental Income to Grow 12.5% Over FY11-13E
Oberoi follows a lease model for part of its commercial and retail properties. As on
31st
March 2011, the company had total lease yielding assets of 0.78msf, which we
expect will grow to 0.95msf by FY13E and rental income during the period is
estimated to grow from `1.12bn in FY11 to `1.42bn in FY13E, a CAGR of 12.5%.
Exhibit 85: Rental Income (` Mn); Leased Assets (msf)
1,126
1,237
1,423
0.78
0.84
0.95
0.00
0.20
0.40
0.60
0.80
1.00
1.20
0
200
400
600
800
1000
1200
1400
1600
FY11 FY12E FY13E
Exhibit 86: Leased Asset Portfolio (msf)
Completed Type Area msf Location
Commerz I Commercial 0.36 Goregoan
Oberoi Mall Retail 0.55 Goregoan
Total 0.91
Ongoing Type Area msf Location
Commerz II, Phase 1 Commercial 0.73 Goregoan
Commerz II, Phase 2 Commercial 1.66 Goregoan
Total 2.39
Planned Type Area msf Location
Oberoi Edu. Complex Social Infra 0.87 Goregoan
Oberoi Hospital Social Infra 0.38 Goregoan
Oberoi Splendor School Social Infra 0.43 Andheri
Total 1.67
Total Lease Assets 4.97

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Oberoi to generate net positive operating
cash flow of `2.05bn and`3.49bn in FY12E-
13E.
Net Positive Operating Cash Flow
The company has zero debt and a huge amount of cash in its books. Further, we
expect it to generate net positive operating cash flow of `2.05bn and`3.49bn in
FY12E-13E. As on 31st
March 2011, the company had a cash balance of ~`14bn. This
allows Oberoi to invest in lucrative investment projects or even to fund its
development projects. The cash balance also gives the company the leeway to
procure additional land without stretching its balance sheet. A satisfactory cash
balance also ensures timely completion of its project, which further adds to the
company’s reputation for reliability.
The company’s net D/E continues to be negative, and has been since FY09. We
estimate it will be -30.1% by FY13E.
Exhibit 87: Net D/E (x)
0.08
-0.11
-0.19
-0.42
-0.34
-0.30
-0.50
-0.40
-0.30
-0.20
-0.10
0.00
0.10
0.20
Inexpensive Prime Land Bank in Mumbai
Oberoi is a Mumbai-focused real-estate company; out of its 20msf land bank, 93%
is in Mumbai and the balance in Pune. Oberoi, during 1999-2005, concluded three
major land deals in the localities of Goregaon, Mulund and Andheri, which are a
long distance away from Mumbai’s Business District, Nariman Point. The company
spent a total of `4.33bn to acquire 127.2 acres for these three deals. It acquired
this land through institutional players like Novartis, CIBA, and GlaxoSmithKline
Pharmaceuticals, thus assuring clear and genuine titles for the land parcels.
Exhibit 88: Land Bank Break-Up (msf)
Micro Market Locations Total %age
Andheri Mumbai 3.12 15.5%
Goregoan Mumbai 9.09 45.1%
Juhu Mumbai 1.29 6.4%
Mulund Mumbai 3.20 15.9%
Worli Mumbai 2.12 10.5%
Pune Pune 1.33 6.6%
Total 20.15 100.0%
Mumbai
18.82
93%
Pune
1.33
7%
Present in 2
cities

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Margins to Expand by 540bps
We expect the company’s margins to expand by 540bps over FY11-13E, to 59.9%
from the current 54.5%. This will be primarily driven by the launch of new premium
projects (in Goregaon, Mulund and Worli) and also by its historical land bank
(acquired at a lower cost).
3,048
2,769
4,733
6,398
8,194
11,656
46.1
54.4
58.0
54.5
59.2 59.9
0
10
20
30
40
50
60
70
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Net Profit CAGR 25% over FY11-13E
We expect our net profit to grow at CAGR of 24.8% over FY11-13E, to `8.05bn,
from current levels of `5.17bn. However, the net profit margin is expected to
decline to 40.9% in FY13E from current levels of 42.9%. This is mainly due to full tax
payment being applicable from FY12E on all new projects launched by the
company. The effective tax rate is likely to increase gradually from the current 16%
levels, to 25% in FY12E and 28% in FY13E.
Exhibit 90: Revenues (` Mn); Net Profit Margin (%)
2,960
2,515
4,425
5,172
5,867
8,051
44.5
48.8
54.0
42.9 41.9
40.9
0
10
20
30
40
50
60
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Exhibit 91: ROE (%)
17.4
23.9
15.4 15.3
17.5
0.0
5.0
10.0
15.0
20.0
25.0
30.0
FY09 FY10 FY11 FY12E FY13E
ROE is FY12E is anticipated to be subdued at 15.3%, while it is expected to rise by
200bps in FY13E to 17.5%. This ill primarily be driven by the revenue contribution
expected from the new prime location projects (Worli, Mulund and Goregaon).

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Concerns
Single Contractor Risk
Oberoi is dependent on a single-contractor, Larsen & Turbo Ltd, for its execution.
Any adverse developments at L&T would disturb Oberoi’s timeline and affect its
delivery.
Raw Materials Shortage
Sand shortage because of restrictions on sand mining in the Mumbai Metropolitan
Region could delay construction activities including, those of Oberoi.
Over Dependence on the Mumbai Region
93% of the company’s land-bank is based in Mumbai. So any political instability or
natural disaster in the Mumbai region would have adverse repercussions on the
company.
Difficulty In Acquiring New Land Bank
Oberoi is expected to exhaust its 20msf land bank in the next five to six years and
to fuel growth it would need to acquire additional land. Given that there is a
restricted supply of land in Mumbai, Oberoi might find it difficult to acquire the
vacant land parcels that it was able to in the past and those, too, at an attractive
price. This might affect its future development activities.
Changes in the FSI and TDR Regulations
Oberoi, like all real-estate firms, is subject to the municipal planning and land use
regulations in effect in the cities, like Mumbai and Pune, in which it operates. Any
regulations to reduce the applicable FSI or to disallow the use or acquisition of
TDRs could affect the company’s operations.
Delay In Regulatory Approvals
Any delay in regulatory approvals, especially for the Sangam City, Pune project
would adversely impact our target price.

