Equity Research Report[1].

2008

EQUITY RESEARCH BY WAY OF FUNDAMENTAL ANALYSIS

FACULTY GUIDE: COMPANY GUIDE:

PROF. A. K. MITRA MR. S. P. TULSIAN

PROFESSOR CEO& EDITOR

ICFAI BUSINESS SCHOOL PREMIUM INVESTMENTS

GURGAON MUMBAI

PURVA SOMANI

(07BS3100)

IBS GURGAON

BY:

PURVA SOMANI

(07BS3100)

Distribution list:

Prof. A. K. Mitra Mr. S. P. Tulsian

CEO& Editor

IBS Gurgaon

Premium Investments

A REPORT

ON

“EQUITY RESEARCH”

BY WAY OF FUNDAMENTAL ANALYSIS

A report submitted in partial fulfillment of

the requirements of

MBA Program

ACKNOWLEDGEMENT

Milestones achieved in the journey of life are never achieved alone,

and this is no exception. As I complete this enlightening journey, I

would like to acknowledge and thank my Guide and Companions, who

helped me, put my best foot forward and made this story a success.

I am very grateful to my Company Guide, Mr. S.P.Tulsian who

inspired me to work well on the topic and seeing to it that my

performance is up to the mark. He not only helped me on the topics

but also helped me to understand the nuances of Capital Market

I would also like to thank my Faculty Guide Prof. A.K.Mitra, for his

support and professional approach in guiding me through the careful

details of the project.

I am highly indebted to my Mother for her moral support and

encouragement. Also I thank my source of inspiration, my teachers

and professors.

I would also like to express my gratitude to my friends and colleagues

who have been support in my effort to explore this area of study.

All the above mentioned people have left a mark on this project and I

will always remain indebted to them.

i

TABLE OF CONTENTS

Particulars Page No.

Acknowledgement i

List of Illustrations iii

Abstract ix

I. Introduction

1.1. Objective

1.2. Methodology

1.3. Limitations

1.4. Company Profile

1

3

9

10

II. Union Budget Analysis 12

III. Company Analysis

3.1 Kernex Microsystems

3.2 Reliance Power IPO

3.3 India Glycols

16

17

40

61

IV. Industry Analysis 76

V. Appendices 170

VI. References 170

VII. Glossary 172

ii

LIST OF ILLUSTRATIONS

KERNEX MICROSYSTEMS

TABLES GRAPHS

Particulars Page No Particulars Page No

Management

Team

20 Global Scenario 23

Product &

Services

21 Sales & Growth 24

Operating Profit

Margin

26 Cost structure 25

Financial

Performance

27 Operating Profit

Margin

26

Ratios 29 Financial

Performance

27

Shareholding

Pattern

31

Relative Market

Share

32

iii

RELIANCE POWER

TABLES GRAPHS


Issue Details 46 Gap between

energy

requirement and

supply in India

44

Objects of Issue 47 Energy

requirement in

India

45

Utilisation of

Issue Proceeds

48 Electric peak

load

45

IPO Details 50 Bid details 51

Listing Details

(BSE, NSE)

52 Share price

trends

53

Relative Index 54

iv

INDIA GLYCOLS

TABLES GRAPHS


Management

Team

62 Sales & Growth 65

Products &

Services

63 Cost Structure 66

Ratio 69 Operating Profit

Margin

67

Financial

Performance

68

Shareholding

Pattern

70

Relative Market

Share

71

v

REALTY INDUSTRY

TABLES GRAPHS


GDP 77

Commercial

Property Capital

Values

86 Demand Drivers

of Real Estate

81

UNITECH

Ratios 92 Financial

Performance

91

Shareholding

Pattern

93

HINDUSTAN CONSTRUCTION

Ratios 98 Financial

Performance

97

Shareholding

Pattern

99

PARSHVANATH DEVELOPERS

Ratios 105 Financial

Performance

104

Shareholding

Pattern

106

HDIL


Performance

113

Shareholding

Pattern

115

vi

DLF


Performance

119

Shareholding

Pattern

122

OMAXE


Performance

126

Shareholding

Pattern

128

BRIGADE ENTERPRISE

Ratios 130

KOLTE PATIL

Ratios 133 Shareholding

Pattern

134

AKRUTI CITY


Performance

138

Shareholding

Pattern

140

IVR PRIME


Performance

142

Shareholding

Pattern

145

ORBIT CORPORATION

vii


Performance

147

Shareholding

Pattern

149

INDIA BULLS REAL ESTATE


Performance

152

Shareholding

Pattern

154

COMPETITION

Herfindahl Index 158 Michael Porter 160

Michael Porter

Analysis

161

Peer Comparison 164

MARKET PERFORMANCE

IPO Rates 166 Relative Index 165

viii

ABSTRACT:

The project aims at tracking the stock market and finding the stocks

that would show good performance in the prevailing situations.

Premium Investment runs website www.premiuminvestment.in which

give recommendation to the paid users being a paid website. It bases

its research mainly on the fundamentals of the stock market.

During the tenure of my internship I have worked upon the Railway

Budget, Union Budget Analysis, Company Analysis & Industry

Analysis. The Companies covered were

Kernex Microsystems

Reliance Power

India Glycols

We have analysed the “Realty Industry” under which we have covered

12 major companies.

To name some DLF, Parsvnath Developers, Unitech, HCC, Akruti city

etc. were analysed.

ix

http://www.premiuminvestment.in/

1

I. INTRODUCTION

1.1 OBJECTIVE

Our objective for the project has been to identify the right stock to invest for long term

wealth creation. The stocks have been identified on the basis of various situations

prevailing in the country keeping in mind the global scenario. So the following stocks

were selected because:-

KERNEX MICROSYSTEMS

We identified this stock as a good buy mainly based on the Railway Budget 2008-

09.These was one of biggest beneficiaries of the Railway Budget and suddenly, post

Budget, the prospects of the company changed from bright to excellent.

We thus decided to analyse this company as a good buy for the long term, keeping

in mind the various advantages it will now accrue due to its product profile and the

proposed expansion of the Indian Railway.

INDIA GLYCOLS

The rising crude oil price is a perennial source of worry for the entire world. And

just when all were grappling with it, we came across this company, India Glycols,

which uses ethanol as a substitute for crude oil. This was precisely the need of the

hour, a company not using crude oil and that thus made India Glycols an excellent

stock to buy and hold for the long term.

RELIANCE POWER IPO

Primary market is the source of the secondary market. And in that context, when we

talk of the recent IPO markets, the IPO of Reliance Power is a landmark and the

way in which it managed to shake up the entire stock markets made us want to look

into the nitty-gritties of the IPOs in the Indian stock markets.

The sheer size of the IPO, the response it evoked which hinged near mass hysteria

and the debacle it faced after having got listed below the offer price, made it a case

study in itself.

REALTY SECTOR

When the stock markets had touched the 20,000 levels in January 2008, it was the

realty sector, which led the rally and at that time, almost all the stocks, from all the

groups, went top gainers every day.

2

And then the markets fell and along with the index, the realty stocks fell like nine

pins. The same realty stocks, which led the index some time ago, were now amongst

the top losers.

This rise and fall of the realty stocks, along with the rise and fall of the index made

it very interesting. We wanted to learn why the realty stocks had so much hold over

the markets and thus decided to do an in-depth analysis of the entire Indian realty

sector and the frontline listed stocks.

3

1.2 METHODOLOGY

Equity Research refers to the study of the performance of the economy as a whole, the

industry and various companies and analyzing the same. It enables to predict the future

performance of a particular stock based on its past performance, the current status of

the internal as well as the external environment.

The internal environment includes:

The financial performance

The operational performance

The future deals with the clients

The share price trend

The management of the company, i.e. the Board of Directors etc.

The nature of the business

The external environment includes:

The Economy

The global scenario with respect to the business

General economic scenario

Political scenario

Performance of the stock market on the whole

Competitors

EQUITY RESEARCH can be done by two methods:

Fundamental Analysis

Here we look at balance sheet, income statement etc. to determine a

company‘s value. In financial terms it is used to measure a company‘s

intrinsic value. It takes a long term approach to analyze the market as

compared to technical analysis. It often looks at data over a number of

years.

Technical Analysis

Technical traders study the price movements of the particular company's

stock in the market. Technical analysts strongly believe that the price

movements follow a trend and by identifying the trend, one can

accurately predict the price that might occur in future. Technical analysts

use financial tools with software support. One can be overawed by the

terms and studies of a technical analyst when he/she explains the

rationale behind the prediction. Technical analysis is used for a time

frame of weeks, days or even minutes.

4

The various steps in fundamental analysis are listed below.

Fundamental Analysis is a conservative and non-speculative approach based on the

―Fundamentals‖.

The Economy

The Industry

The Company

A brief glimpse of each of these factors is explained below:

The Economy Analysis

In the table below are some economic indicators and their possible impact on the stock

market are given in a nutshell:-

Economic Factors Economic indicators Impact on the stock

market

GNP - Growth

- Decline

- Favorable

- Unfavorable

Price Conditions - Stable

- Inflation

- Favorable

- Unfavorable

Economy - Boom

- Recession

- Favorable

- Unfavorable

Employment - Increase

- Decrease

- Favorable

- Unfavorable

Personal Disposable Income - Increase

- Decrease

- Favorable

- Unfavorable

Personal Savings - Increase

- Decrease

- Favorable

- Unfavorable

Interest Rates - Low

- High

- Favorable

- Unfavorable

Balance of Trade - Positive

- Negative

- Favorable

- Unfavorable

Strength of Rupee in Forex

Market

- Strong

- Weak

- Favorable

- Unfavorable

Corporate Taxation (Direct & Indirect

Taxes)

- Low

- High

- Favorable

- Unfavorable

5

The Industry Analysis

1. Overview- past and present scenario, market size, residential and commercial,

various themes

2. Government. policies

3. Status in tier I,II and III cities

4. Demand and Supply

5. Problems

6. Company Analysis

About the Company

Financial Performance

Shareholding Pattern

Projects Done

Projects in Pipeline

7. Competition

Herfindahl Index

Michael Porter Analysis

8. Market Performance.

9. Synthesis.

The Company Analysis

There may be situations where the industry is very attractive but a few

companies within it might not be doing all that well; similarly there may be one

or two companies which may be doing exceedingly well while the rest of the

companies in the industry might be in doldrums. You as an investor will have to

consider both the financial and non- financial aspects so as to form qualitative

impression about a company .Some of the factors are:-

1) About the Company

2) Management Team

3) Products / Services

4) Business model analysis

5) Industry Analysis

6) Operational Performance (June 07 to Dec07)

Sales & its Growth

Segment Wise Analysis

Operating Profit Margin

6

Cost Structure

7) Financial Performance

Profit/Loss & Balance Sheet (2years)

Ratios

The following ratios are usually calculated to assess a

company. But sometimes due to lack of certain data,

some ratios may not be calculated

Liquidity ratios:

Liquidity implies a firm‟s ability to pay its debts in the short run. If a firm has

sufficient net working capital, it is assumed to have enough liquidity. The current

ratio and the quick ratio are the two ratios, which directly measure liquidity.

Current Ratio:

As the CURRENT RATIO measures the ability of the enterprise to meet its current

obligations. It gives an idea about the short term liquidity position of the firm.

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES

Quick Ratio:

In current ratio, the composition of current assets is not considered. A firm which has

large amount of cash and accounts receivable is more liquid than a firm with high

amount of inventories in its current asset. Thus we take quick ratio which shows the

firm‘s ability to pay its liabilities without relying on sale and recovery of its inventory.

QUICK RATIO = CURRENT ASSETS – INVENTORY – PREPAID EXPENSES

CURRENT LIABILITIES

PROFITABILITY RATIOS:

These ratios measure the efficiency of the firm‟s activities and ability to generate

profits.

Gross Profit Margin:

This ratio is used as an indicator of the efficiency of the production operation and the

relation between production costs and selling price.

7

GROSS PROFIT MARGIN= GROSS PROFIT

NET SALES

Net Profit Margin:

It measures the overall efficiency of production, administration, selling, financing,

pricing and tax management.

NET PROFIT MARGIN= NET PROFIT

NET SALES

Return on Equity (ROE):

It measures the corporation's profitability that reveals how much profit a company

generates with the money shareholders have invested.

Calculated as:

ROE = PROFIT AFTER TAX

SHAREHOLDER‘S EQUITY

The ROE is useful for comparing the profitability of a company to that of other firms in

the same industry.

Return on Capital employed (ROCE):

It measures the efficiency and profitability of a company's capital investments.

Calculated as:

ROCE = PBDIT

FA+CA-CL

ROCE should always be higher than the rate at which the company borrows, otherwise

any increase in borrowing will reduce shareholders' earnings.

Return on Investment (ROI):

It measures the efficiency of an investment or to compare the efficiency of a number of

different investments.

Calculated as:

ROI = PBDIT

NET ASSETS

8

TURNOVER RATIO:

It gives the speed of conversion of current assets (liquidity) into cash.

Asset Turnover:

It highlights the amount of assets that a firm uses to generate its total sales.

ASSET TURNOVER RATIO = SALES

AVERAGE ASSETS

LEVERAGE RATIO:

These are of two types:

1. Capital Structure Ratio- these are based on proportions of debt and equity

in the capital structure of the firm.

2. Coverage Ratio- these are derived from the relationships between debt

servicing commitments and sources of funds for meeting these obligation.

Capital Structure Ratio:

Debt Equity ratio:

It indicates the relative contributions of creditors and owners.

DEBT EQUITY RATIO= DEBT

EQUITY

Coverage Ratio:

Interest Coverage Ratio:

This ratio tells us how many times the firm can cover or meet the interest payments

associated with debt.

INTEREST COVERAGE RATIO= EBIT

INTEREST

EQUITY – RELATED RATIOS

It measures the shareholders return and value.

Earning Per Share:

It gives the performance of the firm.

9

EPS = NPAT

Number of Outstanding shares/Ordinary shares

Price Earnings Ratio:

It is the number of times the market price of a share is discounted vis-à-vis the EPS of

the firm. It is the most popular financial ratio in the stock market for secondary market

investors as it indicates whether the stock is undervalued or overvalued. This method is

useful as long as the firm is a viable business entity and its real value is reflected in its

profits.

P/E RATIO = MARKET PRICE OF SHARE

EARNING PRICE OF SHARE

8) Shareholding Pattern

9) Capital Market Performance

Company with Sensex

Company with Competitors

Company with Industry Sensex.

10) SWOT Analysis

11) Recent Strategy/Management Discussion

12) Synthesis

1.3 LIMITATIONS

The research that we are doing of the companies and IPOs help us to suggest as to buy,

hold or to sell the particular stock. But these suggestions are based on what we expect,

would happen in the environment, the working of the company, global economies, etc.

This means that whatever value we expect would change as the conditions that are

beyond our control, keep on changing.

10

1.4 COMPANY PROFILE

1991 – Premium Investments was started as a weekly English investment tabloid.

Building our reputation over a period of time with our succinct and up to-the-point

precise analysis, the paper went on to surpass the one lakh per week circulation figure.

We soon went on to publish Premium Investments in Hindi and Gujarati languages and

soon became a popular sight all over India.

Then came the advent of the electronic media which more or less razed down all the

weekly publications. News became real time and the entire dynamics of the industry

changed. The inevitable happened and we downed our shutters in May 2001.

2007 – Armed with knowledge of the new media and constant urging by our loyal past

subscribers, we have now decided to launch the internet version of Premium

Investments. The ethos and principles will remain the same. We will continue to

analyze corporate news and IPO's the way we have always been doing – with a razor

sharp edge. Even our editorial team remains the same. The only change is that instead

of being a weekly, Premium Investments will now be available online 24/7 and news

will be updated and analyzed as they evolve. .

2008- April the website became paid.

11

MANAGEMENT TEAM

S P Tulsian

CEO& Editor

Ruma Dubey Vinod Harlalka

Associate Editor Market Consultant

Lucas D‟Souza Peter Rodrigues

Senior Correspondent Technical Support

Murali A. Raghavan Nandan Maheshwari

Consultant Research Assistant

12

II. BUDGET „08 ANALYSIS

INDUSTRY BUDGET IMPACT ON COMPANIES

AUTOMOBILES – LCV/HCV

Excise Duty reduce from 16% to 12% for LCV and 24% to 14% for HCV

Electric cars and specified spare parts of electric cars exempted from excise duty.

Ashok Leyland, Tata Motors, Eicher & M&M

2/3 WHEELRS

Excise duty reduce from 16% to 12%

Hero Honda, Bajaj Auto, TVS Motors & Kinetic Motor

PSU BANKS

Government to waive off loans of 60,000 crore of farmers which will help banks to clean up their balance sheets by reducing the NPAs of public sector banks.

SBI, Dena, Bank, UCO Bank, Vijaya Bank, Andhra Bank, IDBI, PNB, Bank of India & Canara Bank.

CEMENT

Bulk Cement It will attract an excise duty of Rs.400 pmt or 14% ad velorem duty rate whichever is higher Cement Clinker Excise duty of Rs.450 per metric tonne.