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Recommendation
Oberoi is the best representative of Mumbai’s real estate market, with 93% of its
land bank based in Mumbai. We like the company based on the following
parameters: a) negative net gearing (-34%) for FY12E; b) steady lease rentals
`1.24bn and`1.42bn in FY12E and FY13E; c) inexpensive land bank in a prime
suburban Mumbai market; d) robust revenue and cash flow visibility; e) higher
operating profit margins and ROE profile; f) clear land titles; and g) huge brand
equity in the Mumbai real estate market.
We recommend investors Buy Oberoi Realty Ltd (Oberoi) with a one-year price
target of `304, an upside potential of 26%. We have arrived at our target price
based on a 20% discount to the NAV of `380/share. At current prices, stock trades
at 13.6x and 9.9x its FY12 EPS `17.9 and FY13E EPS of `24.5, respectively. We have
not ascribed any value to the Juhu hotel project due to the pending litigation.
276
55
10
-40
380
-76
304
-100
-50
0
50
100
150
200
250
300
350
400
Resi Lease Hotel Net
Debt
NAV Disc. Target
100
200
300
400
500
600
700
800
900
1,000
Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11
4x
4.5x
5x
5.5x
6x
6.5x
Exhibit 94: ORL P/BV vs BSE Realty P/BV
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
0
1
2
3
4
5
6
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11

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Company Background
With nearly three decades of experience in real estate development, Oberoi Realty
Ltd (Oberoi) has positioned itself as one of the leading Mumbai-based developers in
the premium development space. The company has earned a reputation for
delivering innovative projects with clear emphasis on contemporary architecture
and quality construction. Oberoi has a very diverse portfolio mix, including
residential, office space, retail, hospitality and social infrastructure properties. It
has a total land bank of 19.9msf in two micro markets, i.e. Mumbai and Pune.
Exhibit 95: Corporate Chronicle
May'98
•Incorporatesas a private limited company with the name Kingston PropertiesPvt Ltd.
Feb'02
•Acquiresland parcels worth 83.8 acres @ `1,067.7mn in Goregaon from Multi-National Companies like Ciba, Novaritis etc.
Total developable area ~11.2msf
Apr'03
•Oberoi Mall Pvt Ltd becomes a wholly owned subsidiary of the company.
Feb'05
•Acquiresdevelopmentrights worth 6.97 acres @ `317.2mn acres at Andheri (West). Total developable area 0.6msf
Mar'05
•Entersinto Master Asset Purchase Agreementfor acquisition of Hotel Tulip Star at Juhu. Total plot area 6.1 acres.
Sep'05
•Acquires land parcels worth 18.8acres @ `2,210mn in Mulund from GlaxoSmithKline Pharmaceuticals Ltd.
Oct'05
•Acquires land parcels worth 24.7acres @`1,060mn from Madhu Fantasy Land Private Limited and Avinash Bhosale at
Andheri (East). Total developable area – 3.1msf.
Jan'07
•SSIII, a Morgan Stanley subsidiary invests `6,750 million in the company.
Jan'08
•Entersinto Hotel Operating ServicesAgreement with Starwood Asia Pacific Hotels for operating The Westin Mumbai -
Garden City hotel at Goregaon (East), Mumbai.
Sep'09
•Enters into a joint venture agreement for the development of the free-sale component under slum rehabilitation scheme
at Annie Besant Road, Worli, and Mumbai. Developable area – 2.1msf.
Oct'09
•Company name changed from Kingston Properties Pvt Ltd to Oberoi Realty Pvt Ltd.
Oct'10
•Comes up with an IPO raising `10.2bn. Oversubscribed 12x times.
Nov'10
•Mr Vikas Oberoi, the MD of ORL wins the True Entrepreneur of the year’ award at the Economic Times ACETECH Award
2010,the largest exhibition in Asia ever held on Architecture,Design, Construction and Allied Industries.

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FINANICAL STATEMENT
Total Income 7,898 10,588 13,509 18,954 EPS 15.3 15.8 17.9 24.5
Cost of Const. 3,043 3,766 4,708 6,696 Growth (%) -98.4% 2.8% 13.4% 37.2%
Deprecation 91 237 371 473 DPS 0.2 1.0 1.0 1.0
Interest 0 2 0 0 Payout (%) 1.3 6.3 5.6 4.1
PBT 4,651 6,155 7,823 11,182
Tax 226 983 1,956 3,131 Valuation Ratios
PAT 4,425 5,172 5,867 8,051 P/E 15.8 15.4 13.6 9.9
Cash P/E 15.5 14.7 12.7 9.3
Pref. Capital 359 359 0 0 ROE (%) 23.9 15.4 15.3 17.5
Networth 18,481 33,476 38,442 46,110 RoCE (%) 25.1 18.4 20.3 24.3
Loans 0 0 0 0
Assets EBDITA 58.0 54.5 59.2 59.9
Capital WIP 5,103 5,103 5,103 5,103 PBT 56.9 52.2 56.4 57.4
Investments 790 650 650 650 PAT 54.0 42.9 41.9 40.9
Current Assets
b) Sundry Debtors 404 468 729 1,022
d) Other Current Assets 52 173 270 188 Inventory T/o 0.5 0.5 0.6 0.6
e) Loans & Advances 6,259 7,163 6,740 9,413 Debtors T/o 19.2 21.3 18.3 18.3
Current Liabilities 6,842 6,412 6,921 8,027 Creditors T/o 0.6 1.0 0.8 1.0
D/E % 0.0 0.0 0.0 0.0
Cash Flow FY10 FY11 FY12E FY13E Net D/E % -18.7 -41.8 -33.8 -30.1
CF before WC Changes 4,591 5,927 4,787 11,300
Net Cash from Oper. 5,071 2,161 2,045 3,494 Sales 73.6 34.1 27.6 40.3
Cash from Invstment (2,848) (1,463) (2,358) (2,260) Expenses 77.6 32.4 26.8 37.3
Cash from Financing (443) 9,846 (687) (328) EBDITA 71.0 35.2 28.1 42.2
Net Change 1,781 10,543 (1,001) 906 Interest Cost -92.8 498.5 -100.0 0.0
Op. Cash 1,669 3,450 13,993 12,992 PBT 72.4 32.7 27.0 42.9
Cl. Cash 3,450 13,993 12,992 13,898 PAT 75.9 16.9 13.4 37.2