ACC, Ambuja, Ultra Tech, Grasim & India Cement

13

IT

Introduction of Smart Cards into Public Distribution System (PDS)

Allocation of Rs.100 crore to IT Ministry to set up National Knowledge Centre.

IT/ITES sector has been allocated Rs.1,680 crore in FY09

Excise duty on packaged software increased to 12 % from 8%.

Infosys, TCS, Wipro, Satyam, Tech Mahindra, HCL Tech & Vakrangee

PHARMA

Allocation of Rs.16,534 crore for Health care sector

Increased allocation by 15% for FY09.

Allocation for HIV/Polio.

Custom duty on Life Saving Bulk Drugs reduced from 10% to 5%

Reduction in Excise duty from 16% to 8%

Cipla,Ranbaxy,Panacea Biotech,Dr.Reddys Lab & Nicholas Piramal

FMCG

Reduction in general CENVAT rate from 16% to 14%.

CST reduced from 3% to 2%.

Excise duty on packaged materials and breakfast cereals reduced from 16% to 8%.

Excise duty of16% on coffee and tea pre-mixes removed.

HUL,ITC,Marico

14

INFRASTRUCTURE

Rs.31, 280 crore allocated to Bharat Nirman.

Corpus of Rural Infrastructure Development fund to be raised to Rs.14, 000 cr.

Rs.12,966 crore National Highway Plan

Lanco Infra, GVK Power, GMR Infra, IRB, Mundra Port, Marg Construction, Gammon India & IVRCL Infra.

HOSPITALS

5 year Tax Holiday to set up hospitals in Tier II & III cities.

Allocation of Rs.16,534 crore for Health care sector

Apollo Hospitals & Fortis Health Care

POWER Tata Power, Power grid, NTPC, Neyvilli Lignite, Kalpataru Powers & Jyoti Structures.

Urged bidding for 5 more UMPPS

Allocation of Rs.800 crore proposed for accelerated power reform in FY09.

CAPITAL GOODS

Benefit from Agricultural spending.

More funds allocated to Defence by 10%

5 UMPP and Tilaiya UMPP

BHEL, L&T, Siemens, ABB, Thermax, Crompton Greaves, Areva T&D

OIL EXPLORATION Foreign investments of $3.5 billion to $8 billion expected for exploration and development of new oil blocks in NELP VII

ONGC,Hind Oil Exploration, Videocon Industries, Assam Co, Aban.Offshore, Great Offshore, Jindal Drilling & Shiv Vani.

TEXTILES

Textile Upgradation Fund raised from 911 cr to 1090 crore.

Allocation towards the Scheme for Integrated Textile Parks maintained at Rs.450 crore.

30 integrated textile parks approved.

Arvind Mills,Century,S Kumars,Bombay Deying,Malwa Cotton & Vardhman Textile.

15

National Calamity Contingent Duty of 1% on polyester yarn abolished.

EDUCATION Increased allocation by 20% for FY09

Everonn, NIIT, Educomp, Aptech,Todays Writing & Navneet Publication

PAPER & PAPER PRODUCTS

Reduction in excise duty on paper and paper products from 12% to 8%

20% increase in Fund Allocation for education

West Cost Papers,Rama Newsprint,TN Newsprint, Ballarpur Industries,

TEA

Special purpose Tea fund to get Rs.40 crore.

Crop Insurance Scheme for Tea.

Tata Tea, Jayshree Tea,Tata Coffee,Macleod Russel & Harrisons Malyalam

FERTILISER

Subsidies to continue shift to nutrient based subsidiary.

This negative will remain till Regulator is appointed.

FACT, Nagarjuna Fertilisers, Tata Chemicals, SPIC, Zuari Chemicals, Chambal Fertiliser, RCF & Deepak Fertilisers

AGRICULTURE

Increased allocation for irrigation and farmer oriented policies

Jain Irrigation, Finolex,United Phosphorus,KSB Pumps

CIGARETTES

Excise duty on Filter & Non-Filter Cigarettes bought at par

ITC, Godfrey Phillips, GTC, VST Industries

RETAIL Increase in Exemption Limit will lead to a spurt in Consumers purchasing power.

Pantaloon, Vishal Retail, Koutons, Shoppers Stop, Pyramid

DEFENCE

Increase outlay for defence will increased the demand for Defence related Equipments

BEL,BEML,Ashok Leyland,M&M & Astra Microwaves

16

III. COMPANY ANALYSIS

3.1 KERNEX MICROSYSTEMS (03.03.08 to 07.03.08)

3.2 RELIANCE POWER (10.03.08 to 14.03.08)

3.3 INDIA GLYCOLS (17.03.08 to 26.03.08)

17

3.1 KERNEX MICROSYSTEMS:

CONTENT

1) ABOUT THE COMPANY………………………………………….18

2) MANAGEMENT TEAM……………………………………………20

3) PRODUCTS/SERVICES…………………………………………….21

4) BUSINESS MODEL …………………………………………………22

5) GLOBAL SCENARIO………………………………………………23

6) OPERATIONAL PERFORMANCE………………………………..24

7) FINANCIAL PERFORMANCE…………………………………….27

8) SHAREHOLDING PATTERN……………………………………….31

9) CAPITAL MARKET PERFORMANCE……………………………32

10) SWOT ANALYSIS…………………………………………………….34

11) RECENT STRATEGY………………………………………………..36

12) SYNTHESIS…………………………………………………………….37

18

1. ABOUT THE COMPANY

The company was incorporated on September 16, 1991 as a private limited

company with the object of designing, developing, installing and maintaining

software packages for domestic and international markets. The company is

registered as 100% Export Oriented Unit (EOU) with Software Technology

Parks of India, Department of Electronics, Govt. of India, New Delhi.

Kernex has developed and exported software packages from 1993 to 2003

which is shown under Products and Services heading.

Its turnover increased from Rs. 4.5 Million to Rs. 78 Million during fiscal year

1993 to 2003. In the domestic market, the company also developed Intelligent

Data Acquisition System and installed on Konkan Railways in 53 stations from

1997 to 1999.

The Company has started developing Railway Safety systems from 1999 and

successfully developed and demonstrated a prototype of ACDs to Konkan

Railway Corporation Limited (KRCL) and Members of the Railway Safety

Board.

In March 2000 it entered into a Memorandum of Understanding with KRCL for

Technical Collaboration for developing full scale networked Anti-Collision

Devices (ACDs). The company, jointly with KRCL, took up an intensive

analysis of the major accidents that occurred in India, The functional

requirements of the clients and operational safety procedures have been fully

considered, for designing the logics of Anti Collision Systems. Based on the

concept and domain knowledge provided by Konkan Railway Corporation Ltd,

The Company has developed the networked Anti-Collision Devices, using

Global Positioning System, Radio Data Communication, Application Logics

and Inter facing these with an Auto Breaking System developed by KRCL.

The product has been successfully developed for deployment after initial and

extended field trials on the Amritsar- Jalandhar Section of Northern Railway

19

using 125 ACDs of different types during July 2002 to January 2003. The

product underwent improvements with series of successful trials over a period

of 3 years. Consequent to an agreement in the year 2003 with KRCL, the

company became the exclusive manufactures and suppliers of these systems to

KRCL including installation and maintenance. On January 20, 2004, the then

Honorable Railway Minister launched the project at Kishangunj, Bihar on a

1,730 KMs rail route on the Northeast Frontier Railway route.

The company has also developed Auto Driving Devices (ADDs) for Metro

Sky-Bus System during 2003 - 04 under technology partnership with KRCL.It

has also been carrying out research and development work on Advanced

Railway Signal Systems on cost sharing basis with KRCL.

Kernex Microsystem have come with an IPO in 2005 of Rs.1000 million which

has resulted in an increase in the equity capital of the company from Rs.74

million to Rs. 113 million.

The company‘s registered office is located in Hyderabad and also has wholly

owned subsidiary in U.S.A. i.e. ―Avant-Garde Info systems, Inc‖.

20

2.MANAGEMENT TEAM

1 Mr. B Murali Mohan Director

2 Mr. S V Subba Raju Chairman / Chair Person

3 Mr. R Sankaran Director

4 Dr. Jyoti Raju Director

5 Dr. M Anji Raju Director

6 Col. S S Rajan Director

7 Mr. S Nandakumar Director

8 Col. L V Raju Managing Director

Key Executives

1 Mr. I Srinivas Co. Secretary & Compl. Officer

2 Mr. V Badarinarayana Chief Financial Officer

About Managing Director

Col. L.V. Raju (Retd.) 61, holds a Post Graduate Diploma in Industrial Engineering &

Information Technologies from NITIE, Bombay, PG Diploma from College of Military

Engineering, Pune, PG Diploma in Military Science from Defense Service Staff

College, Ooty, Tamil Nadu and BE in Mechanical Engineering from Sri Venkateswara

University, Tirupati. He joined as Managing Director of Kernex on August 25, 1994.

During his tenure, the Company has diversified into Research & Development of new

technologies and products and was instrumental in company's development of anti-

collision devices for use in Railways. His main area of interest is railway safety and

signal systems.

21

3. PRODUCTS & SERVICES

PRODUCTS

SOFTWARE PACKAGES

(EXPORT)

NAME USES

Mimex GUI Application

LearnX Self Learning Tool

ELX

Flicker

MathX Interactive mathematical wizard

EzEc Builder Electronic Commerce Tool

Netcare

E-DOCS Document management

DOMESTIC MARKET

RAKSHA KAVACH/ACD It is an electronic control system

designed to minimize collisions.

Auto Control System (ACS) It monitors and control continuously

rail movements.

Satdham Safety System

Auto Tracking & Safety System

Accurex

Edocs

SERVICES

- Technical Feasibility

- Time and cost estimation

- Positional Survey

- Inter ACD Radio

communication Survey

- Point Survey at Stations

- Pilot Project Execution

- Configuration and

Customization

- Warranty Maintenance

- Post Warranty Annual

Maintenance

22

4. BUSINESS MODEL

This shows from where the business generates cash. In this case, it is through

sales in the foreign market and also services. But in the domestic market its

major source is through services provided. But after the RAILWAY BUDGET

was announced it is expected that its sales in the domestic market would also

increase.

CASH GENERATION

DOMESTIC OVERSEAS

SERVICES SERVICES SALES

23

5. GLOBAL SCENARIO

Above graph is about Railway network of all over the world.So we can say that

Germany has the largest railway network of 76,473 km,China has 74,200 km ,India

63,221km and Japan has 27,628 km.

So we can say that Kernex Microsystems has ample of oppturnity in countries like

Gremany,China and all .So the compnay should manufactures product to suit the global

market and this can be done by entering into partnership with overseas companies .

24

6. OPERATIONAL PERFORMANCE

SALES & ITS GROWTH

Analysis:-

The major portion of the company‘s income comes from the renewal of its maintenance

contracts. But from the last quarter we see a growth in the sales of its products like

ACDs etc. which can be seen from the above graph. This would mean that the

company‘s sales in the coming fiscal would see more growth, with the combined

strength of its maintenance service contracts and also the increased product sales.

We see a YoY growth increasing from -28% to 7%.

25

COST STRUCTURE

Analysis

From the above figure, we see that in the recent quarters, there has been a major shift in

the company‘s cost structure.

There has been a major decline in the cost of sales. Due to unavailability of

data, we cannot specify the reasons of this decline. But we can conclude,

logically, that this may be due to improvement in the technical equipments or

decline in the cost of raw material or other costs.

There has been an increase in staff costs.

The other expenditures do not vary much.

The research and development cost has emerged in Q3 FY 08. This shows that

there has been a major research program undertaken.

Interest has emerged in the Q2 FY08 and has declined further in Q3. This shows

that the company is paying interest on the secured loan it has taken.

The depreciation is almost same in all the quarters. This shows that they have

not incurred much on fixed assets.

The tax has been almost the same in the three quarters as there is no major

change in the government policies regarding tax.

26

OPERATING PROFIT MARGIN


ITEMS Sep.06 Dec.06 March.07 June.07 Sep.07 Dec.07

NET SALES (Rs. Mn) 55.17 55.63 54.18 46.69 50.19 58.90

OPERATING

PROFIT (Rs. Mn) 28.40 33.20 39.86 29.06 26.84 27.76

OP MARGIN (%) 51.48 59.68 73.57 62.24 53.48 47.13

Analysis:-

From the above we can say that OPM was on its peak in March, 07 quarter which

started declining, but we may see a rise in its profit margin after its work starts on the

Indian Railway Project.

27

7. FINANCIAL PERFORMANCE

ITEMS Sep.06 Dec.06 March.07 June.07 Sep.07 Dec.07

PAT 14.07 12.04 8.74 14.56 13.15 14.02

NET

PROFIT 14.07 12.04 8.74 14.56 13.15 14.02

NET

SALES 55.17 55.63 54.18 46.69 50.19 58.90

NET

PROFIT

MARGIN 25.50 21.64 16.13 31.18 26.20 23.80

28

Analysis:-

We see that the NET PROFIT MARGIN is declining in March 07 quarter while

there was an increase in the operating profit margin. This shows that there has

been an increase in the expenses like depreciation, tax etc. Thus, this gives the

reason pertaining to the decrease in the net profit margin.

In the next quarter, they have managed to bring their profits to the level where

they can easily meet the other expenses to maintain their level of PAT and they

have continued to maintain the same in the successive quarters with very minor

ups and downs.

But in coming quarters, there will be a change as they will be getting orders

from Indian Railways.

29

RATIOS

RETURN ON CAPITAL EMPLOYED (ROCE)

YEAR

PBDI

T

CAPITAL

EMPLOY

ED

ROC

E

Year Ended

06-07 141.22 1371.00 10.30

Year Ended

05-06 147.76 1351.00 10.94

Year Ended

04-05 167.37 255.00 65.64

RETURN ON EQUITY (ROE)

YEAR

NET

PROFIT

NET

WORTH ROE

Year Ended 06-07 63.80 1260 5.06

Year Ended 05-06 85.80 1209 7.10

Year Ended 04-05 89.50 246 36.38

DEBT EQUITY

YEAR

TOTAL

DEBT EQUITY

DEBT

EQITY

RATIO

Year Ended 06-07 0.00 113.00 0.00

Year Ended 05-06 0.00 113.00 0.00

Year Ended 04-05 0.00 74.00 0.00

30

EARNING PER SHARE (EPS)

YEAR EPS

BASIC DILUTED

Year Ended 06-07 5.61 NIL

Year Ended 05-06 7.55 9.93

P/E RATIO

YEAR C .M. P* EPS P/ E

FY 07 126 5.61 22.46

FY 06 271 7.55 35.89

* - C.M.P is taken as on 31.03.07 and 31.03.06 respectively.

31

8. SHAREHOLDING PATTERN

Analysis:-

In the above pie-chart we see that the major chunk of the shares is owned by the

promoters, which speaks highly of the management.

This shows that the promoters have faith in their company.

From the above we can say that there can be an increase in the share of FIIs,

NRIs & MF as company starts its project in Indian Railways which can lead to

increase in share price.

32

9. CAPITAL PERFORMANCE

Analysis:-

In relative market index, we have compared company‘s share price with Sensex

for the period January 2007 to February 2008.

We see that initially, the prices were same as per the market but then it went

down. In June 07 it rose above the Sensex and maintained itself there for around

three months and then went up to a high of 180 while market was just at 140.

Then it came down to 140 where the market was, in October 07.

When initially the market price of Kernex‘s share was down because public

might not have the knowledge about the company. But after some period of

time, people started taking interest in the company by knowing that this is the

only company that makes ACD‘s which will be soon implemented all over

India.

This shows that, though the market was not good still the share prices were

going up. This may be because of

33

1. The unique nature of the company‘s working

2. Its good income volume

3. Its future growth prospects

4. The present status of its working in the North Frontier areas

5. Its expectation of flow of orders from Indian Railways.

6. The fancy of the market for the company.

34

10. SWOT ANALYSIS:

STRENGTHS:

Unique Player

Excellent R&D Base

High EPS because least interest and depreciation burden.

Debt free company. So higher EPS because it has a low burden

of interest and also of repayment.

Exclusive International marketing rights

The company has an exclusive international marketing right for

ACDs, suitable and cost effective on medium to low density routes

both for passenger and freight trains, in the developing countries

with a royalty payment to KRCL to be mutually agreed upon. The

company is planning to enter international markets by establishing

marketing offices at New Mexico for USA, Mauritius for Africa,

Italy for Europe and Bangkok for South East Asia, with the base

established at Hyderabad.

Exclusive Manufacturer of ADDs for Metro Sky Bus

Kernex is entitled to hold intellectual property rights for the Auto

Driving Devices for Metro Sky Bus Urban Transport System and the

sole supplier of the ADDs to KRCL. It is also the partner to sky bus

which is economical and space saving in comparison to metro rail.

OPPORTUNITIES:

Order from Indian railways for 62,500 km. in next 7 years.

Well positioned to take on opportunities in other countries like

Egypt, S. Africa, Brazil, Argentina, Venezuela, Indonesia,

Cambodia and Vietnam.

The Company also makes auto driving devices for metro

railways, which would be developed once the Indian market for

the same is developed.

Entry Barrier for New Players

Kernex Microsystems is the only manufacturer of ACDs in India

and also holds the exclusive manufacturing and international

35

marketing rights. This was in collaboration with KRCL which

supplies to Indian railways. Hence there could be stiff resistance

for new players to enter the market.

THREATS:

As it has a huge dependence on Indian Railways for sales in

Domestic Market. Thus, if any changes made in the orders, it

may hit the company very bad.

Dependence on KRCL

Kernex solely manufactures ACDs but the Intellectual Property

Rights vests with KRCL. Kernex is totally dependent on KRCL

for marketing ACDs in India. If KRCL is not able to sell ACDs

in India, company‘s revenue s from ACDs would be affected as

railways are free to adopt any system and 90 percent of

company‘s revenues are from ACDs

36

11. RECENT STRATEGIES

Kernex Microsystems (India) Limited has recently issued Bonus shares in the

ratio of one new share (Bonus share) for every ten shares held by the

shareholders, with the record date for the Bonus entitlement having fixed at

October 17, 2007.

According to Railway Corporate Safety Plan, the ACD system will be deployed

in the entire Indian Railway Network by 2013 that is in the next 6 years. As

part of above, survey work over 10,000 KMS is in progress.

The estimated amount of contract for Operation and Maintenance of ACD

systems will be about Rs.28.50 Crores for the period from September, 2005 to

March, 2008 and the value of such Contracts will be about Rs.15.00 Crores for

the financial year 2007-08.

37

12. SYNTHESIS

Kernex Microsystems is engaged into manufacturing of Networked Anti-

Collision Devices (ACD) for Indian Railways and had installed over 2,500 kms.

In Indian Railways since 04 – 05.

These ACDs are supplied by the company to Railways, through Konkan

Railways, under its exclusive Technology and Production Tie-up.

Railways Board, after review of ACD Pilot Project in North Frontier Railways,

set by the company, declared it to be completed, commissioned and proved to

be successful. According to Railway Safety Plan, ACD Systems will be

deployed in the entire Indian Railway Network by 2013 and survey over 10,000

kms is in progress.

Railway Minister Lalu Prasad Yadav has cleared deploying thee ACDs under

Railway Safety Plan, in its 08 – 09 budget. This was pending for quite a long

time, which finally saw light of the day.

The total outlay by Railways on these ACDs, till 2013 – 14 is estimated to be

about Rs.3,500 crores, taking cost escalation and design changes into

consideration and for about 56,000 kms., covering all routes of Indian Railways.

So, annual flow of orders to the company could be about Rs.400 crores.

For FY 07, total income of the company was at Rs.29.68 crores, of which

Rs.6.90 crores came via bank interest and provisions written back. Due to this,

EPS for the year was at Rs.5.61. The income of Rs.21.80 crores from its core

business is purely of maintenance of ACDs supplied earlier by the company,

which is about 15% annually, of cost of equipment.

Even in first nine months of FY 08, total operational income of about Rs.15

crores is purely from AMC of ACDs supplied by the company to Railways,

earlier. Even this activity would give an EPS of about Rs.5 to the company.

38

The present paid-up equity of the company is at Rs.12.50 crores, which got

raised due to 1 bonus share, issued on every 10 shares held, by the company. Of

this, promoters holding are 58% while 42% is held by the public.

The EBITDA margin of the company on these ACDs are over 40% and costs

about 35% to 40% against similar devices, if imported. Also, any supply of

ACDs gives an assured AMC of 15%, every year, to the company, on

equipments supplied. ACD supplied by the company in 05 – 06 is enabling the

company to earn AMC revenue of Rs.20 crores, annually, by which EPS of

about Rs.5 is being earned.

Once this supply will start to Railways, the performance of the company, would

come in new orbit with EBITDA in excess of Rs.50 crores, depending upon the

quantum of order flow from Railways. Even bottomline could be close to Rs.25

crores, giving an EPS of Rs.20 as the company has least interest and

depreciation burden.

The company is also aiming to capture the major segments of medium to light

density Rail routes in developing countries, as the ACD system is efficiently

suited and cost effective. The company is hopeful of securing ACD orders from

countries like Egypt, South Africa, Brazil, Argentina, Venezuela, Indonesia,

Cambodia and Vietnam.

Even continuous upgradation keep happening in ACDs as R&D is the main

focus of the company. This would keep demand of improved version products

in place, which shall assure continuous and assured business to the company.

The company also makes Advanced Railway Signal Systems, for which major

trust has been given by Railways in its recent budget. This could be another area

of growth for the company.

The company is also developing ―Multi Section Digital Axle Counter‖ in

collaboration with Altpro, Zerob, Croatia and Indian Railways has requirement

of about Rs.600 crores, in the next five year for this product.

39

The company also makes Auto Driving Devices for Metro Railway, which

would be developed once Indian Market for the same is developed.

The company is a debt free company and Rs.99 crores, raised by the company

from IPO is still available with the company.

With expectation of these Railway orders, working of the company would

improve sharply from FY 09. Since the sector enjoys a very high PE multiple,

share had potential to cross Rs.350 mark in the next 10 – 12 months. Long term

prospects are extremely bright.

Share at Rs.170 is a safe bet which can give a return of 100% in the next 12

months and a consistent return of 40% to 50%, annualized, over the next 2 – 3

years.

References

www.kernex.in

www.bseindia.com

www.sptulsian.com

www.moneycontrol.com

http://www.kernex.in/

http://www.bseindia.com/

http://www.sptulsian.com/

http://www.moneycontrol.com/

40

3.2 RELIANCE POWER IPO

CONTENT

PRE - IPO

1. ABOUT THE COMPANY……………………………………………..41

2. HIGHLIGHTS………………………………………………………….42

3. KEY RISKS…………………………………………………………….43

4. INDUSTRY OVERVIEW……………………………………………..44

5. ISSUE DETAILS ………………………………………………………46

6. OBJECT OF THE ISSUE……………………………………………...47

7. UTILIZATION OF ISSUE PROCEEDS……………………………...48

8. IPO GRADING………………………………………………………….48

9. PAYMENT METHOD………………………………………………….49

POST - IPO

1. IPO DETAILS…………………………………………………………...50

2. DISCOVERY OF PRICES……………………………………………...51

3. LISTING………………………………………………………………….52

4. SHARE PRICE TRENDS ……………………………………………….53

5. ANALYSIS OF BONUS/IMPLICATIONS……………………………..55

6. WHY IPO DID NOT DO WELL?.............................................................57

7. PRESENT SCENARIO…………………………………………………..59

41

PRE – IPO


Reliance Power Limited is a part of the Reliance Anil Dhirubhai Ambani Group (R-

ADAG). It is engaged in the construction and development of gas based and coal based

thermal power projects and hydro electric power projects in various parts of the

country.

Reliance ADA group company, Reliance Energy Limited (REL) has a significant

experience in project execution. The Company expects to draw on the expertise of REL

in providing engineering, procurement and construction (EPC) services and to benefit

from the rights that Reliance Natural Resources Limited (RNRL) has to fuel reserves. It

has one of the Largest Portfolios of Power Generation Projects under development in

India. The company intends to develop 13 projects which have a combined planned

installed capacity of 28200 MW. It plans a diversified portfolio of power projects –

seven coal-fired projects (14620 MW) employing super-critical (13120 MW) and sub-

critical (1500 MW) pulverized coal combustion (PCC) technology, two gas-fired

projects (10280 MW) employing combined cycle gas turbine technology and four run

of the river hydroelectric projects (3300 MW).

Strategic location advantage will provide cost benefit. The proposed project sites are

located in western India (12220 MW), northern India (9080 MW), north eastern India

(2900 MW) and southern India (4000 MW). Reliance ADAG brand has historically

created shareholders‘ wealth. There has been a Growth of the Indian Power Generation

Sector. The Peak deficit in FY2007 was 13897 MW.

42

2. HIGHLIGHTS

Developing 13 medium and large power projects.

Planned installed capacity of 28200 MW, largest portfolio of power generation

assets in India.

CRISIL has assigned a grade of 4/5 to the issue, indicating above average

fundamentals.

First IPO of a Private Company in India to offer discount of Rs 20 (close to 5%

of issue price) to retail investors.

43

3. KEY RISKS

The power sector is highly dependent on Government‘s rules and regulations.

Securing uninterrupted fuel supplies is likely to be challenging

The company has no power plants in operation. Executing big plans is not likely

to be easy.

The company does not have significant operating history.

Projects under development have long gestation period.

44

4. INDUSTRY OVERVIEW

The Government of India has identified the power sector as a key sector of focus to

promote sustained industrial growth. It has embarked on an aggressive mission –

―Power for All by 2012‖– and has undertaken multiple reforms to make the power

sector more attractive to private sector investment.

The power industry in India has historically been characterized by energy shortages

which have been increasing over the years.

The following graph represents the gap between requirement and supply of electricity

in India from FY2002 to FY2007:

GAP BETWEEN ENERGY REQUIREMENT AND SUPPLY IN INIDIA

MU – Million Units

Public entities such as the National Thermal Power Corporation (NTPC) and state

generation companies have been prominent players in capacity addition in the power

sector. The participation of private sector, however, has increased over time owing to

power sector reform.

According to Central Electric Authority (CEA), the total energy requirement in India

will increase to 968659 Gigawatt hours (GWh) by fiscal year 2012, 1392066 GWh by

fiscal year 2017 and to 1914508 GWh by fiscal year 2022. This would lead to an

annual Electric Peak load of 152746 MW in fiscal year 2012, 218209 MW in fiscal

year 2017 and 298253 MW in fiscal year 2022. The northern region is expected to

contribute 30.1% and the western region is expected to contribute 28.4% of the overall

45

annual Electric Peak load in fiscal year 2022. This is explained below with the help of a

Graph.

The following graphs show Energy Requirement and the Peak Load in

India in coming years:

GWh – Giga Watt hours

MW – Mega Watts

46

5. ISSUE DETAILS

IIA

Industry Power – Generation

Issue opens 15th Jan, 2007

Issue closes 18th Jan, 2007

Price Band Rs. 405 – Rs. 450

Face value Rs. 10

Issue size (No. in Mn) 260

Promoters Contribution(No. in Mn) 32

Net Issue Size (No. in Mn) 228

Net Issue Size (Rs. in Mn) 92,340 - 1,02,600

Discount to Retail Investors Rs 20 (Fixed)

Issue type 100% Book Building

Market Lot (No. of shares) 15

Book Running Lead Managers (BRLM) Enam, JM Financial, Kotak Mahindra

Capital, UBS Securities, ICICI

Securities, JP Morgan, ABN Amro

Securities, Macquarie India, SBI

Capital Markets and Deutsche

Equities.

Registrar Karvy Computershare

Listing Exchange BSE, NSE

47

6. OBJECTS OF THE ISSUE

The Issue Proceeds are intended to be utilized, after deducting the underwriting and

issue management fees, selling commissions and other expenses associated with the

issue (the Net Proceeds) for the following objects:

1. From issue to part-finance of construction and development costs of certain

identified projects worth Rs. 86424.3 million.

(Rs. in millions)

PROJECTS LOCATIONS AMOUNT

600 MW Rosa Phase I Uttar Pradesh 3931.5

600 MW Rosa Phase II Uttar Pradesh 6149.5

300 MW Butibori Maharashtra 4114.2

3,960 MW Sasan Madhya Pradesh 54613.5

1,200 MW Shahapur Coal Maharashtra 11458.0

400 MW Urthing Sobla Uttarakhand 6157.6

TOTAL 86424.3

2. General corporate purposes.

3. Achieve benefits from listing of the equity shares.

48

7. UTILIZATION OF ISSUE PROCEEDS

(Rs. in millions) Annual funding schedule

Identified Fiscal Fiscal Fiscal Fiscal Fiscal Generating

Estimated date

of

Projects Subsidiaries 2008 2009 2010 2011 2012 Total

Plant

(MW) commissioning

Rosa

Phase I RPSCL 36.9 1,645.80 2,249 0 0 3,931.50 300*2 = 600

Unit 1 :

December 2009

Unit 2 : March

2010

Rosa

Phase II RPSCL 584.4 1,129.30 2,024.50 2,411.30 6,149.50 300*2 = 600

Unit 1 : June

2010

Unit 2 :

September 2010

Butibori VIPL 375.3 855 2,286 597.9 4,114.20 150*2=300

Unit 1 : March

2010

Unit 2 : June

2010

Sasan SPL 15,000 7,072.80 5,415 17,904 9,221.70 54,613.50 660*6=3960

Unit 1 : May

2013

Others : April

2016

Shahapur

Coal MEGL 4,375 480.8 742.5 2,492.50 3,367.30 11,458.10 600*2=1200

Unit 1 :

September 2011

Unit 2 :

December 2011

Urthing

Sobla USHPPL 75 225 426.6 1050 4,381 6,157.60 100*4=400 March 2014

8. IPO GRADING

The issue has been graded by CRISIL Limited as CRISIL IPO GRADE 4/5, indicating

that the fundamentals of the issue are above average.

49

9. PAYMENT METHOD

Reliance Power IPO has 2 Payment Methods

The Payment Methods available to investors to apply in this Net Issue are as follows:

1) Payment Method - 1

Only Retail Individual Bidders and Non-Institutional Bidders are eligible for

this method QIBs cannot submit a Bid under this Payment Method.

While bidding, the Bidder shall make a payment of Rs. 115 per Equity Share,

irrespective of the Bid Price. Investors should note that the total Bid Amount

will be used to determine whether a Bid is in the Retail Individual category,

Non-Institutional category or not, and not the amount payable on submission of

Bid-Cum-Application Form.

At the time of allotment: 1. If the amount paid by the Bidder is equal to or

higher than the total amount payable (being the Issue Price multiplied by the

number of shares allotted) by the Bidder on the Equity Shares allotted to the

Bidder, we reserve the right to adjust the excess amount towards the Balance

Amount Payable and issue fully paid Equity Shares only. The excess amount, if

any, after adjusting the Balance Amount Payable shall be refunded to the

Bidder (i.e., Refund = Total amount paid on bidding minus the total amount

payable on the shares allotted). 2. If the amount paid by the Bidder is less than

the total amount payable by the Bidder (being the Issue Price multiplied by the

number of shares allotted) on the Equity Shares allotted to the Bidder, we

reserve the right to adjust the excess of the amount received from the Bidder

over the Amount Payable on Submission of Bid-cum-Application Form

towards the Balance Amount Payable and issue a Call Notice for the balance.

2) Payment Method - 2

Bidders under any category can choose this method.

While bidding, the Bidder shall have to make the full payment (Bid Amount

multiplied by number of Equity Shares bid) for the equity shares bid. Bidders in

QIB category will be required to make payment of 10% of the Bid Amount

multiplied by the number of Equity Shares bid, with the balance being payable

on allocation but before allotment.

50

POST – IPO

1. IPO DETAILS.

SUBSCRIPTION DETAILS AS ON THE CLOSURE OF THE ISSUE (18TH

JANUARY

2008)

Sr.No. Category

No. of shares

offered/reserved No. of shares bid for

No. of times of total

meant for the

category

1

Qualified Institutional

Buyers (QIBs) 136800000 11302275660 82.619

1(a)

Foreign Institutional

Investors (FIIs) 9071443275

1(b)

Domestic Financial

Institutions(Banks/

Financial

Institutions(FIs)/

Insurance Companies) 2021003775

1(c) Mutual Funds 186855315

1(d) Others 22973295

2

Non Institutional

Investors 22800000 4332525630 190.0231

2(a) Corporate 1851688320

2(b)

Individuals (Other than

RIIs) 2384642025

2(c) Others 96195285

3

Retail Individual

Investors (RIIs) 68400000 1017218385 14.8716

3(a) Cut Off 971736060

3(b) Price Bids 45482325

51

We see that the institutional buyers made more bids as compared to the non

institutional buyers. Here the RIIs made a meager amount of bids of just.

2. DISCOVERY OF PRICES

The company has decided to keep the price of Rs.450 for QIB‘s and Rs.430 for Retail

Investors.

52

3. LISTING DETAILS

The details pertaining to the listing of the IPO on the Stock Exchanges is as follows:

BSE DETAILS

Listed on 11/02/2008

Issue Price 450

Open 547.80

High 599.90

Low 355.05

Close 372.5

BSE Script Code 532939

BSE Symbol : RPOWER

NSE DETAILS

Listed on 11/02/2008

Issue Price 450

Open 530

High 530

Low 355.3

Close 372.3

NSE Script Code 201879

NSE Symbol : RPOWER

53

4. SHARE PRICE TRENDS

The following graph shows the trend in the share price of Reliance Power since its

listing from 11th February 2008 till date.