Anant Raj Industries Limited
25 July 2011
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Execution
As on July 22,2011
Face Value (`) 10
Codes
BSE Code 515055
NSE Code ANANT RAJ
Bloomberg Code ARCP IN
Reuters Code ANRA.BO
Promoters 61.7 61.7 61.4
FII 23.1 23.8 25.1
DII 2.9 2.9 3.2
Others 12.3 11.6 10.4
30
40
50
60
70
80
90
100
110
120
130
ARIL Sensex
Anant Raj Industries Ltd. (ARIL) is a leading real-estate company which focuses on the
Delhi-National Capital Region (NCR) area. It builds and develops residential properties,
commercial space, IT parks, SEZs and hotels. We are positive on ARIL on the following
parameters: a) high-quality inexpensive land banks in Delhi; b) steady rentals: to cross
~`1bn in FY13E; c) comfortable net D/E levels, at 0.28x; d) lease rentals to fund the
working capital requirements and e) huge potential for revenue growth from 0.5msf
luxury residential projects at Hauz-Khas and Bhagwandas Road. We estimate the
company will post a 21.5% revenue CAGR and 14.9% operating profit CAGR over FY11-
13E, mainly because of new launches planned for FY12E and FY13E and increased lease
rentals. We recommend Buy on ARIL with a 12-month target price of `106. At the current
price, the stock trades at FY12E andFY13E P/E of 19.2x and 14.9x and P/BV of 0.70x and
0.67x, respectively.
Lease rentals to cross `1bn mark in FY13E
We expect revenues from Hotel Tri-Colour and lease rentals from Kirti Nagar Mall (0.6msf)
to commence from Q2FY12E and Q4FY13E. This is expected to give a major boost to the
lease rentals, which we estimate will grow at 24.3% CAGR to `1.17bn in FY13E from
`760.5mn, currently.
New Launches To Boost Revenues
ARIL has planned three new launches in FY12E, i.e.: a) Rajasthan (1.8 msf); b) Haryana (1.0
msf) and c) Gurgaon (150 acres). We believe this will probably boost the company’s
residential revenues in FY12E and FY13E. We estimate residential revenues will grow at
19.2% CAGR during FY11-13E to `4.45bn.
Focus on Execution
The company has now changed its focus from land acquisition to execution of projects for
FY12-13. It plans to launch three new residential projects in FY12E. Total construction
expenditure is estimated to be `4bn and`4.5bn in FY12E and FY13E.
Attaining Sustainable Margins Due to Change in Product Mix
Operating profit margins are expected to drop from 78% in FY10 to more sustainable levels
of sub-50%. This is mainly because of the change in product mix, which is now skewed
towards residential development, compared to plot sales in FY10.
Inexpensive Valuation: ARIL trades at FY11E and FY12E P/E of 19.2x and 14.9x, respectively
and FY12E and FY13E P/BV of 0.70x and 0.67x, respectively. Our target NAV estimate is
`33.27bn or `106/share. We recommend a Buy on ARIL.
1M 6M 12M
Absolute 47 -11 -30
Relative 7 -10 -34
Hitendra Gupta
Contact No: -91 22 4354 2023
Net Sales 2,867 3,851 4,814 5,685
EBITDA 3,093 2,615 2,806 3,451
EBITDA Margin (%) 78.0 60.0 47.8 52.7
Net Profit 2,390 1,674 1,418 1,819
PAT Margin (%) 57.0 35.8 14.5 21.5
EPS 8.1 5.7 4.5 5.8
PER (x) 10.6 16.2 19.2 14.9
PBV (x) 0.7 0.7 0.7 0.7
ROE (%) 6.6 4.5 3.6 4.5

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Key Assumptions
Y/E March FY11 FY12E FY13E
Real Estate Business
Area Sold (msf) 1.48 1.49 2.04
Sale Price (` psf) 3,760 3,000 3,198
Const. Cost (` psf) 1,050 1,050 1,119
Exhibit 114:Leased Asset Assumptions
Leased Assets FY11 FY12E FY13E
Leased Assets (msf) 0.9 1.1 1.5
Avg. Rentals (` psfpm) 69 63 65
Rental Income (` mn) 760.6 847.4 1,175.8
Exhibit 115:Calculation of WACC
Calculation of WACC
Tax Rate (%) 25.0
Beta (x) 1.3
Wt. Debt (%) 50.0
Wt. Equity (%) 50.0
WACC (%) 14.6
Residential 129 40,798 75
Rentals 24 7,703 14
Land Bank 19 6,124 11
Gross NAV 173 54,625 100
Net NAV 132 41,591
Discount (%) 20
Target Price 106 33,273
CMP 86
Source – Company, Jaypee Research residential

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residential segment is estimated to grow by
19.2% over FY11-13E to `4.45bn
New Launches to Boost Revenues by 22% During FY11-13E
The company’s new launches are expected to boost revenues in FY12E and FY13E.
Revenue from the residential segment is estimated to grow by 19.2% over FY11-
13E to `4.45bn, because of new launches planned for FY12E: a) Rajasthan (1.8 msf);
b) Haryana (1.0 msf) and c) Gurgaon (150 acres). We expect Kirti Nagar Mall
(0.6msf) and Hotel Tri-Colour to commence lease income from Q4FY12E and
Q2FY12E, respectively. Total lease income is estimated at `1.17bn in FY13E,
growing faster than the residential segment, registering 24.3% growth during FY11-
13E.
Total income is estimated to grow annually by 21.5% from `3.85bn to `5.69bn
during FY11-13E, while net profit during the same period is likely to grow by 4.3%
to `1.82bn.
Exhibit 118:Total Income to grow by 22% during FY11-13E (` mn)
5,401
4,160
2,867
3,851
4,814
5,685
0
1,000
2,000
3,000
4,000
5,000
6,000
Construction expenditure estimated to be
`4bn and`4.5bn in FY12E and FY13E,
respectively.
Focus on Execution
The company spent `8.30bn in FY11 on acquiring land bank across the NCR region,
and of this, `6bn alone was spent on acquiring 150 acres of land tract in Gurgaon
(Extended Golf Course Road). ARIL has now changed its focus from land acquisition
to execution of projects during FY12E-13E. It plans to launch three new residential
projects in FY12E; total construction expenditure is estimated to be `4bn
and`4.5bn in FY12E and FY13E, respectively.

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Rental income to grow from `760.6mn to
`1.18bn, at 24.3% CAGR
Steady Rental Income: to Cross `1bn in FY13E
The company earned rentals of `760.6mn in FY11 from 0.9msf of retail and
commercial space and four hotels. Kirti Nagar Mall (0.75msf) is expected to
commence from Q4FY12 and Hotel Tri-Colour (rental of `9mn p.a.) from Q2FY12.
During FY11-13E, total leased assets are expected to grow from ~0.9msf to ~1.5msf
and rental income from `760.6mn to `1.18bn, at 24.3% CAGR. Rental business not
only generates positive net operating cash flow for the company, but also helps to
fund its construction. Furthermore, this business comes with an inherent trait of
being downward sticky and with the assurance of cash year after year.
Exhibit 119: Lease Rentals to cross `1bn in FY13E. (` mn)
511
761
847
1,176
0
200
400
600
800
1,000
1,200
1,400
Quality Land Bank
ARIL has ~1,000 acres of prime land in the Delhi-NCR area, with a total developable
area of 70msf. Out of the total land bank, 500 acres is in Delhi and the balance 90%
is within 30km of New Delhi. Some of the residential projects are located in
Kapashera, Hauz-Khas and Bhagwandas Road, Delhi’s luxurious abode. It has retail
malls at the shopping hubs of Karol Bagh and Kirti Nagar, which are completely
leased out. Four of its five operational hotel properties are located within 3km of
the airport.
Exhibit 120: Land Bank Break-up -70msf
IT/SEZ/Logistic
Park
53%
Residential
32%
Comm./Retail
2%
Hotel/Entertain
ment
13%

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Change in product mix leading to improved
margins
Change in Product Mix Leading to Higher Operating Profits and Margins
We estimate operating profits will grow by 14.9% during FY11-13E to `3.45bn,
because of increased lease rentals and the high-value of residential projects.
Operating profit margin (OPM) is expected to decline to 47.8% in FY12E, before it
rises to 52.7% in FY13E, due to the change in product mix, which is now skewed
towards residential development, rather than plot sales, as in FY10.
Exhibit 121: Operating Profit (` mn); OPM Margin (%)
5,483
4,468
3,093
2,615
2,806
3,451
85.1
80.7
78.0
60.0
47.8
52.7
0
10
20
30
40
50
60
70
80
90
0
1,000
2,000
3,000
4,000
5,000
6,000
Stronger balance sheet
Balance Sheet Continues to Be Strong
ARIL is expected to increase its debt from `9.28bn to `14bn by FY12, to fund its
expansion. We believe ARIL’s balance sheet will continue to be stronger than that
of its peers in the NCR region. We estimate net D/E will increase from -9.8% in FY10
to 28.4% in FY13E.
-0.19
-0.15
-0.10
0.22
0.35
0.28
-0.30
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40

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Concerns
Focus on Single Location
ARIL is present only in the Delhi-NCR region. Thus, any significant changes in
government regulations and real estate prices in the region are likely to impact the
company’s execution.
Delay in Projects
Any legal disputes regarding land titles will cause delays in launching new projects.
Slowdown in the Commercial and Retail Business
Lease rentals contribute almost 20% to ARIL’s total revenues. Hence, any slowdown
in the commercial or retail business would have an adverse impact on the
company’s total income.
Terror Attacks Would Impact the Hospitality Business
Any terror attacks in India would lead to a decline in tourist arrivals, thereby
impacting the hospitality business. ARIL has all its hotels in NCR, and hence, any
attack in the NCR region would be a major risk to our hospitality business
assumptions.

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Recommendation
Anant Raj Industries Ltd. (ARIL) is a leading real-estate company which focuses on
the Delhi-National Capital Region (NCR) area. It builds and develops residential
properties, commercial space, IT parks, SEZs and hotels. We are positive on ARIL
broadly, on the following parameters: a) high-quality, inexpensive land banks in
Delhi; b) steady rentals: to cross ~`1bn in FY13E; c) comfortable net D/E levels, at
0.28x; d) lease rentals to fund the working capital requirements and e) huge
potential for revenue growth from 0.5msf of luxury residential projects at Hauz-
Khas and Bhagwandas Road. We estimate the company will post a 21.5% revenue
CAGR and 14.9% operating profit CAGR over FY11-13E, mainly because of new
launches planned for FY12E and FY13E and increased lease rentals.
At CMP of `86, the stock is trading at 19.2x and 14.9x FY12E and FY13E earnings,
while on a P/BV basis the stock is available at 0.70x and 0.67x its FY12E and FY13E
book value, respectively. We recommend Buy on ARIL with a target price of `106.
129
24
19
-41
132
-26
106
-100
-50
0
50
100
150
200
Resi. Rentals Land
Bank
Net
Debt
NAV Disc. Target
0
50
100
150
200
250
300
350
400
0.5x
1x
1.5x
2x
2.5x
3x
Exhibit 125: ARIL P/BV vs BSE Realty P/BV
-120%
-100%
-80%
-60%
-40%
-20%
0%
0
1
1
2
2
3
3
4
4
5
5
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11