Analysis:-

Reliance Power was issued at Rs.450 .Despite great response to the mega IPO of

Reliance Power (RPower), shares of the company settled at a discount of 16.67% due

to prevailing adverse market sentiments, fuelled by renewed indications of a US

recession and global meltdown. Shares opened at a premium of Rs 80, or 17.78%, at Rs

530 as compared with the issue price of Rs 450 a share. It touched a high of Rs 530 and

a low of Rs 355.30. It finally closed with a discount of Rs 75, or 16.67%, at Rs 375. On

18th February the stock gain a momentum as there were news of Bonus and all. 25th

February Company decides to give bonus shares in ratio of 3 shares for every 5 shares

held to all shareholders excluding the promoter group. Even after that also share price

did not went up or remain constant. The share price start falling and it touch a level of

Rs.350 from Rs.450 level before bonus declaration. We can say that stock was

overvalued and the company was not having any ongoing projects just they were on

papers. This was main reason why the stock did not do well.

54

Relative Share Index

In relative market index, we have compared company‘s share price with Sensex for the

period starting from 11th

February, 2008 to 14th

March, 2008.The above graph clearly

shows how share price of Reliance Power is down as compare to Sensex .The main

reason was that the IPO was overvalued.

55

5. ANALYSIS /IMPLICATION OF BONUS

Reliance Power gave 3 bonus shares for every 5 shares held, which was 60% of the

shares held.

In fact, call it compensatory issue and not bonus issue, as issue has been made to bring

down the cost of investors, having acquired shares in IPO, in retail category, from

Rs.430 to Rs.269 per share and in non-retail category, from Rs.450 to Rs.281 per share.

The issue of free shares also establishes a fact that issue was overpriced by about 60%

and even this issue has failed to take its share price to cross Rs.450 mark.

The present equity of the company has risen from Rs.2260 crores to Rs.2396.80 crores.

In order to enable Reliance Energy Ltd (REL) to maintain its stake, in relative term,

post bonus, Anil Ambani would be offering about 6.14 crore shares from AAA Project

Venture P. Ltd. (100% owned by Anil Ambani) (AAA) to REL, free of cost. Due to

this, absolute holding of REL would rise from 101.60 crore share to 107.74 crore

shares, keeping its stake at 44.96%, pre-bonus and post-bonus. Conversely, holding of

AAA would fall from 44.96% (pre-bonus) to 39.83% (post-bonus).

IMPLICATIONS

This issue is made, mainly to avoid any foreseeable litigation by any shareholder of

REL for excluding REL from bonus eligibility, in spite of REL holding pari-passu

shares.

R Power in its statement issued to BSE, has stated that ―The reduction of Mr. Ambani‘s

shareholding in Reliance Power by 5% from 45% to 40% represents a contribution of

nearly Rs.5000 crore (US $ 1.2 billion) by him, in favor of nearly 6 million investors in

Reliance Energy and Reliance Power.‖ This statement is a wrong statement as value of

6.14 crore share of R. Power, to be given by AAA to REL shall be about Rs.1800

crores, calculated on ex-bonus basis.

The effective cost per share to both the promoters viz. REL and AAA is Rs.16.93 per

share. So on actual cost basis, it is about Rs.104 crores only.

In another statement, it was stated that R-Power market capitalization is over Rs.94000

crores, which is true based on closing price of 22-02-08. However, on ex-bonus basis, it

may be close to Rs.72000 crores, if calculated at Rs.300 per share, on ex-bonus basis.

Also, notice by REL to BSE states that R. Power is implementing power projects with

aggregate capacity of over 28000 MW. Of this, the company has only 6 power projects,

for 7060 MW, as ―Identified Projects‖ for which cost of project and means of Finance

has been worked out and these were intended to get financed from the IPO proceeds

56

while balance of Rs.22835 crores to be financed by debt, out of total project cost of

Rs.31789 crores.

Remaining 6 projects for 21140 MW were under development for which, not much

headway or progress has been made like feed stock tie-up, land procurement, financial

closure or order of equipments, plant and machinery etc. Obviously, financing of these

projects would dilute the equity of the company from Rs.2260 crores and will also raise

debt of the company beyond Rs.22835 crores.

The present bonus issue would materialize by 1st week of April, considering about 24

days for postal ballot and 14 days for record date. After declaring of Bonus on 24th

February, 2008 the share price was there at a level of Rs.450 but then it started falling

and now it‘s trading around Rs.350 and this shows that this was the gimmick and

nothing for the investors really.

Hereafter, the share of R Power would get valued purely on fundamentals, for which

NTPC, maybe, a right comparison. NTPC is presently valued at a PE multiple of 20

times, on historic earnings of FY 08 and at a price to book of 3 times. Since NTPC is

into existence for years, its book value is reflecting very low cost, for its power

generating capacity. The present market capitalization of NTPC is at Rs.165000 crores

while enterprise value is about Rs.180000 crores considering net debt of Rs.15000

crores. This gives a per MW valuation at Rs.6.50 crore as NTPC has a present

generating capacity of 28000 MW. The present cost of new power project is Rs.4.50

crore per MW for thermal while Rs.6.50 crore per MW for Hydro. So on breakup value

of assets method, share is valued at about 1.4 times.

Going by these parameters, even R-Power stock should get valued on the same basis, as

no premium for such long gestation period or to the group can be given. Identified

project of the company would go on stream, earliest on December 09 being 300 MW of

Rosa Phase I while 3960 MW Sasan project will start from May 2013, with its final

commencement from April 2106.

In these circumstances, the issue of bonus share should be viewed more as

compensatory issue to correct the higher price charged by R-Power.

57

6. WHY IPO DID NOT DO WELL?

Extremely poignant and poetic, with a tongue-in-cheek look at the current state of the

markets and the investors, this is indeed the bitter scenario today. The IPO of Reliance

Power is now considered a jinx for the markets. The primary markets and the secondary

markets in tow have been on the decline ever since the IPO closed. And on 11th

Februray,2008 after its listing pounded badly on the BSE and NSE, it was quoted at

Rs.372, much below its IPO price of Rs.450 and even lower than the retail discounted

price of Rs.430 per share.

The biggest victim of this drubbing on the counters of Reliance Power has been the

brand equity of the entire group – the name tag of ―Reliance‖. Be it Mukesh or Anil

Ambani, the way people have been hurt, because of having invested in the IPO, mainly

on the basis of the name tag of ―Reliance‖ is something that they will not forget in a

hurry. This has happened for the first time in the history of Reliance that a Reliance

IPO, on the very first day of trading was ruling so much below the IPO price. The fact

that this happened, shook the entire confidence of the markets.

As on 11th

February, 2008, all the Reliance stocks, of both the brothers were down in

the dumps. Reliance Industries was down at Rs.2275, RNRL at Rs.124, RPL at Rs.152,

Reliance Capital at Rs.1615, Reliance Communication at Rs.590, Reliance Energy at

Rs.1580 and RIIL at Rs.1632. The newly listed Reliance Power ended the day at

Rs.372, as against the IPO price of Rs.450.

Reliance Power, a few days ago boasted of having the largest number of shareholders,

as prior to its listing the count of total shareholders was 41.85 lakh shareholders, surely

that number would undergo a drastic change now. Going by the trend shown today, it

seems sure that by the end of this fiscal, till 31st March 2007, the total number of

shareholders would be less than 30 lakh.

Reliance Power is a classic case of overpricing. There was a sense of madness when the

IPO opened for subscription and everyone, right from the dabbawallah to the

housewife in the far flung suburbs, all rushed in to invest. Kudos to the PR agency of

ADAG and surely, the ad agency of the IPO needs to be congratulated too, for having

done such a fantastic job of promoting Anil Ambani and the ―Reliance‖ tag! People

invested without even casting a glance at the fundamentals of the issue, pricing did not

matter at that time. There was so much hype that all felt they will make a bounty if they

invested. Now they know!

The retail investors got to know of this the hard way. The drubbing today has made

them realize that the market is always right and just a name or a person cannot get away

with anything. Unfortunately, they learnt this lesson by paying a price.

58

For the overpricing, the blame lies fair and square on the shoulders of the BRLMs to

the issue – Kotak Mahindra Capital, UBS Securities, ABN Amro, Deutsche Bank,

Enam Securities, ICICI Securities, JM Financial and JP Morgan. All such big names in

the financial sector of India, it is indeed sad that they altogether indulged in such

overpricing, at the cost of the investors. These are supposed to be the most learned

people when it comes to IPOs and for them to have not judged the markets and the

effect of their pricing on the markets is indeed deplorable. It makes make actually

wonder what exactly these BRLMs are up to.

The blame for this IPO also lies with the grey market to a very large extent. The way in

which the premiums were quoted on the grey market is what led people to think that

they will easily get an immediate return on their investment. Now they hopefully know

better!

There is news that it is the QIBs who are the maximum sellers on the Reliance Power

counter. How can they do that? These QIBs were the ones who rushed to get as many

shares as they could and that too at the maximum rate of Rs.450. So now that the tides

have turned and the secondary markets have also changed their direction, the QIBs are

getting out like rats from a sinking ship. Doesn‘t this now mean that, in the future, if

QIBs clammer to get shares in any particular IPO, it is best to then stay away as they

could be the reason for the stock crashing on listing? Infact on Dalal Street today, QIBs

has become a bad word!

This unexpected turn of Reliance Power now casts a shadow over the IPO of the

Reliance Infratel, for which Anil Ambani has already filed in the Draft red Herring

Prospectus with SEBI. He had probably hoped to cash in further on the brand equity. It

seems there were almost five to six more IPOs planned by both the brothers – Reliance

Fresh and Reliance Entertainment being in the forefront. After this, maybe the brothers

also need to get a reality check done on their expectations and public perception of their

brand equity.

59

7. PRESENT SCENARIO:

On February 11, 2008 equity shares of Reliance Power got listed. The shares opened at

Rs.547.8 which was at a premium of 27.39% against the issue price of Rs.430 to Retail

Investors and at 21.73% against the issue price of Rs.450 to Non-Retail Investors.

Despite great response to the mega IPO of Reliance Power (RPower), the share price

of the company closed at Rs.372.5 even though it touched the height of Rs.599.9 but it

could not sustain for a longer period at the apex .This fall was due to prevailing adverse

market sentiments, fuelled by renewed indications of a US recession and global

meltdown. Incessant selling on the counter right since it got listed was also stated to be

one of the biggest reasons. Even today it continues to be quoted at below the offer

price.

The share price remained between Rs.350 to Rs.380 till February 15, 2008 which was

very disappointing for the investors. In order to gain the confidence of the investors, the

Company‘s Board proposed to issue Bonus to all the shareholders except the Promoters

in a bid to compensate them for the loss they suffered. On the day of listing i.e. on

Sunday, February 17, 2008, in their AGM, the Anil Dhirubhai Ambani Group

(ADAG) alleged that corporate rivals were pulling down share prices of all its group

companies. The investors were eagerly waiting for the market to open on Monday at a

positive note. On February 18, 2008 the share price opened at Rs.418.65 which was

Rs.33.95 more compared to the previous close which was Rs.384.7.

Between February 18, 2008 and February 22, 2008 the share price traded at level of

Rs.410 to Rs.420.

When board declared the bonus issue of 3 shares for every 5 shares held, on February

24, 2008 the share price opens at Rs.425 and closed at Rs.450.40 compared to previous

day‘s close of Rs.416.85.

Anil D. Ambani, Chairman, Reliance ADA Group, simultaneously announced a

voluntary contribution of 2.6% of his shareholding in Reliance Power to Reliance

Energy, to protect the company from any dilution of its existing 45% stake in Reliance

Power, as a result of the bonus proposal. Accordingly, Reliance Energy`s stake in

Reliance Power will be maintained at the

Level of 45% and the revised shareholding pattern of Reliance Power will be as

Follows:

Pre – Bonus Post – Bonus

Anil Ambani 45% 40%

Reliance Energy 45% 45%

Public Shareholders 10% 15%

The reduction of Anil Ambani‘s shareholding in Reliance Power by 5% from 45% to

40%, represents a contribution of nearly Rs. 50 billion (US$ 1.2 billion) by him, in

Favor of nearly 6 million investors in Reliance Energy and Reliance Power.

60

Based on the issue of bonus shares, the paid up share capital of the company will stand

increased to 2.397 billion equity shares of Rs. 10 each.

Anil Dhirubhai Ambani Group Chairman, Anil Ambani on Mar.4, 2008 said that the

work on the Reliance Power owned Rs 200 billion Ultra Mega Power Project at Sasan,

would begin in next 90 days and the plant will be fully operational in 50-60 months. He

added that power generation from Rosa power project in Uttar Pradesh would start

from 2009.

On the issue of gas-based Dadri project, he said that negotiations on supply of gas were

in process and would soon be finalized.

Now the share is currently trading at Rs.337.45 as on March 14, 2008.

Reliance Power has long gestation projects. And the share prices are not yielding the

requisite profits. Thus, it is better for the investors to get the bonus to decrease their

losses to some extent and then quit. Because the projects will take some time to

enhance the share value. In Market stocks like NTPC, Tata Power which is available at

much lower rate which can u good returns as compare to Reliance Power which is good

in long term.

References

www.sptulsian.com

www.bseindia.com


www.myiris.com

Capital Market Magazine (Aug 27 – Sep 09,2007)

Red Herring Prospectus




http://www.myiris.com/

61

3.3 INDIA GLYCOLS

CONTENT

1) ABOUT THE COMPANY………………………………………………….62

2) MANAGEMENT TEAM…………………………………………………….62

3) PRODUCTS/SERVICES……………………………………………………63

4) BUSINESS MODEL ANALYSIS…………………………………………...64

5) OPERATIONAL PERFORMANCE………………………………………..65

6) FINANCIAL PERFORMANCE…………………………………………….68

7) SHAREHOLDING PATTERN……………………………………………...70

8) CAPITAL MARKET PERFORMANCE…………………………………...71

9) RECENT STRATEGY……………………………………………………….73

10) SYNTHESIS…………………………………………………………………..74

62


India Glycols is the First and only company in the world to produce Ethylene Oxide

(EO) / Mono Ethylene Glycol (MEG) from renewable agro route based on molasses,

since 1989. They are the Leading manufacturers of Glycols, Ethoxylates, Performance

Chemicals, Glycol Ethers & Acetates, Guar Gum and Potable Alcohol. Completely

integrated state - of - the - art manufacturing process with emphasis on superior quality

by deploying internationally proven technologies, innovative R&D and customized

approach.

Largest Ethoxylate, Glycol Ether producer and thus leader in Ethylene Oxide

Derivatives/Surfacetant business in India.

Global player meeting international specifications and norms, exporting to

South East Asia, Middle East, Europe, Australia and USA.

Catering to more than 1,000 customers in various end-use industries such as

Textile, Agrochemical, Oil & Gas, Personal Care, Pharmaceuticals, Brake

Fluids, Detergent, Emulsion Polymerisation & paints etc.

Offer customer specific products to meet their performance / technical

requirements.

Customer base includes large MNCs, Public Sector Undertakings and large as

well as medium & small Indian organizations.

2. MANGEMENT TEAM

NAME DESIGNATION

Late M.L.Bhartia Chairman & Managing Director

S.K.Sood President – Finance

Lalit Kumar Sharma Company Secretary

U S Bhartia Managing Director

63

3. PRODUCT & SERVICES

PRODUCT TECHNOLOGY/LICENSOR

Glycols Scientific Design Company Inc., USA

(leading Ethylene Oxide / Ethylene Glycol licensor

globally)

Ethoxylates & PEGS Press industria AG, Italy

(leading Ethoxylates technology licensor globally)

Performance Chemicals Sanyo Chemical Industries Ltd. Japan

Leader in speciality Surfactants in Japan

Glycol Ethers Sulzer Chemtech, Switzerland

Guar Gum

Extra Neutral Alcohol Alfa Laval, India,USA

64

4. BUSSINESS MODEL ANALYSIS

This shows where the business generates cash from. In this case, the Company is

getting money by selling their products to MNCs, Public Sector Undertakings and large

as well as medium & small Indian organizations and Exporting to South East Asia,

Middle East, Europe, Australia and USA.

CASH GENERATION

DOMESTIC OVERSEAS

MNCs PSUs

Large

&xcbcb

zSSSM

SMEs

65

5. OPERATIONAL PERFORMANCE

SALES & ITS GROWTH

Analysis:-

The net sales for the AMJ 07 quarter surged to 52.56% to Rs.3, 301.60 million.

Similarly, the net sales for JAS 07 surged to 58.07% to Rs.3, 558.90 million and for

OND 07 it surged to 93.32% to Rs.4, 499.80 a year ago when compared with the

corresponding quarter.

This shows how the company is performing well quarter on quarter and its performance

was outstanding in the last quarter. The sales include export sales also in all Quarters.

Export sales accounts to 14% in first two quarter and 10% in last quarter.

66

COST STRUCTURE

Analysis:-

From the Cost structure we can say that there is not much change in quarters

which shows how the company is consistent regarding expenses.