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Company Background
Anant Raj Industries Ltd. (ARIL) is a leading real-estate company which focuses on
the Delhi-National Capital Region (NCR) area. It used to mainly manufacture
ceramic wall and floor tiles. In 2005, the company entered real estate development
and now its complete focus is on the real-estate business. In the last five years the
company has built and developed residential properties, commercial space, IT
parks, SEZs and hotels.
ARIL is one of the key players in the Delhi-NCR region, with one of the largest land
banks in the region. As on 31st
March 2011, the company had 1,000 acres of prime
land in the Delhi-NCR area and total developable land of 70msf. Out of the total
land bank, 500 acres is in Delhi and the balance 90% is within 30km of New Delhi.
It leases all its commercial properties and follows a sale model for the residential
projects. This unique business strategy of Anant Raj has not only kept the company
afloat during the downturn period, but has also led to a strong balance sheet, with
`1.48bn cash in its books, as on 31st
March 2011.
Exhibit 126: ARIL Land Bank

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Financial Statements
Revenues 2,867 3,851 4,814 5,685 EPS 8.1 5.7 4.5 5.8
Other Income 481 283 630 489 Growth (%) -34.7 -29.9 -20.7 28.3
Total Income 3,349 4,134 5,443 6,175 Cash EPS 8.5 6.1 5.2 6.5
Cost of Sales 89 1,313 2,359 2,412 Book Value 121.8 118.2 123.6 128.7
Employee Cost 77 80 111 111 DPS 0.6 0.6 0.6 0.6
Sales & Admin. Exps. 89 126 167 200 Payout (%) 0.1 0.1 0.1 0.1
Total Expenditure 255 1,519 2,637 2,723
EBDITA 3,093 2,615 2,806 3,451 Valuation Ratios FY10 FY11 FY12E FY13E
Deprecation 106 125 213 222 P/E 10.6 16.2 19.2 14.9
Interest 48 210 702 803 Cash P/E 10.2 15.1 16.6 13.3
PBT 2,939 2,280 1,891 2,426 P/ BV 0.7 0.7 0.7 0.7
Tax 549 606 473 606 EV/Sales 4.2 5.7 4.6 3.7
PAT 2,390 1,674 1,418 1,819 EV/EBDITA 4.5 9.0 9.0 6.6
ROE (%) 6.6 4.5 3.6 4.5
Balance Sheet FY10 FY11 FY12E FY13E RoCE (%) 7.8 5.2 4.9 6.0
Liabilities
Share Capital 590 590 630 630 Margin (%) FY10 FY11 FY12E FY13E
Networth 35,951 37,242 38,943 40,542 EBDITA 78.0 60.0 47.8 52.7
Secured Loans 998 9,280 14,000 12,500 EBIT 74.8 56.7 36.1 44.4
Unsecured Loans 376 376 376 376 PBT 73.4 51.3 23.2 31.4
Total Liabilities 38,181 47,694 53,320 53,418 PAT 57.0 35.8 14.5 21.5
Assets
Fixed Assets (Net) 26,970 29,076 27,863 27,391 Turnover Ratios FY10 FY11 FY12E FY13E
Investments 2,949 2,579 2,579 2,579
Dfrd. Tax Asset (Net) -9 -12 -9 -9 Asset T/o 0.1 0.1 0.2 0.2
Current Assets 10,130 17,608 24,459 25,072 Inventory T/o 2.2 0.2 0.3 0.3
a) Inventories 118 7,117 9,533 8,395 Debtors T/o 1.2 1.6 1.2 1.2
b) Sundry Debtors 2,399 2,412 3,741 4,622
c) Cash & Bank 4,891 1,482 588 1,358 Debtors (Days) 305 226 300 300
d) Loans & Advances 2,721 6,597 10,597 10,697 Inventory (Days) 169 1,754 1,200 1,100
Current Liabilities 1,885 1,576 1,591 1,635 Creditors (Days) 444 183 113 106
Total Assets 38,181 47,694 53,320 53,418 Leverage Ratios FY10 FY11 FY12E FY13E
D/E (x) 0.0 0.3 0.4 0.3
Cash Flow FY10 FY11 FY12E FY13E Int. Cov. Ratio (x) 61.8 11.9 3.7 4.0
CF before WC Changes 2,666 9,765 1,882 2,962 Net D/E (x) -0.1 0.2 0.4 0.3
Cash from operations 4,675 -1,431 -5,848 3,162 Growth Ratio (%) FY10 FY11 FY12E FY13E
Net Cash from Oper. 4,073 -2,258 -6,542 2,335 Sales -29.9 23.4 31.7 13.4
Cash from Invstment -5,082 -10,528 1,630 739 Expenses -17.0 494.6 73.6 3.3
Cash from Financing 550 9,377 4,018 -2,303 EBDITA -30.8 -15.5 7.3 23.0
Net Change -1,366 -3,409 -894 771 Interest Cost 960.4 334.0 234.6 14.4
Op. Cash 6,257 4,891 1,482 588 PAT -34.7 -29.9 -15.3 28.3
Cl. Cash 4,891 1,482 588 1,358 Cash EPS -33.3 -27.9 -15.1 25.1

Godrej Properties Limited
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As on July 22,2011
52 Week High/Low (`) 845/545
Face Value (`) 10
Codes
BSE Code 533150
NSE Code GODREJ PROP
Bloomberg Code GPL IN
Reuters Code GODR.BO
Promoters 83.8 83.8 83.8
FII 5.5 5.5 4.8
DII 2.0 2.0 2.5
Others 8.7 8.7 9.0
80
90
100
110
120
130
GPL Sensex
Godrej Properties Ltd (GPL) is a pan-India real estate player focused on the affordable
housing segment with 83.64msf saleable area, across 11 cities in India. We are positive on
the company’s future outlook broadly on the following parameters: a) a successful pan-
India expansion through its JDA and outsourcing business model; b) execution of ~88% of
its saleable area is undertaken through JDA model, ensuring low initial capital outflow,
higher margins and higher ROE; c) access to unqualified 685 acres of quality land banks
through its parent, Godrej Group; d) an MOU with the Godrej Group to develop 185 acres
in the growing markets of Mohali, Bengaluru and Hyderabad; e) monetization of the
Vikhroli 500-acre land bank; f) leveraging brand ‘Godrej’ helps to attract customers and
land-owners alike. Based on these attributes, we believe GPL should trade at a premium
to its peers. We have Neutral rating on GPL with a price target of `730. At the current
price, the stock trades at FY12E and FY13E P/E of 45.4x & 34.8x and P/BV of 5.7x & 5.1x
respectively.
High-Value Mumbai-NCR Projects to Drive Revenues
GPL has a huge pipeline of projects to be launched in the next two years and is
likely to sell 3.51msf in FY13E from the current level of 3.20msf. Overall, we
anticipate GPL’s net income to grow by 31% CAGR over FY11-13E, to `7.75bn in
FY13E from the current `4.52bn. This growth is primarily due to new launches in
the high-value market of Mumbai and Gurgaon and also due to increased execution
at the existing projects.
Access To Quality Land-Bank Through Godrej Group
GPL has unqualified access to strategic land holdings across India through its
parent, the Godrej Group (GG). The Godrej Group has entered into an MOU with
GPL to develop 185 acres across Chandigarh, Bengaluru and Hyderabad. We believe
access to such quality land bank renders a high value to the company and we have
estimate a value for the MOU. Based on 60% probability, we have arrived at a
value of `167/share.
Monetization of Vikhroli Land Parcel
GPL will be developing 500 acres of land at Vikhroli, Mumbai over next 7-10 years.
We have assigned a value to this land bank, and at 50% execution probability and
13% discount we arrive at a value of `500/share. However, for our target price we
have considered only the 35 acres of land which the company is currently
developing.
1M 6M 12M
Absolute 21 38 26
Relative 14 40 22
Hitendra Gupta
Contact No: -91 22 4354 2023
Net Sales 3,134 4,515 6,242 7,749
EBITDA 2,008 3,240 4,528 5,584
EBITDA Margin (%) 28.3 23.3 23.7 24.9
Net Profit 26 40 47 53
PAT Margin (%) 39.6 31.6 22.4 23.3
EPS 17.6 18.7 17.9 23.4
PER (x) 46.3 43.5 45.4 34.8
PBV (x) 7.0 6.2 5.7 5.1
ROE (%) 19.9 22.5 20.0 23.1
Company Update CMP: `814 TARGET: `730 NEUTRAL

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Key Assumptions
Real Estate Business FY10 FY11 FY12E FY13E
Area Sold (msf) 1.38 3.20 3.09 3.51
Sale Price (` psf) 3,080 3,350 3,404 4,034
Calculation of WACC
Tax Rate (%) 25.0
Beta (x) 1.1
Wt. Debt (%) 60.0
Wt. Equity (%) 40.0
WACC (%) 12.4
1% Increase in the Avg. sale Price 1.3% Change in NAV 1.3
1% Increase in the Avg. Const. Cost -0.8% Change in NAV -0.8
1% Increase in Discount Rate -5.2% Change in NAV -5.20
Resi 394 27,534 43
Comm-Sale 119 8337 13
Comm-Lease 16 1,125 2
Value of Land Bank 218 15,240 24
Option Value of MOU 167 11,665 18
Gross NAV 915 63900 100
Net NAV 812 56,719
Discount (%) 10
Target Price 730
CMP 815
Upside/(Downside) (%) -10

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New launches in the Mumbai and Gurgaon
regions, to drive 31% revenue CAGR over
FY11-13E
High-Value Mumbai-NCR Projects to Drive Revenues
GPL has a huge pipeline of projects to be launched in next two years. We estimate
the area sold will increase to 3.51msf in FY13E from the current level of 3.20msf, a
4.8% CAGR while average realization is expected to increase by 9.7% annually, from
`3,350 per sq. ft to `4,034 per sq. ft. Overall, we anticipate GPL’s net income to
grow by 31% CAGR over FY11-13E to `7.75bn in FY13E from the current `4.52bn.
This growth is primarily due to increased execution at the company’s existing
projects and new launches in the Mumbai and Gurgaon regions, high value
markets.
Exhibit 171: Revenues (` Mn)
2,506
2,555
3,134
4,515
6,242
7,749
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
185 acres MOU with Godrej & Boyce valued
at `167/share
Access To Quality Land Bank Through Godrej Group
GPL has unqualified access to strategic land holdings across India through its
parent, the Godrej Group (GG). In order to monetize these land parcels, GG has
entered into an MOU with GPL to develop 185 acres across Chandigarh, Bengaluru
and Hyderabad. GG will transfer land through a SPV, for GPL to exploit. GPL will
hold 59%, 75% and 59% stake, respectively, in these projects. We believe access to
such quality land bank renders a high value to the company. We have tried to put a
value on this MOU. Based on 60% probability, we have arrived at a value of
`167/share.