67


Analysis:-

Here OPM is declining for 3 Quarters and then start rising .The reason behind this fall

in starting 3 Quarters is that company did not perform well and results were also not

good. From April, 07 the company started to do well because various reasons like

company started its operation of manufacturing mono-ethylene glycol (MEG), strong

results in all 3 Quarters, acquiring a subsidiary and declaration of bonus.

68

6. FINANCIAL PERFORMANCE

Analysis:-

The company posted a loss in March 2007 quarter mainly on account of a sharp drop in

sales. This had been its lowest sales ever. And this was probably on account of the

company shutting down its plant for over three weeks for debottlenecking. The sales

fell but the over outgo increased, and this depressed the bottom lines further, pushing it

into losses. Simple – income falls and expenses increase, loss is bound to be there.

The effect of the removal of the debottlenecking was seen in June 07 quarter as its sales

soared to a new high, its highest ever. And naturally, when there has been such a vast

increase in the top line, the bottom lines were up despite increased outgoes on interest,

depreciation and over expenses.

69

RATIOS

RETURN ON CAPITAL EMPLOYED

YEAR PBDIT CAPITAL EMPLOYED ROCE

Year Ended 06-07 1210.98 8651.84 14.00

Year Ended 05-06 1234.98 7836.40 15.76

Year Ended 04-05 1540.31 6041.20 25.50

RETURN ON EQUITY

YEAR NET PROFIT NET WORTH ROE

Year Ended 06-07 410.53 3161.62 12.98

Year Ended 05-06 585.76 2860.25 20.48

Year Ended 04-05 789.74 2411.66 32.75

DEBT EQUITY RATIO

YEAR TOTAL DEBT EQUITY DEBT EQITY RATIO

Year Ended 06-07 5509.14 278.82 19.76

Year Ended 05-06 4992.57 278.82 17.91

Year Ended 04-05 3699.31 278.82 13.27

EARNING PER SHARE

YEAR EPS

Year Ended 06-07 14.72



P/ E RATIO

YEAR C .M. P* EPS P/ E

FY 07 104.65 14.72 7.11

FY 06 151.05 21.01 7.19

FY 05 146.15 28.32 5.16

* - C.M.P is taken as on 31.03.05, 31.03.06 and 31.03.07 respectively

70

7. SHAREHOLDING PATTERN

Analysis:-

From the Shareholding pattern we can say that the company is sound enough because

49% share is with promoters and company have overseas subsidiary which shows there

is likely to be increase in share of FII‘s.

71

8. CAPITAL MARKET PERFORMANCE

RELATIVE INDEX

Analysis:-

The Company India Glycol is performing well as compared to Sensex. The company‘s

share price was around Rs.107 to Rs.122 from January, 07 to March, 07 because

results for the quarter ended December 31, 2006 was not promising. The earnings

dropped by 46.58% and profits also fell. Then after that the stock started taking a

momentum and reached to Rs.179 in August, 07 from Rs.138 in April, 07. Company

declared a 30% dividend in September,07 and results also for AMJ,07 quarter where

good as there was phenomenal jump in net profits as it rose to 2.97 times and sales also

rose by 6.33% as compared to previous quarter. As a result of all this in Sepetmber, 07

the stock did well and touched Rs.256 mark. From October, 07 to December, 07 the

stock traded between Rs.368 to Rs.460 because of strong financial performance in the

September, 07 quarter the net profit rose to 2.33 times and sales jumped to 58.07% and

also in this period company establishes overseas subsidiary. The company‘s share price

touched a 52 week high of Rs.510 in January, 08.But from January, 08 to March, 08 the

share price started declining and it reached to Rs.246. The main reason was that the

company acquired Shakumbari Sugar with a stake of 96.56%.

72

VOLATILITY

In volatility Calculation - Historical volatility using excel sheet has been

calculated. In one column we have taken the closing price of India glycols from

14.09.07 to 14.03.08 and in next column daily price changes i.e. by (Subtracting

today‘ s price from yesterday‘s closing price and dividing by yesterday‘s

closing price) have been taken.

Then taking the ‗STDEV‘ (standard deviation) of all the calculated daily price

changes we get the value in % which is the ‗Historical Volatility‘ of the share

for the above mention period.

In this case Standard deviation is 4.28%

Then we have to take square root of trading days, so here we have taken 254 as

trading days. SQRT OF 254 =15.937.

Statistical volatility = 4.28*15.93=68.26%.

From this we can interpret that the share price has 68.26% potential to move up

or down with respect to the current price over the next 254 trading days. This

means that the share price of India Glycols can touch a 400 mark in 254

trading days, but there are also various factors which support market which can

lead to change in volatility of share price.

73

9. RECENT STRATEGY

India Glycols acquires Shakumbari Sugar

India Glycols acquired a controlling stake of 96.56% in Shakumbari Sugar &

Allied Industries, located in Uttar Pradesh. The company acquired the majority

stake at a consolidated price of Rs 470 million. They have acquired 3, 17,

24,200 shares of Rs 10 each of Shakumbari Sugar and Allied Industries.

Shakumbari Sugar & Allied Industries has a crushing capacity of 3,200 tons per

day (TCD) along with a modern distillery of 40 kilo litres per day (KLPD).

India Glycols establishes overseas subsidiary New Delhi-based India Glycols, a company engaged in manufacturer of glycol

chemicals, incorporated an overseas 100% subsidiary Private Company by

shares. The company established this subsidiary to augment its activities in

South Eastern region and other related activities. India Glycols is the largest

ethoxylate, glycol ether producer and leader in ethylene oxide

derivatives/surfactant business in India.

74

10. SYNTHESIS

India Glycols is the first and only company in the world to produce Ethylene

Oxide (EO) / Mono Ethylene Glycol (MEG) from renewable agro route based

on molasses, which is a by-product of the sugar industry.

MEG is used in the manufacture of polyester resins, films fibres, and is an

important raw material used in the production of coolants, antifreezers, aircraft

ant-icers and solvents. Thus the client base of India Glycols covers almost entire

India Inc, supplying MEG to more than 1,000 customers in various end-use

industries such as Textile, Agrochemical, Oil & Gas, Personal Care,

Pharmaceuticals, Brake Fluids, Detergent, Emulsion Polymerisation & paints

etc.

Making MEG from ethanol is highly cost effective as against using crude,

which is currently ruling at record high prices. Using crude is uneconomical and

world over; companies are shifting to use of such renewable agro routes.

Currently the price of ethanol has been fixed at Rs.21.50 per litre for the next

three years (which is less than a dollar) and this is in no way even comparable to

the over $100 per barrel of crude. So in this context, India Glycols, having the

largest plant in India for making MEG from ethanol has a great advantage.

The company is now in the midst of enhancing its MEG capacity by 20% at an

investment of Rs.25 crore resulting in a very attractive payback.

During the quarter, the company acquired a controlling stake in Shakumbari

Sugar & Allied Industries at a consolidated price of Rs.47 crore, which has a

crushing capacity of 3200 Tonnes per Day (TCD) along with a modern

distillery of 40 kilo litres per day (KLPD). With this acquisition, the company

would be vertically integrated to captively produce additional ethanol

requirements.

The company has also established its subsidiary in Singapore to augment its

activities in South Eastern Asian region and other related areas. It is already

exporting to South East Asia, Middle East, Europe, Australia and USA.

Apart from this, the company has also got into purifying Carbon Di-oxide

(CO2), a by-product produced in the distillery, both at its Kashipur and

Gorakhpur units which have application in food, beverage and other industrial

usage. CO2 plants at both distilleries are to be commissioned in March 2008.

Indian Glycols has had a super third quarter ending. For Q3 ended 31st

December 2007, the company, on a QoQ basis reported a 26% jump in net sales

at Rs.449.98 crore, which on a YoY was up by 93%.

EBIDTA was up in Q3, on a Q0Q by 29% at Rs.113.53 crore which YoY was

up by a whopping 219%. OPM improved from 15.27% in Q3 FY07 to 24.52%

in Q2 FY08 and now in current Q3, it was at 25.23%.

75

The best probably jump has been in its net profit. For the current Q3 it was at

Rs.67.50 crore, which on a QoQ indicated a jump of 40% but YoY, it has gone

by an unbelievable over 6 times. NPM rose from a meager 4% in Q3 FY07 to

13.56% in Q2 FY08 and now in Q3 FY08 it stands at a healthy 15%.

On equity of Rs.27.88 crore, the company, for Q3 FY08 posted an EPS of

Rs.24.21. What this means is that the company will end this fiscal with an EPS

of Rs.80, that‘s a certainty. Also based on the present earnings, one can safely

say that for FY09, the company will have an EPS of Rs.100, what with the

additional capacity also expected to go on stream.

The cash EPS for Q3 was at Rs.31 and this means that we are looking at a

certain cash EPS of around Rs.100 in FY08 and Rs.120 in FY09.

For a nine months ending 31st December 2007, though the company had forex

gains of Rs.21.80 crore, the same would get added on in FY09 through

improved performance and hence an EPS of Rs.100 for FY09 can be reasonably

expected.

The stock is currently quoted at Rs.261, giving us a PE of just 3 on the EPS of

Rs.80 estimated for this fiscal and if we look at the expected EPS of Rs.100 in

FY09, the PE works to a measly 2.50 times. Now if that isn‘t good enough,

nothing else will be!

What makes India Glycol a great buy is the fact it has a unique business model

which enables the company to produce petrochemicals and specialty chemicals

from renewable agro route base and that too where the cost of the raw material

is fixed and is available in abundant supply. Coupled with growing demand and

higher margins through larger volumes, there is no way that this winner of a

company can falter. The icing on the cake is that currently, looking at the future

discounting, the company is quoted at a dirt-cheap price.

One can safely buy India Glycols at the current rate of Rs.261 for a sure 50%

return over the next 12 months.

References

www.indiaglycols.com

www.bseindia.com

www.sptulsian.com

www.myiris.com

http://www.indiaglycols.com/




76

IV. ANALYSIS OF REALTY INDUSTRY (27.3.08 TO

18.05.08)

CONTENT

1. OVERVIEW OF ECONOMIC & REAL ESTATE………………..77

2. GOVERNMENT POLICIES………………………………………...79

3. DEMAND DRIVERS OF THE REAL ESTATE…………………...81

4. DEMAND & SUPPLY AT MAJOR CITIES……………………….84

5. ROLE OF NRI IN REAL ESTATE SECTOR……………………..89

6. COMPANY ANALYSIS

I. UNITECH……………………………………………………91

II. HINDUSTAN CONSTRUCTIONS (HCC)…………………96

III. PARSVNATH DEVELOPERS……………………………..103

IV. HOUSING DEVELOPEMENT & INFRASTRUCTURE

LTD (HDIL)….……………………………………………...112

V. DLF………………………………………………………….118

VI. OMAXE……………………………………………………..125

VII. BRIGADE ENTERPRISE…………………………………..130

VIII. KOLTE PATIL DEVELOPERS…………………………….133

IX. AKRUTI CITY……………………………………………....137

X. IVR PRIME URBAN………………………………………...142

XI. ORBIT CORPORATION……………………………………146

XII. INDIA BULLS REAL ESTATE…………………………….152

7. COMPETITION………………………………………………………..158

8. MARKET PERFORMANCE...………………………………………..165

9. KEY HIGHLIGHTS OF METROS ………………………………….167

10. SYNTHESIS……………………………………………………………169

77

1. OVERVIEW:

INDIAN ECONOMY:

India is the twelfth largest economy in the world in terms of absolute GDP. In recent

years, India has experienced a rapid economic growth. India‘s GDP for last four years

is:

Year

GDP (in %)

2007-08 9.1

2006-07 9.4

2005-06 9.0

2004-05 7.5

India‘s economy is expanding rapidly, with a GDP growth rate of around 9.1% in 2008.

This has in turn propelled rapid growth in disposable income, allowing consumers to

afford and demand good infrastructure services. If we look at India‘s urban

infrastructure we see poor and overcrowded public transport, jam-packed roads,

inadequate water and sewage systems, and uncollected solid waste. The situation is

even at risk of worsening, because the economic boom confronts India with a

significant increase in urbanization. The services sector is rapidly expanding,

contributing over 60% of GDP. An important factor in the growth of services sector has

been the strong growth of IT and IT Enabled Services (ITES) sectors, i.e. BPO and

KPO services. The industrial sector is only gradually outgrowing its niche. About 20%

of GDP is generated by industry (including the construction and energy sectors), but it

employs only about 12% of the labor force.

Source: www.rbi.org and www.cso.nic.in

http://www.rbi.org/

http://www.cso.nic.in/

78

REAL ESTATE SECTOR IN INDIA:

Historically, the real estate sector in India has been unorganized and characterized by

various factors that did not involve organized dealing such as the centralized title

registry providing title guarantee, lack of uniformity in local laws and their application,

non availability of bank financing, high interest rates and transfer taxes and lack of

transparency in transaction values. In recent years, however, the real estate sector in

India has exhibited a trend towards greater organization and transparency, accompanied

by various regulatory reforms.

The trend towards greater organization and transparency has contributed to the

development of reliable indicators of values and organized investments in the real

estate sector by domestic and international financial institutions and has resulted in the

greater availability of financing for real estate developers. Regulatory changes

permitting foreign investment are expected to further increase investment in the Indian

real estate sector. The nature of demand is also changing with heightened consumer

expectations that are influenced by higher disposable incomes, increased globalization

and the introduction of new real estate products and services.

Cumulative investments of Rs.5106 billion in real estate- related construction, leading

to 8288 million sq. ft of additional space between fiscal 2006 and 2008.It is expected

that the real estate sector would grow at 30% p.a. to reach to $45 to $50 billion by 2010

from the existing $12 billion.

To achieve such a growth, real estate in India would require huge investments over the

next five years. By 2015, it is projected that the market size would grow to $90 Billion.

High economic growth has fuelled the demand for real estate. Cities continue to attract

interest from IT and ITES companies that are either establishing a base or are looking

to expand.

According to one estimate, the IT and the ITES sector are creating over 200000 jobs

per annum which itself will create a demand for commercial space of 15 million square

feet. Besides, it will also generate a huge demand for residential flats. So there will be

more need for luxury lifestyle residential apartments in India.

India has become the second-most favored destination for FDI in the world because the

government has allowed 100% foreign investment in the real estate sector from

November 2005. As the investment scenario in India changed, India attracted more than

three times foreign investment at US$7.96 billion during the first half of 2005-06 fiscal.

79

2. GOVERNMENT POLICIES:

Investments in infrastructure have a long-term horizon, and as such the need for

political continuity and stability is a vital concern. This implies that investment in

infrastructure is highly political in nature and it is often the lack of political stability

that holds back necessary investment. Investors are hesitant to make long-term

commitments for fear of government intervention and breaches of contractual

obligations.

India has a well-established democracy and policy liberalization has progressed in

recent years. But India‘s current fractious government – the United Progressive

Alliance (UPA), a 19-party coalition led by the Congress Party – has made some

investors nervous due to the potential for derailment. The congress Party constantly

competes with many of its coalition partners, which slows necessary reforms. The

privatization of the government-owned businesses continue to generate political debate,

advances are being made but only at a slow pace. The balance of power for

infrastructure planning and control among the central government, the 28 states and

seven territories (including the National Capital Territory of Delhi) is gradually

changing. In the past, the central government was dominant. At the moment the state

governments are playing an increasingly important role, as regional parties have grown

in strength. This decentralization trend has developed more or less autonomously

within the different states or infrastructure sectors, which has resulted in a complex

bureaucratic system that foreign players find difficult to understand. But most of all it

has slowed the process of infrastructure development in India.

The World Bank, in fact, expects the investment requirements to amount to USD 425

bn. According to the 11th FYP, even more than USD 450 bn worth of investment is to

flow into India‘s infrastructure by 2012. In order to fund these investments India‘s

Planning Commission has called on the government to increase the current gross

capital formation for infrastructure from around 5% of GDP to 9% of GDP for the

period 2008 to 2012.

Policy on foreign direct investment

India‘s government encourages not only domestic but also foreign private capital to

invest in India‘s infrastructure.

As a part of these policy reforms, the Foreign Investment Promotion Board (FIPB) has

been changed and the Indian Investment Commission established to act as a one-stop

shop between the investor and the bureaucracy in order to speed up the FDI project

review process. FDI inflows into various infrastructure sectors are now permitted up to

100% under the automatic route, i.e. without prior approval of the FIPB and the

Ministry of Finance.

80

Recent amendments:

The government to liberalize the norms for foreign direct investment (FDI) in

real estate. The department of industrial policy and promotion (DIPP) has

circulated a Cabinet note proposing waiver of two conditions—the three-year

lock-in on foreign investment and the minimum investment criteria of $5

million for joint ventures or $10 million for wholly-owned ventures.

The waiver has been sought for real estate projects, including hotels. The

proposal has been justified on the ground that it would boost tourism and

hospitality, sectors which will be plays as vital job creators.

At present, 100% FDI is permitted in hotels and tourism as well as real estate.

However, realty FDI faces a three-year lock-in—the investor cannot sell his

stake during this period. If one wishes to exit before three years, one will have

to take the permission of the Foreign Investment Promotion Board (FIPB).