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Vikhroli land parcel a valued at `500/share
Monetization of Vikhroli Land Parcel
Godrej Group has 3,200 acres of land in Vikhroli, Mumbai, of which it can only
develop 500 acres, as the balance land (2,700 acres) comes under a mangrove area
and hence, cannot be exploited commercially. Currently, these 500 acres house
various plants, residential colonies and corporate offices. To commercially develop
this land tract the group has decided to relocate most of the operations to other
low-cost areas in the next 7-10 years.
GPL has started the monetization process at Vikhroli. In its first phase, the company
has undertaken the development of 36.5 acres translating into a saleable area of
~2.8msf. The Company is constructing its first commercial building of 0.75msf,
which commenced in January 2011. The corporate office, there, will be leased out
after its completion in January 2013. Management has indicated construction of
the residential complex will commence only after the successful completion of the
existing commercial project (i.e. post-Jan’13). As per the Joint Development
Agreement (JDA), GPL is entitled to 60% of the profit from the development and
the balance 40% will accrue to Godrej Group (GG). We expect GPL to sign more
MOUs with GG in the next 12-15 months, for the 500 acres at Vikhroli. Any
announcement to monetize this land will have positive impact on the stock price.
Sensing the current market scenario for the real estate sector, we have not
factored in any value for these yet-to-be-signed MOUs. We estimated a value for
this land bank, at 50% execution probability and 13% discount and we arrive at a
value of `500/share.
Exhibit 172: Sensitivity Analysis on WACC and Execution Probability (`/ Share)
9.9% 10.9% 11.9% 12.9% 13.9% 14.9% 15.9%
20% 262 239 218 200 183 168 154
30% 392 359 328 300 275 252 231
40% 523 478 437 400 366 335 308
50% 654 598 546 500 458 419 384
60% 785 717 655 600 549 503 461
70% 916 837 765 700 641 587 538
80% 1047 956 874 800 732 671 615
WACC (%)
Execution
Probablity
(%)

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GPL’s 88% of land-bank comprises of JDA
projects
Capital Efficient: Joint Development Projects
The company has a distinct business model, as almost 88% of its land bank
(83.64msf) comprises joint-development (JDA) projects. Unlike the traditional land
bank acquisition concept, GPL partners with the land-owners, who agree to provide
land for development in lieu of a specific revenue share or profit share. The Godrej
brand gives some headway to the company to successfully link up with the land-
owners and thereby creates ready access to quality land banks.
The company has a successful track record of joint development projects. The JDA
model is very capital efficient primarily on account of: a) low initial cash outflow (in
contrast to the traditional land acquisition concept with high capital outflows) and
b) reduces the balance sheet burden by avoiding land bank acquisitions normally
associated with high carrying cost. Thus, the JDA model ensures safe margins, limits
the downside risk, and helps scalability of the business along with higher
profitability and higher return on investments.
Exhibit 173: Joint Development Projects - 73.6msf
Projects
under
JDA ;
88%
Own
Develop
ment;
12%
Net D/E Declining Over FY11-13E
GPL has adopted a distinguished business model of developing projects by
partnering with local developers or land owners. This strategy gives the company
an edge over its peers as it churns its investment efficiently, thus giving handsome
returns to the investors. We anticipate the company will generate net cash from
operations of `2.09bn over FY11-13E. Thus, the net D/E ratio is estimated to
decline from current 0.87x levels to 0.56x by FY13E.
Exhibit 174: Net D/E (x)
1.0
2.1
0.8
0.9
0.7
0.6
0.00
0.50
1.00
1.50
2.00
2.50
`

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Margins to be Stabilized
We expect operating margins for Godrej to be stabilized at 24-25% levels. OPM is
anticipated to increase to 24.9% in FY13E from current levels of 23.3%. Operating
profit, though, is estimated to grow by a mere 12.5%, compared to 31% growth in
the top line. This subdued growth is mainly due to the increase in construction cost,
as the number of ongoing projects increases.
1,432
1,628
2,312
2,125
2,093
2,690
57.1
47.2
28.3
23.3 23.7
24.9
0
10
20
30
40
50
60
0
500
1,000
1,500
2,000
2,500
3,000
Net Profit to Grow by 12% Over FY11-13E
We anticipate GPL’s profit will grow by 11.8% CAGR during FY11-13E, to `1.64bn in
FY13E, from the current level of `1.31bn. This profit level has been largely due to
the increase in interest cost (29.2% CAGR) and in deprecation cost (15.1% CAGR).
This would also lead to a decrease in net profit margin by 830bps over FY11-13E to
23.3% in FY13E.
Exhibit 176: Net Profit (` Mn); Net Profit Margin (%)
624
747
1,228
1,309
1,253
1,636
30.3 30.0
39.6
31.6
22.4 23.3
0
5
10
15
20
25
30
35
40
45
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
19.9
22.5
20.0
23.1
18.0
19.0
20.0
21.0
22.0
23.0
24.0

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Concerns
Over Dependence on the Ahmadabad Region
48% of GPL’s ongoing and future saleable area is based in Ahmadabad. Any changes
in Ahmadabad real estate, particularly any changes in government policies, or any
political instability, reduction in demand or any natural disaster in the Ahmadabad
region, would have adverse repercussions for the company.
Dependent on Single Contractor
The company has hired L&T to construct all its existing and future projects. This
opens GPL up to single-contractor risk. Any changes in the company (L&T)
management or working practices, or any other major changes will dismantle GPL’s
business model, impacting our valuations adversely.
Difficulty In Concluding New JDAs
The company has been banking heavily on JDAs for its existing projects. Any conflict
with a JD partner would impact the smooth execution of the project. Therefore,
any difficulty in executing the existing JDAs would lead to delays in completing the
projects, thereby adversely impacting our target price. Further, if the company is
ever unable to conclude new JDAs with land-owners or local partners, this might
affect its future development activities.

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Recommendation
Godrej Properties Ltd (GPL) is a pan-India real estate player focused on the
affordable housing segment with 83.64msf saleable area, across 11 cities in India.
We are positive on the company’s future outlook, based on the following
parameters: a) a successful pan-India expansion through its JDA and outsourcing
business model; b) execution of ~88% of its saleable area is undertaken through
JDA model, ensuring low initial capital outflow, higher margins and higher ROE; c)
access to an unqualified 685 acres of quality land bank through its parent, the
Godrej Group; d) an MOU with the Godrej Group to develop 185 acres in the
growing markets of Mohali, Bengaluru and Hyderabad; e) monetization of the
Vikhroli 500-acre land bank; and f) leveraging brand ‘Godrej’ helps to attract
customers and land-owners alike. Based on these attributes, we believe GPL should
trade at a premium to its peers.
Over the last two weeks, the stock has gained almost 20%, based on the news of
developing Jet Airways’ BKC project. We have a Neutral rating on the stock with a
price target of `730.
Exhibit 178: NAV Break-up (`per share)
394
119
16
385
-103
812
730
-160
-80
0
80
160
240
320
400
480
560
640
720
800
Resi Com Sale Lease Land
Bank
Net
Debt
NAV Disc. Target
100
200
300
400
500
600
700
800
900
1,000
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11
4x
4.5x
5x
5.5x
6x
6.5x
Exhibit 180: GPL P/BV vs BSE Realty P/BV
0%
50%
100%
150%
200%
250%
300%
350%
0
1
2
3
4
5
6
7
8
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11