There are also the stipulations for development of at least 10 hectares of land,

and completion of at least 50% of the scheduled construction in five years of

obtaining all statutory clearances, in addition to the minimum capitalization

norm mentioned above. These conditions do not apply to the hospitality sector.

Moreover, DIPP‘s move to exempt pre-IPO foreign investment from the three-

year lock-in had faced stiff resistance from both RBI and the finance ministry.

The proposal, which was a part of an overall FDI review, was not cleared by the

Cabinet. DIPP is planning to take the proposal again to the Cabinet.

Government is also working on new policy that is revenue- sharing model

.Under this model the government will lease out land to a private land developer

and enter into revenue –sharing agreement. The bidder who offers the highest

revenue- share ratio to the government will bag the project.

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3. DEMAND DRIVERS OF THE REAL ESTATE:

Residential real estate development

The growth in the residential real estate market in India has been largely driven by

rising disposable incomes, a rapidly growing middle class, low interest rates, fiscal

incentives on both interest and principal payments for housing loans and heightened

customer expectations, as well as increased urbanisation and nuclearisation.

India‘s housing shortage has increased from 19.4mn units in 2004 to 22.4mn units in

2006 and is expected to rise further; and the retail market for mortgages grew by 30%

in the second quarter of 2004 and is expected to further grow at a CAGR of 17% from

US$16bn in fiscal 2006 to US$30bn in fiscal 2009.

There is scope for 400 township projects over the next five years spread across 30 to 35

cities, each having a population of more than 0.5mn and that the total project value is

estimated at US $40bn.

The number of households with annual incomes is expected to increase in size by 23%

to 28%, between fiscal 2002 and fiscal 2010.These higher incomes will allow people to

buy houses in luxury and super luxury residential developments.

82

The residential sector is expected to continue to demonstrate robust growth over the

next five years, assisted by the rising penetration of housing finance and favourable tax

incentives.

Commercial real estate development

The recent growth of the commercial real estate sector in India has been fuelled, in

large part, by the increased revenues of companies in the services business, particularly

in the IT and ITES sectors. The IT and ITES sectors will continue to grow and generate

additional employment, which further, will result in increased demand for commercial

space.

Within the IT and ITES sectors, the Indian off shoring operations of multinational

companies are expected to increase demand for commercial space. The total demand

for commercial office real estate in 2005 in the top seven centres of Bangalore,

Chennai, Delhi-NCR, Mumbai, Pune, Hyderabad and Kolkata was over 22mn square

feet and is expected to over 31mn square feet in 2008.The IT and ITES sectors would

require additional space of around 87mn square feet between fiscal 2006 and 2008. The

IT, ITES and related sectors are estimated to account for more than 70% of net demand.

Capital flows into commercial real estate over the next three years are estimated at

more than US$5bn.

Retail real estate development

Retail segment in India is expected to grow at a rate of 25% to 30% over the next five

fiscal years. The growth of organized retail segment is expected to be driven by

demographic factors, increasing disposable incomes, changes in perception of branded

products, the entry of international retailers into the market, the availability of cheap

finance and the growing number of retail malls.

The major organized retailers in India currently include Reliance Retail, Tata-Trent,

Pantaloon, and Shopper‘s Stop, RPG Group, Vishal Retail, Subhiksha, Croma by Tatas

and More by Aditya Birla Group. While the organized retail segment has so far been

limited to larger cities in the country, retailers have announced major expansion plans

in smaller cities and towns. The growth of organized retail in India will also be affected

by the reported entry into the sector of major business groups such as Reliance, Bennett

& Coleman, Hindustan Lever, Hero Group and Bharti. International retailers such as

Metro, Shoprite, Lifestyle and Dairy Farm International have already commenced

operations in the country. It is estimates that, over the next five years, 73.78mn square

feet of floor space and Rs369bn of real estate investment will be required to sustain the

growing organized retail market.

Hotels

Recent growth in the hotel sector in India has primarily been caused by the growing

economy, increased business travel and tourism.

According to the World Travel and Tourism Council, revenue from foreigners

travelling to India is expected to grow to $24 billion by 2015.Indians traveling in India

as well as abroad is expected to spend $63 billion by 2015.This shows that hotel

industry has clearly entered the global stage but still there is shortage of 150,000

rooms which caused a massive price escalation of hotel room rates. The demand is

going to exceed supply by at least 100% over next two years. An estimated $11.41

billion is expected to be seen in the hospitality sector in the next two years and India is

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likely to have at least 40 international hotel brands by 2011 by the help of world

international fund companies like Blackstone, Morgan Stanley, Walton Street Capital

,Starwood Capital , Merrill Lynch ,West bridge Capital ,Lehman Brothers etc. The

above companies have already started investing in India like Lehman Brothers invested

$100 million in Future Capital Holdings for a hotel project in India. This will also

generate the maximum number of employment which will be 426,668 in 2008 .Which

will give rise to level of income and increase in demand for residential space.

It is estimated that investments in the hotel industry will be approximately Rs90bn over

the next five years. According to World Travel and Trade Council Indian tourism

demand is expected to grow at 8.8% till 2013.

DLF and Hilton Hotels Corporation in India have signed management agreements

involving 7 new hotel developments in the pipeline. This marks the second phase in the

DLF-Hilton JV Company‘s overall strategic development plans to build and develop 75

hotels in India in the next 5-7 years.

SEZs

SEZs are specifically delineated duty free enclaves deemed to be foreign territories for

the purposes of Indian custom controls, duties and tariffs. There are three main types of

SEZs: integrated SEZs, which may consist of a number of industries; services SEZs,

which may operate across a range of defined services; and sector specific SEZs, which

focus on one particular industry line. Regulatory approvals have been received for

SEZs proposed to develop by a number of developers, includes DLF, Reliance

Industries Limited and Mahindra Gesco Developers Limited. SEZs, by virtue of their

size, are expected to be a significant new source of real estate demand.

According to the Ministry of Commerce and Industry, 61 SEZs are currently approved

and under establishment. As of March 31, 2005, there were eight functional SEZs

operating in India comprising 811 units, employing over a 100000 people. Investment

per unit in these SEZs is around Rs18bn.

Special Economic Zone, better known as SEZ is a specifically delineated duty free

enclave formed to provide companies with international competitive advantage for

producing goods and services. The units in such area enjoy trade and fiscal benefits and

have access to superior infrastructure, internationally competitive credit products and

lower bureaucratic problems. Through these zones the government is hoping that

foreign companies will be able to avoid restrictive labor laws which in turn will

encourage greater FDI inflow and stronger employment rates.

Source: www.indiainfoline.com

http://www.indiainfoline.com/

84

4. DEMAND & SUPPLY AT MAJOR CITIES:

Office Market:

Mumbai:

The year 2007 saw a supply of 4.6 million sq. ft. Grade A office space in the Mumbai

market. The year saw a positive trend in supply terms because in 2006 it was just 2

million sq. ft. The Bandra- Kurla Complex (BKC) and Andheri were the major supply

contributors with 2.6 million sq. ft. which was 60% of the total supply. But the demand

outpaced the supply with a demand shift for IT/ITES services. But still the supply was

able to decrease the average vacancy levels from 13% to 7% QoQ.

NCR

In year 2007, the NCR region saw a supply of 8 million sq. ft. Significant supply was

seen in the year 2007, but it was not able to fulfill the office space appetite in Delhi &

its suburbs and proved to be inadequate due to the pre-construction leasing

commitments of 2006. Thus, owing to the constant demand, supply was not able to

match the pace with it.

Chennai:

By the end of year 2007, the overall supply of Grade A space stood at an astonishing

figure of

Approx 8.5 million sq. ft. Though the market witnessed quite an optimum supply, the

shift in concentration of supply and the sudden increase in demand for Grade A office

space eventually led to the increase in rentals.

Bangalore:

Year 2007 saw a cumulative Grade A supply of over 5.5 million sq ft in the prominent

locations of Bangalore. Bangalore continued to be a preferred location of IT/ITES

sector. A slight initiation of demand dip was observed in year 2006 owing to poor

infrastructure conditions in both existing & newly developed areas.

Residential Market:

Mumbai:

In 2007, a cumulative Grade A supply of around 4.5 million sq ft was added into the

Mumbai residential market. During Q4_07, some landmark transactions were witnessed

with one of them being at Apsara (NCPA), Nariman Point; where an apartment was

sold at a whopping INR 1 lakh per sq ft. The transaction reflected huge demand present

85

for high-end options on resale in the prime South Mumbai market. Continued demand

for quality apartments in the suburbs like Bandra, Andheri etc was observed from

middle & upper middle income segments from an end-user perspective.

With new infrastructure developments and SEZs coming up in the suburbs, increased

construction activity for residential development has also been observed in suburban

locations like Panvel, Kharghar and other less developed areas of Kamothe and

Kalamboli. Keeping in view the extensive commercial and retail developments taking

place and announcement of the new International Airport, these locations are being

positioned as lucrative investment options.

The major developers in this area are India bulls, DLF, Peninsula, Future Group, etc.

Delhi:

0.3 million sq. ft. quality residential space was added in the NCR market.

Demand from end users and investors for premium residential options remained

persistent. A demand shift from Delhi towards the suburban locations like Gurgaon &

Noida was witnessed due to lack of quality apartments in the affordable price range in

most of the preferred locations like VasantVihar, Shanti Niketan etc. Moreover, owing

to increased infrastructure development, limited quality stock of affordable options in

South Delhi and reduced travel time between Delhi and Gurgaon, expatriates prefer

quality residential options in Gurgaon.

Chennai:

The residential market received a supply of around 0.2 million sq ft space, out of which

the prime areas contributed to around 0.1 million sq. ft. Last quarter of 2007 also

witnessed the launch of many large scale projects by renowned developers like India

Bulls real estate, EMAAR MGF, IVR Prime Urban developers among others.

Bangalore:

Year 2007 for Bangalore residential market ended on a positive note in terms of supply

levels. The city received a cumulative residential supply of around 6.4 million sq ft

during the whole year. Land market is witnessing slight stabilization with additional

land supply brought into the city boundary under new master plan. Over the last six

months, the market observed a check on demand activity owing to high prices,

increased loan interest rates and wait-n-watch attitude of buyers/investors.

86

Conclusion:-

To sum up we can say that demand for luxury homes has come down 10% in last 3

months and this is going to fall 10% more because the people who invested in the stock

market have lost money. There is not enough money to invest in real estate, stock

market or gold. There is one more reason for the slump in demand, if we see the

properties prices have escalated 40-45% in the last two years, whereas salary levels

have only grown 14-15% during the same period. From, this we can say that a house

which used to cost Rs60 lakh in 2005-06 will now cost Rs.1.25 crore at present. So

definitely there is a slowdown in demand.

COMMERCIAL PROPERTY CAPITAL VALUES

MUMBAI (RS./SQ.FT)

PLACES RATES AS ON

03/04/2008

RATES AS ON

1/05/2008 NARIMAN POINT

49,000 45,000

WORLI 42,500

40,000

BKC/CST ROAD 40,000

38,500

LOWER PAREL 35,000

33,500

BALLARD ESTATE 25,000

27,500

FORT/CHURCHGATE 25,000

27,500

ANDHERI (E) 20,000

18,000

POWAI 15,000

16,500

MALAD (MINDSPACE) 11,750

12,000

NAVI MUMBAI 9,250

9,500

THANE 6,750

7,250

87

BANGALORE

PLACES

M.G.ROAD 9,000

9,000

RESIDENCY ROAD 8,000

8,000

INDIRA NAGAR 8,000

8,000

WHITEFIELDS 3,500

3,500

NCR (NATIONAL CAPITLAL REGION)

PLACES

CONNAUGHT.PLACE 42,250

42,250

NEHRU PLACE 35,625

35,625

B CAMAJI PLACE 29,250

29,250

OKHLA INDL AREA 13,875

13,875

GURGAON 13,400

13,400

NOIDA 12,250

12,250

MC AREA 11,250

11,250

PUNE

PLACES

BUND GARDEN 8,500

8,000

SENAPATI BAPAT 7,500

7,250

AUNDH 6,500

7,000

KALAYANI NAGAR 5,500

6,000

KARVE ROAD/KOTHRUD 5,500

5,750

YERWADA/AIRPORT ROAD 4,750

5,000

BANER 4,500

4,750

NAGAR ROAD 4,500

4,750

HADAPSAR 4,500

4,750

88

KOLKATA

PRICES

PARK STREET 9,000

9,300

CAMA STREET 7,650

8,000

SALT LAKE 5,000

5,200

DALHOUSIE 4,750

4,800

HYDERABAD

PLACES

BANJARA HILLS 6,750

7,000

JUBLIEE HILLS 6,750

7,000

RAJ BHAVAN RD. 6,500

6,500

BEGUMPET 6,000

6,000

SOMAJI GUDA 6,000

6,000

MADHAPUR 5,250

5,500

HIMAYAT NAGAR 4,500

4,500

Source: - Economic Times – ET Realty

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5. ROLE OF NRI IN REAL ESTATE:

As home sales continue to dip, real estate developers are tapping the luxury home

segment by targeting Non-Resident Indians and high net worth individuals keen on

buying the exclusive villas in India. The move also seems to be backed by pure market

play as demand in the luxury home segment is growing sharply, bucking the trend seen

in other areas of the industry where exposure to high-risk borrowers has tightened loan

flow from banks. Real estate players feel that ‗nouveau riche‘ is now moving up the

chain and extending their possessions to luxury homes with ultra sophisticated

amenities like personal swimming pools, jogging tracks, health clubs and personal

gardens. Leading real estate developers like Sobha Developers, DLF, Kalpataru, Nitesh

Estates, Unitech, Omaxe, Royal Palms, Lodha Developers and Marvell Realtors are

currently developing projects in cities like Mumbai, Delhi, Pune, Goa, Bangalore and

Kerala, with the price of an average luxury home varying between Rs 3 crore and Rs 50

crore. The price of the luxury home depends on the city it is built in and the range of

amenities it offers.

Rising incomes, easy financing and population growth are driving demand for housing

and luring overseas investors.

India will have at least 50 property-related initial public offerings in the next year as the

real estate industry booms because government is also giving proactive support to

whole sector.

NRI investors were poised to invest over $5 billion in the Indian real estate sector.

Religious tourism is pushing the realty industry‘s growth in destinations like

Vrindavan, Mathura, Haridwar, Ajmer, Amritsar, Tirupati and Nasik - cities on the fast

track and emerging hot spots for real estate developers.

Religious towns have good growth prospects. They are witnessing more than 45 %

annual rise in property prices against the average 25-35% in Tier II cities. Increasing

demand will push growth further. More number of people are investing in property in

these towns that attract a large number of pilgrims from India and abroad promising

inner tranquillity and spiritual bliss. The investment in these areas in less than three

years comes to Rs 15000 crore. This place attracts many non-resident Indians and

foreigners, apart from the usual visitors which lead to huge demand for good housing

from foreigners and NRIs. People are investing in these places as post- retirement

options and their second weekend homes.

It is not the local developers alone who are reaping profits. Even Big players like API,

Omaxe, Unitech and Sahara group are coming up with their projects in these cities.

Omaxe, for instance, has lined up a 440-acre integrated township with more than 2,000

residential units on the Jaipur-Ajmer Expressway to tap visitors to the famous Sufi

shrine of Khwaja Moinuddin Chisti. The company has also plans in Varanasi,

Allahabad, Rishikesh, Haridwar, Vrindavan, Tirupati and Puri.

http://www.indianrealtynews.com/category/real-estate-india/mumbai/

http://www.indianrealtynews.com/category/real-estate-india/pune/

http://www.indianrealtynews.com/indian-states/goa/

http://www.indianrealtynews.com/category/real-estate-india/bangalore/

http://www.indianrealtynews.com/indian-states/kerala/

http://www.indianrealtynews.com/category/real-estate-india/

http://www.indianrealtynews.com/category/nri/

http://www.indianrealtynews.com/indian-states/uttar-pradesh/holy-cities/#vrindavan

http://www.indianrealtynews.com/indian-states/uttar-pradesh/holy-cities/#mathura

http://www.indianrealtynews.com/indian-states/rajasthan/ajmer/

http://www.indianrealtynews.com/indian-states/punjab/amritsar/

http://www.indianrealtynews.com/indian-states/maharashtra/nashik/

http://www.indianrealtynews.com/category/nri/

90

Similarly, Ansal-API has forayed into this market with two townships with their

Sushant City brand - one in Ajmer spread over 125 acres of land and the other at

Kurukshetra over 200 acres.

Unitech and Sahara also have similar plans for Varanasi, with the former already

announcing a 1,500-acre integrated township there.

That is the reason property prices in cities and towns like Amritsar and Ajmer have

gone up by five times in the past two years and more such townships are in the offing.

91

6. COMPANY ANALYSIS

The following 12 companies have been analyzed for real estate industry:-

I. UNITECH

FINANCIAL PERFORMANCE:

Source: www.bseindia.com

Analysis:-

The above figure shows that there has been an increase in the PAT over the recent

quarters and the net profit margin has also shown an upward trend in the recent quarter.