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Company Background
Godrej Properties Ltd (GPL) is an integrated real-estate development company
involved in all the activities (except construction) associated with the development
of commercial and residential real estate. It is one of the progeny of India’s
mammoth conglomerate, the Godrej Group. Today, Godrej Industries Ltd (GIL), the
listed flagship company of the Godrej Group, holds 80.26% in GPL.
In 1991, at the start of economic liberalization, GPL entered the real-estate
business with a clear focus on the affordable housing segment. Initially, its
operations were concentrated only in the Mumbai Metropolitan Region (MMR).
Then it expanded to various other locations across India. Today it is present in
almost 11 cities including Pune, Bengaluru, Gurgaon, Kolkata, Hyderabad,
Ahmedabad, Mangalore, Chandigarh, Chennai and Kochi.
Currently, GPL has a total developable area of 83.64msf, which is highly skewed
towards the single micro market of Ahmedabad: 40msf of developable area. Other
high-weight areas include Pune (12.3msf); Hyderabad (9.6msf) and Kolkatta
(6.83msf).
GPL has distinguished itself by following a joint development (JD) model which has
lower initial cash-outflows. It has released the management bandwidth by
outsourcing the execution (construction activity) to L&T for all its projects across
India.
Exhibit 181: GPL’s Pan-India Presence

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FINANICAL STAEMENT
Income Statement (` Mn.) FY10 FY11A FY12E FY13E Basic Ratios (`) FY10 FY11A FY12E FY13E
Revenues 3,134 4,515 6,242 7,749 EPS 17.6 18.7 17.9 23.4
Other Income 1,426 1,074 612 760 Growth (%) 42.3 6.5 -4.2 30.5
Total Income 4,561 5,589 6,854 8,509 Cash EPS 18.0 19.3 18.6 24.2
Const. Cost 2,008 3,240 4,528 5,584 Book Value 117.0 130.5 142.6 160.1
Employee Cost 107 73 80 84 DPS 4.0 4.5 5.0 5.0
Selling & Admin. Exps. 134 151 153 152 Payout (%) 40.0 45.0 50.0 50.0
Total Expenditure 2,249 3,464 4,761 5,820
EBDITA 2,312 2,125 2,093 2,690 Valuation Ratios
Deprecation 26 40 47 53 P/E (x) 46.3 43.5 45.4 34.8
Interest 662 34 52 57 P/CEPS (x) 45.4 42.2 43.8 33.7
PBT 1,624 2,051 1,993 2,580 P/ BV (x) 7.0 6.2 5.7 5.1
Tax 382 622 598 774 EV/Sales (x) 17.9 12.8 9.1 7.3
PAT 1,228 1,309 1,253 1,636 EV/EBDITA (x) 24.2 27.2 27.3 20.9
ROE (%) 19.9 22.5 20.0 23.1
Balance Sheet RoCE (%) 14.9 11.1 10.9 13.6
Liabilities
Share Capital 699 699 699 699 Margin (%)
Networth 8,173 9,116 9,958 11,186 EBDITA 28.3 23.3 23.7 24.9
Secured Loans 3,831 5,478 4,978 4,478 EBIT 27.4 22.4 23.0 24.2
Unsecured Loans 3,264 3,971 3,771 3,571 PBT 51.8 45.4 31.9 33.3
Total Liabilities 15,298 18,715 18,849 19,404 PAT 39.6 31.6 22.4 23.3
Assets
Fixed Assets (Net) 276 475 627 775 Turnover Ratios
Capital WIP 2 2 2 2
Investments 2,078 141 141 141 Asset T/o 0.2 0.2 0.3 0.4
Def. Tax Assets (Net) 3 8 8 8 Inventory T/o 0.3 0.3 0.4 0.5
Current Assets Debtors T/o 1.2 1.5 2.0 2.0
a) Inventories 7,251 10,154 11,157 11,632
b) Sundry Debtors 1,798 2,900 3,018 3,747 Debtors (Days) 310 240 180 180
c) Cash & Bank 955 1,490 1,568 1,736 Inventory (Days) 1,177 1,070 855 730
d) Loans & Advances 4,924 6,964 6,854 6,807 Creditors (Days) 84 80 73 59
Current Liabilities 1,989 3,420 4,526 5,444
Net Current Assets 12,939 18,088 18,070 18,478 Leverage Ratios
Total Assets 15,298 18,715 18,849 19,404 D/E (%) 86.8 103.6 87.9 72.0
Int. Cov. Ratio (x) 3.5 61.3 39.1 46.5
Cash Flow Net D/E (%) 75.1 87.3 72.1 56.4
CF before WC Changes 182 5,603 1,468 2,143 Growth Ratio (%)
Cash from operations -3,058 859 1,581 1,885 Sales 22.7 44.0 38.2 24.2
Net Cash from Oper. -3,424 236 984 1,110 Expenses 66.8 54.1 37.4 22.2
Cash from Invstment 129 -1,694 214 223 EBDITA 42.0 -8.1 -1.5 28.5
Cash from Financing 3,981 1,993 -1,120 -1,165 Interest Cost 25.7 -94.9 53.8 8.5
Net Change 686 535 77 168 PBT 49.1 26.3 -2.8 29.5
Op. Cash 269 955 1,490 1,568 PAT 64.5 6.5 -4.2 30.5
Cl. Cash 955 1,490 1,568 1,736 Cash EPS 43.1 7.5 -3.5 29.8

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