But the reason for lower margin in Sep. 07 is the decrease in sales and increase in the

expenses, mainly the other expenses.


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RATIOS:



Year Ended 06-07 13956.79 42491.56 32.85

Year Ended 05-06 1327.81 6309.02 21.05

Year Ended 04-05 549.98 3332.24 16.50

RETURN ON EQUITY


Year Ended 06-07 9835.58 11610.02 84.72

Year Ended 05-06 696.43 2245.34 31.02

Year Ended 04-05 299.16 1739.08 17.20 DEBT EQUITY RATIO

YEAR TOTAL DEBT EQUITY DEBT EQUITY RATIO

Year Ended 06-07 36070.83 11610.02 3.11

Year Ended 05-06 6887.55 2245.34 3.07

Year Ended 04-05 3258.85 1739.08 1.87

EPS

YEAR PAT No. of outstanding shares EPS

Year Ended 06-07 9835.58 811.69 12.12

Year Ended 05-06 696.43 62.44 11.15

Year Ended 04-05 299.16 62.44 4.79

P/E

YEAR MPS EPS P/E

Year Ended 06-07 387.35 12.12 31.97

Year Ended 05-06 2785.45 11.15 249.74

Year Ended 04-05 337.35 4.79 70.41

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SHAREHOLDING PATTERN:



94

THE PROJECTS UNDERTAKEN:

COMMERCIAL:

Unitech shows its presence regarding the commercial projects in:

Delhi

Gurgaon

Kolkata

RETAIL:

In retail, it is present in the following areas majorly:

Delhi

Noida

Gurgaon

Kolkata

Bangalore

RESIDENTIAL:

For the residential projects, it has shown its presence in:

NCR

Agra

Lucknow

Kolkata

Varanasi

Hyderabad

Mumbai

Chennai

Bangalore

Kochi

Source: www.unitechgroup.com

http://www.unitechgroup.com/

95

RECENT UPDATES:

Private equity players Lehman Brothers and Deutsche Bank will invest

USD 500 million in an SPV floated by Unitech, reports Economic

Times. The two PE players are in the final stage of negotiation with

the country`s second-most valued real estate developer for buying

minority stake in the SPV. The deal is likely to be closed in the next

three weeks. The SPV was formed to execute two commercial projects

in Mumbai.

Unitech to pump in Rs 90 bn in two properties at Hyderabad. Unitech

has secured two real estate projects in Hyderabad and will be developed

over the next eight years at an investment of about Rs 90 billion. The

company has bagged a mixed-use project located at Budvel from

Hyderabad Urban Development Authority (HUDA) for development of

residential, commercial and retail space over 164 acre of land. The total

investment on this project would be Rs 30 billion, including about Rs

6,640 million for land. The company expects to generate revenue of Rs

60 billion from this project. The construction work is expected to start in

the next fiscal. Source:

i. www.myiris.com

ii. www.bseindia.com

iii. Various newspapers

iv. Various journals



96

II. HINDUSTAN CONSTRUCTION

ABOUT THE COMPANY:

HINDUSTAN CONSTRUCTIONS (HCC) is a front-runner in the engineering

construction space for the last 8 decades, having executed over 300 Bridges, 42 Dams

and Barrages, 13 Hydel and 4 Nuclear Power plants, 140 Kms of Tunneling and 1,000

Kms of Roads and expressways. HCC‘s major engineering landmarks include the

world‘s longest barrage at Farakka in West Bengal, India‘s first underground metro at

Kolkata and the second one in New Delhi, the Mumbai-Pune Expressway – India‘s first

six-lane expressway, the unique double curvature arch dam at Idukki in Kerala and one

of Asia‘s largest breakwaters at Ennore Port in Tamil Nadu. HCC has constructed four

out of seven operational nuclear power plants and has constructed more than 23% of

India‘s installed hydel capacity. The Company is also developing free India‘s largest

Hill Station, Lavasa, spread across a picturesque landscape of 100 sq kms, and is

located 4 hours drive from Mumbai.

The company got listed at Re. 1 per share on BSE and NSE.

97



Analysis:-

From the above figure we derive that the performance of the company in the second

quarter was not as good as the other quarters. This was because of the decline in the net

sales of the company. But it has regained its profit levels in the next quarter.


98

RATIOS



Year Ended 06-07 2461.00 22264.95 11.05

Year Ended 05-06 1857.43 20611.81 9.01

Year Ended 04-05 1652.63 7194.97 22.97

RETURN ON EQUITY


Year Ended 06-07 1218.00 9040.75 13.47

Year Ended 05-06 1247.98 8898.14 14.03

Year Ended 04-05 740.20 3529.84 20.97

DEBT EQUITY RATIO


Year Ended 06-07 15510.60 9040.75 1.72

Year Ended 05-06 12978.39 8898.14 1.46

Year Ended 04-05 4256.82 3529.84 1.21

EPS

YEAR PAT No. of outstanding

shares EPS

Year Ended 06-07 1218 256.25 4.75

Year Ended 05-06 1247.98 256.25 4.87

Year Ended 04-05 740.2 229.36 3.23

P/E

YEAR MPS EPS P/E

Year Ended 06-07 89.45 4.75 18.82

Year Ended 05-06 173.15 4.87 35.55

Year Ended 04-05 478.75 3.23 148.35

Source: www.myiris.com


99




100

PROJECTS:

The company has shown its presence in many cities for various projects.

The major projects that were undertaken are:

1. Bandra Worli sea link

The link will provide a fast moving outlet from South Mumbai to the suburbs in the

west. This link will also help in reducing the present congestion on the Mahim

Causeway (which is the only link available at present between western suburbs and

south Mumbai) and Western Express Highway.

The project envisages construction of 8 lane Sea link freeways from the interchange of

Mahim intersection at the Bandra end to Worli Sea face on Khan Abdul Ghaffar Khan

Road. The Construction of the sea link project is divided into four packages namely

Package I, Package II, Package III, and Package IV. The Package IV executed by HCC

forms the main and the most technically challenging construction package of this

project.

2. Godavari bridge

HCC was involved in the design and construction of this superstructure for the III

Godavari Bridge across river Godavari at Rajahmundry.

The construction of Godavari Bridge Superstructure was unique in nature and the first

of its kind in Asia in the annals of Railway Bridges, involving technical know-how and

a challenging type of construction. The length of bridge is 2745 m.

3. Naini bridge

This project involved construction of Concrete Cable Stayed Bridge across river

Yamuna at Allahabad/ Naini on NH-27 in Uttar Pradesh. The scope of work included

the construction of a 4-lane Concrete Cable Stayed Bridge with an approach road on

both sides consisting of four modules. Total length of this bridge is 1510 m. The project

has been executed by HCC in joint venture with M/S Hyundai, Korea

101

4. Kaliabhomora bridge Assam:

The project is the construction of Road Bridge over river Brahmaputra at Bhomaraguri

near Tezpur, Assam. Its total length is 3015m. The contract is worth Rs. 1348 million.

5. Mumbai Pune Expressway:

This project was given by Maharashtra State Road Development Corporation Ltd. The

project was worth Rs. 3503 million and was completed by March 2002.

6. West Bengal Road:

This project was given by National Highway Authority of India (NHAI). The project

was worth Rs. 3457 million and was completed by May 2005. It is a four laned flexible

pavement with central median of 5m width. The width of the pavement is 8.5m.

7. Kolkata metro:

HCC has built 6460 m of India's first Metro Railway Project at Kolkata in 6 different

packages. 5330 m of this stretch was built by using Cut and Cover method and the

balance 1.14 KM was built by using Shield Tunneling method. This was the first

Underground Rapid Transit System in India. The contract value was worth Rs.6360

million. It was completed in October 1996.

8. Delhi Metro:

It has undertaken Design, construction, equipping, testing and commissioning

(including integrated testing and commissioning) for the 4142 m long section from

North of Vishwa Vidhyalaya Station (inclusive) to South end of ISBT Station

(inclusive) of Metro Corridor by Cut and Cover Method. The Length of Metro is 4142

m and it covers four stations. The contract is worth Rs.9379 million. It was completed

in July 2005.It has also taken major projects in areas like Railways, Hydel Power,

Barrages, Dams, Power Plants, etc.

Source: www.hccindia.com

http://www.hccindia.com/

102

RECENT UPDATES:

Mumbai-based construction firm Hindustan Construction

Company said that it received a letter of acceptance (LoA) for

project worth Rs 3.75 billion. The contract involves execution of

civil works for underground rock cavern for strategic storage of

crude oil at Visakhapatnam, Andhra Pradesh. The contract was

awarded by the Indian Strategic Petroleum Reserves, New Delhi.

Hindustan Construction Company has incorporated a special

purpose vehicle (SPV) company that is HCC Infrastructure, as a

wholly owned subsidiary of the company. The new company

will undertake infrastructure development projects.

Source:

i. www.myiris.com






103

III. PARSVNATH DEVELOPERS LTD (PDL)

ABOUT THE COMPANY:

The Parsvnath Group was founded in 1990 and is a buoyant conglomeration of

companies endowed with impeccable foresight, enviable expertise and innate acumen

providing cost effective and holistic solutions to the Real Estate & Construction World.

With more than two decades of experience in its repertoire, the group has already

stamped its presence in seventeen states and is now going Pan – India.

Funds raised through IPO – Rs.9971.4 million and Funds raised through Green Shoe

Option - Rs.926.34 million. The Total fund raised through IPO is Rs.10897.74 million.

The Company got listed on 30th

November, 2006 at Rs.300 on BSE and NSE.

104

FINANCIAL PERFORMANCE


Analysis:-

The money raised through IPO amounts to Rs.10897.74 million. Expenditure like

Development and Construction of Projects Specified for IPO – Rs.4534.51 million, IPO

Expenses including Advertisement – Rs.458.11 million and Expenses for post listing &

General Corporate Purposes – Rs.926.34 million was booked in these 3 quarters. The

balancing amount Rs.4978.78 million is invested in short term investments for reducing

bank overdrafts. Also 5 new subsidiaries were incorporated during last quarter i.e.

Dec‘07.

The sales have increase to 15% from 1st Quarter to 3

rd Quarter. Other Income in 3

rd

Quarter has increase tremendaiously from Rs.10.98 crores in 1st Quarter to Rs.31.78

crores in 3rd

Quarter.


105

RATIOS


YEAR PBDIT CAPITAL

EMPLOYED ROCE

Year Ended 06-07 3614.53 24392.67 14.82

Year Ended 05-06 1477.65 4282.06 34.51

Year Ended 04-05 745.05 2180.69 34.17

RETURN ON EQUITY


Year Ended 06-07 2717.76 14626.8 18.58

Year Ended 05-06 1062.46 2011.51 52.82

Year Ended 04-05 656.65 1015.71 64.65

DEBT EQUITY RATIO

YEAR TOTAL DEBT EQUITY DEBT EQUITY

RATIO

Year Ended 06-07 10090.00 14626.80 0.69

Year Ended 05-06 2350.70 2011.51 1.17

Year Ended 04-05 1207.00 1015.71 1.19

EARNING PER SHARE

YEAR EPS

BASIC




P/E RATIO

YEAR C .M. P EPS P/ E

FY 07 259 14.71 17.61

106

SHAREHOLDING PATTERN AS ON 31ST

DECEMBER,2007



107

COMPLETED PROJECTS

Areas No. of Projects

RESIDENTIAL 12

COMMERCIAL 12

DMRC 7

TOTAL

31

RESIDENTIAL

Projects are completed in Greater Noida, Noida, Gurgaon, Ghaziabad, and Mohan

Nagar.

COMMERCIAL

Projects are completed in Faridabad, Noida, Moradabad, Saharanpur, Mohan Nagar,

Indirapuram, Greater Noida and Gurgaon.

DELHI METRO RAIL CORPORATION (DMRC)

No. of Projects were 13 out of which, 7 got completed and the Total Leasable Area

2.31mn sq ft

of which, the Area Lease Period is 2.14mn. sq. ft. for 30 years and 0.17 mn. Sq. ft. for

12 years

7 Projects have been completed with leasable area of 3, 70,000 sq. ft.

Total leased area – 0.47 mn. sq. ft.

Total Cost – Rs. 922 Cr.

Cost per sq. ft. – Rs. 3356

Payback period 3 years after completion.

Annual lease rentals would reach Rs. 325 Cr. ($ 82 mn.) in FY 2011.

HOTELS

Types No‟s

5 Star 9

4 Star 2

3 Star 5

Serviced Apartments 1

TOTAL 17

The No. of Rooms will be 2600 and Area will be 2.27mn.sq ft and for all this, capital

cost will be Rs.750 crore.

108

Status of Hotels

Locations Status

Mohali Construction Started

Chandigarh Film City Construction will start soon

Chandigarh IT Park Construction will start soon

Shirdi Construction Started

Jodhpur –1 Construction will start soon

Jodhpur – 2 Construction will start soon

Ahmedabad Construction Started

Hyderabad Construction Started

Goa Construction will start soon

Kochi Airport Construction will start soon

Kochi Beach Construction will start soon

Indore Construction will start soon

Ujjain Construction will start soon

Ranchi Construction will start soon

Lucknow Construction will start soon

New Delhi Construction will start soon

Bhiwadi Construction Started

Parsvnath Hotels Ltd. has signed an MOU with Fortune Park Hotels of ITC Welcome

group. Parsvnath and Fortune will develop 50 Hotels in the next 5 years, where

Parsvnath will own and develop the hotels and Fortune will Operate and market these

hotels. Under this agreement, twenty 5-Star, twenty 4-Star and ten Mid-Market Budget

Hotels, will be developed.

MULTIPLEXES

Developing 114 Multiplex Screens all over India

Finalized the MOU with M/s Movietime Cineplex Pvt. Ltd. for leasing all our

Multiplex Screens in existing and future projects upto 100screens @ Rs. 48.50 per sq.

ft. with 15% increase every third year.

• The Screens are to be given on lease initially for a period of 9 years.

• 6 Screens are Operational.

• 34 Screens are under construction.

Estimated yearly rentals = Rs. 43 crore (10.9 US $ Mn.)

SEZs

- 17 SEZs with developable area of 367.49 mn. sq.ft.

- Plans under formulation to start development work on already notified SEZs -

Gurgaon, Indore, Dehradun and Nandad, in next financial year.

- Signed LOIs with Govt. of Rajasthan and Govt. of Madhya Pradesh for

providing assistance and support for establishment of proposed Gems and

Jewellery SEZ at Jaipur and IT SEZ at Indore.

109

FORTHCOMING PROJECTS

Group Housing Projects

Parsvnath

Premium - Pune

Parsvnath Royal

Villas - Goa

Parsvnath

Prominence - Bhiwadi

Project Located

at Noida - Uttarpradesh

Projects Located

at Jammu - Jammu & Kashmir

Project Located

at Ranchi - Jharkhand

Project Located

at Siligudi - West Bengal

Project Located

at Panipat - Haryana

Project Located

at Jam Nagar - Gujarat

Project Located at

Khekhra - Uttarpradesh

Townships

Parsvnath Narain

City - Jaipur

Parsvnath City - Malerkotla

Parsvnath City - Saharanpur

Parsvnath City - Rohtak

Royal Floors

Parsvnath City - Lucknow

Parsvnath City - Kundli

Parsvnath City - Kurukshetra

Parsvnath City - Karnal

Commercial Projects

Parsvnath Mall - Amritsar

Parsvnath City

Centre - Sonepat

Parsvnath City

Mall - Sonepat

Parsvnath Mall - Kukatpally (Hyderabad)

http://www.parsvnath.com/JaipurCity.asp

http://www.parsvnath.com/LucknowCity.asp

110

Parsvnath City

Mall - Amritsar

Parsvnath Mall - Chandigarh

Parsvnath Mall - Mumbai

Parsvnath Mall - Dwarka

Parsvnath Mall - Siligudi (West Bengal)

Parsvnath Mall - Ranchi (Jharkhand)

IT Parks

IT Park - Chennai

IT Park - Gurgaon

Hotels

Hotel I - Jodhpur

Hotel II - Jodhpur

Hotel - Seelampur, New Delhi

Hotel - Rajiv Gandhi Chandigarh Technology Park,

Chandigarh

Hotel - Indore, Madhya Pradesh

Hotel - Lucknow, Uttar Pradesh

Hotel - Ujjain, Madhya Pradesh

Hotel - Goa

Hotel - Film City, Chandigarh

Hotel - Ranchi

Hotel - Cochin

Source: www.parsvnath.com

http://www.parsvnath.com/Mahabalipuram.asp

http://www.parsvnath.com/

111

RECENT EVENTS

Parsvnath Developers is looking at investing between Rs 20-25 billion for the

development of 40 more hotels. The company is in talks with leading domestic

and international hotel chains for tie-ups. The company intends to develop 100

properties acrossIndia.

The company had announced a joint venture between its subsidiary Parsvnath

Hotels (PHL) and Royal Orchid Hotels (ROHL) to develop 10 hotel projects in

the next five years across India. The construction of the hotels would involve

an investment of Rs 5 billion spread across 3-5 years.PHL has signed a

memorandum of understanding with Fortune Park Hotels (FPHL), a wholly

owned subsidiary of ITC, to manage 50 hotels across India in the next three to

five years.

Parsvnath Developers announced an investment of Rs 600 billion in next five

years in diversified areas such as SEZs, airports, express ways and retails

business.

The company shall bid for upcoming airports such as Udaipur, Greater Noida,

Maharashtra and other states and will invest heavily in SEZs.

Parsvnath is also believed to be in talks with two French majors Carrefour and

Club Casino to set up retail chains in India. The company owns over 14 million

square feet of land for retail business in 48 cities.

Parsvnath Developers received a Letter of Intent (LoI) from director town and

country planning, Haryana to develop an IT Park project. The project is

expected to be Rs 6.5 billion within 2 financial years. IT Park is spread over an

area of 6.8 acres and is located in Sec - 48 in Gurgaon. The project sprawls

over a total build-up area of 8.5 Lac sq ft. and will showcase state of the art IT

Park giving boost to IT and ITES services in the area. The project has already

started and will be completed within next 24 months.

112

IV. HOUSING DEVELOPMENT & INFRASTRUCTURE

LTD(HDIL)

ABOUT THE COMPANY

HDIL is the part of the Wadhawan Group (formerly known as the Dheeraj Group),

which has been involved in real estate development in the Mumbai Metropolitan

Region for almost three decades. Since 1996, HDIL has been satisfying the diverse

needs of scores of home seekers in Mumbai Metropolitan region. There business

focuses on real estate development, including construction and development of

residential projects, commercial, retail and slum rehabilitation projects. HDIL provided

and still provides all services under one roof through tie-ups with banks and HFC‘s.

Today, HDIL has several projects underway in the Western and Eastern suburbs of

Mumbai, catering to the customer with varied needs and tastes.

Funds raised through IPO – Rs.14850.00 million and Funds raised through Green Shoe

Option - Rs.2136.00 million. The Total fund raised through IPO is Rs.16986 million.

The company got listed on 24th

July, 2007 at Rs.500 on BSE and NSE.

113



Analysis:-

The money raised through IPO amounts to Rs.16986 million. Expenditure like Issue

Expenses - Rs 893.80 million, Acquisition of land and land development rights - Rs

4108.00 million and

Construction of ongoing projects - Rs 4210.40 million. Balancing figure amounting to

Rs.7773.8 million is lying in Liquid Funds.

Sales have increase 11% from 1st Quarter to 3

rd Quarter. Other Income has also increase

tremendaiously from Rs.25.6 million to 198.9 million.


114

RATIOS


YEAR PBDIT CAPITAL

EMPLOYED ROCE

Year Ended 06-07 6537.75 9361.71 69.83

Year Ended 05-06 1316.22 2675.89 49.19

Year Ended 04-05 321.10 1048.09 30.64 RETURN ON EQUITY


Year Ended 06-07 5418.13 7255.24 74.68

Year Ended 05-06 1139.20 1844.79 61.75

Year Ended 04-05 145.79 710.79 20.51

DEBT EQUITY RATIO

YEAR TOTAL DEBT EQUITY DEBT EQITY

RATIO

Year Ended 06-07 913.85 7255.24 0.13

Year Ended 05-06 1964.64 1844.79 1.06

Year Ended 04-05 3756.85 710.79 5.29

EPS

YEAR EPS

BASIC




P/E RATIO

P/E Ratio cannot be calculated because the company got listed on 24th

July, 2007.

115

SHAREHOLDING PATTERN AS ON 31ST

DECEMBER, 2007



116

COMPLETED PROJECTS

DheerajApartments

Jogeshwari (E), Mumbai, Maharashtra

RowHouseKandivali

Kandivali (E), Mumbai, Maharashtra

Sneh

Bandra (W), Mumbai, Maharashtra

Swapna

Bandra (W), Mumbai, Maharashtra

Arma

Bandra(E),Mumbai,Maharashtra

Type: Commercial

VasaiSEZ

Multi Service SEZ

PROJECTS IN PIPELINE

Affaire Bandra (W), Mumbai, Maharashtra

Multiplex

Kandivali (E), Mumbai, Maharashtra

Harmony

Goregaon (W), Mumbai, Maharashtra

Dreams

Off LBS Marg, Bhandup (W), Maharashtra

Type: Residential

Dreams the Mall

Off LBS Marg, Bhandup (W), Maharashtra

Type: Commercial

117

Cyber City

Kalamasserry, Kochi

Type: IT Park

Developable size of 8.00 million sq ft with 5.5 million sq.ft for IT/ITES. Cyber City

will have 2.5 million sq ft of mixed usage developments which includes residential

apartments, retail shopping area, schools, villas and entertainment zones.

Source: www.hdil.com

MAJOR ACQUISITIONS/ANNOUNCEMENTS

Housing Development & Infrastructure (HDIL) sold a commercial land in

Andheri (in the western suburb of Mumbai) to Mack Star Marketing, a private

company, for around Rs 9 billion.

HDIL bagged the project under the slum rehabilitation scheme three years ago,

which had a total of one million sq. ft. of space with 0.5 million sq. ft. being a

part of slum rehabilitation and rest for the developer. HDIL, a part of the

Wadhawan group, has a land bank of 132 million sq. ft. in the Mumbai region.

Housing Development and Infrastructure (HDIL) is planning to enter the

entertainment sector under the brand name Broadway. The investment will be

close to Rs. 10 billion to fund expansion in the country`s multiplex market. This

venture will offer films through its multiplexes and will have a range of gaming

centres with food court that will be managed by Broadway. HDIL will set up its

first Broadway theatre in Vasai, a Mumbai suburb. This will be followed with

the opening of the Broadway entertainment centre at Kandivali somewhere

around mid-January next year. The multiplex will have four screens by the end

of the current fiscal. The company plans to set up over 150 theatres in major

cities by the end of the fiscal 2009.

HDIL has been awarded contract from MIAL (Mumbai International Airport

Limited).for Rehabilitation of approximately 85000 slum dwellers under

expansion and Modernisation of Mumbai airport.

HDIL has been short listed for prestigious Dharavi Slum Rehabilitation projects

after technical evaluations. Lehman Brothers are financial partners to the

project.

15 acres land acquisition in New Mumbai from Eveready. HDIL plans to set up

IT&ITES units with developable area of 2 million sq.ft.

8.32 acres Land acquisition in Bhandup from Kilburn Engineering. HDIL plans

to set up IT& ITES units with developable area of 1.2 million sq.ft.

169 acres of land acquisition in MMR (Palghar) to be used for Industrial and

plotted developments.

118

V. DLF

ABOUT THE COMPANY:

The DLF group is a leading real estate developer in India. The group has over 224

million sq. ft. of existing development and 748 million sq. ft. of planned projects. The

company has entered into several strategic alliances with global industry leaders.

Their core business traditionally has been into three prime divisions: Homes, Offices

and Shopping Malls. To these DLF has added three more divisions: Hotels,

Infrastructure and SEZs.

The company was listed on 5 July 2007at Rs. 2 per share on BSE and NSE. The IPO

was for Rs.90785.30 millions which has been utilized.

119



Analysis:-

The above figure shows that there has been an increase in the PAT in the second

quarter. Although the sales were same but there has been an increase in profit because

of decrease in interest expense and also there has been a tax refund in the September 07

quarter where the tax expense in the previous quarter was Rs.2952 millions.

In the third quarter there has been a decrease again owing to increase in tax expense to

Rs.2030 millions.


120

UTILISATION OF THE FUNDS:

The company came with an IPO worth Rs. 90785.30 million. This sum was utilized as:

Particulars Amount (Rs.

Millions)

Acquisition of land and development rights 56695.50

Development and construction cost for existing projects 6362.50

Prepayment of Loans 24697.50

Issue related Expenses 3029.80

Total 90785.30



121

RATIOS



Year Ended 06-07 7083.00 70633.00 10.03

Year Ended 05-06 4769.76 22615.45 21.09

Year Ended 04-05 1244.51 8432.08 14.76

RETURN ON EQUITY


Year Ended 06-07 4178.16 10633.00 39.29

Year Ended 05-06 2274.38 6449.31 35.27



Year Ended 06-07 67692.00 10633.00 6.37

Year Ended 05-06 30138.97 6449.31 4.67

Year Ended 04-05 6331.01 3839.26 1.65

EPS

YEAR PAT No. of outstanding

shares EPS

Year Ended 06-07 4178.16 1529.5 2.73

Year Ended 05-06 2274.38 188.84 12.04

Year Ended 04-05 677.06 17.54 38.60 Source: www.myiris.com


122




123

PROJECTS COMPLETED:

1. DLF SILVER OAKS, GURGAON

Silver Oaks is located in a prime location of Phase I. It is a low-medium-and high-rise

apartment complex spread over 15 acres of land. There are over 600 apartments and 12

penthouse apartments ranging in size from 1,058 square feet to 2,100 square feet.

2. DLF BEVERLY PARK GURGAON

3. DLF REGENCY PARK

It is located in DLF Phase 4 in close proximity to DLF City Club and Shri Ram School.

It is a part of 24.645 acres group housing. Options include two bedroom, three bedroom

and five bedroom duplex penthouse apartments.

UPCOMING PROJECTS:

1. GARDEN CITY DLF, NEW INDORE

Garden city's 82 acres of pollution-free environs gives the residents a perfect answer to

beat their stressful lifestyle.

2. NEW TOWN HEIGHTS, DLF GURGAON

It is an excellent housing opportunity from DLF in the price range of Rs 45-75 Lakh

(approx), in the National Capital Region.

DLF‘s NEW TOWN HEIGHTS, a residential project in Sector-90 Gurgaon has a built-

up area between 1760 sq. ft. to 2505sq.ft.

3. NEW TOWN HEIGHTS, KOLKATTA

It is a premium residential condominium in Kolkata's most sought-after neighborhood,

Rajarhat.

‗New Town Heights‘ DLF Rajarhat offers 15 acres in various configurations, to cater to

individual requirements.

124

4. DLF RIVERSIDE, KOCHI:

It is located on the extensive 175 meter waterfront of the Chilavannoor River, ‗DLF

Riverside‘, spread over 5 acres, and almost floats on the backwaters.

5. DLF PARK PLACE, GURGAON:

6. THE BELAIRE, GURGAON:

Apartments in The Belaire are in the price range of Rs. 2.1 to Rs. 3.3 crores.

Source: www.dlf.in

RECENT UPDATES:

DLF signed management agreements with Hilton Hotels

Corporation involving seven new hotel developments in the

pipeline. This makes the second phase in the DLF-Hilton JV

Company‘s overall strategic development plans to build and

develop 75 hotels in India in the next 5-7 years.

CRISIL rates DLF at AA & P1+

Citigroup, Merrill Lynch and DE Shaw may pump-in Rs 20

billion (USD 500 million) in the DLF Assets` (DAL) real estate

investment trust (REIT), part of the DLF group.

D&G to set up retail outlet in 51:49 percent JV with DLF.

Source:

i. www.myiris.com




http://www.dlf.in/



125

VI. OMAXE

ABOUT THE COMPANY

The company was originally set up as Omaxe Builders Private limited in 1989,

promoted by Mr. Rohtas Goel, The founder, to undertake construction & contracting

business. The company further changed its constitution to a limited company known as

Omaxe Construction Ltd., in 1999. The name of the company has now changed to

OMAXE LTD from 2006. The company began as a civil construction and contracting

company, has successfully executed more than 120 prestigious Industrial, Institutional,

Commercial, Residential and Hospital construction projects.

The company entered the Real Estate Development business in 2001 and in now

amongst the large Real Estate Development companies in India.

The company came with an IPO in the year 1999 worth Rs. 5516.92millions. The face

value of each share was Rs.2.

126



Analysis:-

We see that although the net profit has increased over the quarter, the Net Profit

margin has declined sharply.

UTILIZATION OF THE FUNDS:

The company came with an IPO worth Rs.5516.92millions and raised funds through

green shoe option worth Rs.253.27millions. Thus, total funds amounted to Rs.5770.19

millions. This was utilized in the following manner:

Particulars Amount (Rs. Millions)

Repayment of loans 1,500.00

Payment related to land 124.10

IPO expenses including advertisement 545.22

Development and construction cost of projects specified in the objects of the

issue

114.00

Total funds utilized up to September 30, 2007 2,283.32

Balance as at September 30, 2007 3,486.87

The unutilized funds as on September 30, 2007 have been temporarily invested in short term

liquid instruments.




127

RATIOS:



Year Ended 06-07 2461.00 22264.95 11.05

Year Ended 05-06 1857.43 20611.81 9.01

Year Ended 04-05 1652.63 7194.97 22.97

RETURN ON EQUITY


Year Ended 06-07 1218.00 9040.75 13.47

Year Ended 05-06 1247.98 8898.14 14.03



Year Ended 06-07 15510.60 9040.75 1.72

Year Ended 05-06 12978.39 8898.14 1.46

Year Ended 04-05 4256.82 3529.84 1.21

EPS


Year Ended 06-07 1218 256 4.76

Year Ended 05-06 1247.98 256 4.87

Year Ended 04-05 740.2 229 3.23



128



PROJECTS:

The company in a short span of 5 years has completed and delivered 11 projects

consisting of 8 residential, 1 Integrated Township and 2 commercial covering approx

5.59 million sq. ft of area. The company currently has 54 projects under development.

These include 23 group housing projects, 16 integrated townships, 14 shopping malls

and commercial complexes and 1 hotel. The company is at present developing over 156

million sq ft of area across 31 towns in 10 states in Northern, Central India and

Southern India.

Source: www.omaxe.com


http://www.omaxe.com/

129

RECENT UPDATES:

Omaxe wins Rs 12 bn contract from NRDA, Chhattisgarh. Omaxe has

won the bid from Naya Raipur Development Authority, Chhattisgarh for

development of Theme Township with 18 Hole Golf Course on over 400

acres (approx.) at Naya Raipur, Capital City of Chhattisgarh. The value

of the project is Rs 12 billion (approx.), which shall include the

development of residential and commercial buildings, golf villas and a

hotel.

Omaxe inks MoU with Rajasthan for assisting in setting up of SEZ

.Omaxe announced that the company entered into a memorandum of

understanding (MoU) with the state of Rajasthan for assisting in setting

up of `Multi Product Special Economic Zone` at district Alwar in

Rajasthan. The MoU was inked on the occasion of Resurgent Rajasthan

Partnership Summit held on Nov. 30, 2007 at Jaipur.

The planned SEZ is, over 5,000 hectares (12,500 acres approx) of land

in the district of Alwar, Rajasthan. It is proposed to be set up in an

estimated period of 5 years and is expected to generate direct and

indirect employment for approximately 600,000 people in the Rajasthan.

Further, the company informed that it promoted a wholly owned

subsidiary by the name of Omaxe Rajasthan SEZ Developers. For this

the company has invested Rs 500,000. The above has been approved by

the government of India.

Omaxe is proposing to invest Rs.80, 000 crore in next five years to build

I million affordable housing units in the country. Housing units will be

priced between Rs. 2.5 lakh to Rs.20 lakh over areas ranging from 300

to 1,200 sq.ft.

Source:

i. www.myiris.com


iii. Various newspapers and journals



130

VII. BRIGADE ENTERPRISE

ABOUT THE COMPANY

The company have completed total of 67 properties, comprising of 41 residential

properties, 21 commercial properties, aggregating to approximately 5.67 million sq.ft

of saleable area and approximately 6.74 million sq.ft of Developable Area.

Brigade Enterprise raised Rs.7456.15 million from IPO out of which Rs.6483.64

million is from Net IPO proceeds and Rs.972.55 million from Green Shoe Option. The

Company got listed on 31st December, 2007 at Rs.390 on BSE and NSE.


We have information of only the 3rd

Quarter that is OND‘07.

Net Sales of the company were Rs.1, 18.86 crores.

Profit after Tax was Rs.36.70 crore.

RATIOS


YEAR PBDIT CAPITAL

EMPLOYED ROCE

Year Ended 06-07 1198.62 3859.81 31.05

Year Ended 05-06 503.43 1812.79 27.77



Year Ended 06-07 729.04 1471.89 49.53

Year Ended 05-06 419.86 804.24 52.21

Year Ended 04-05 196.03 430.41 45.54

DEBT EQUITY RATIO


RATIO

Year Ended 06-07 2402.03 1471.89 1.63

Year Ended 05-06 1025.24 804.24 1.27

Year Ended 04-05 1092.70 430.41 2.54

131


YEAR EPS

BASIC




SHAREHOLDING PATTERN

Data Not Available

PROJECTS COMPLETED

Mainly they are into Residential and Commercial.

APARTMENTS IN

BENGALURU MYSORE

Brigade Classic Brigade Elegance

Brigade Coronet Brigade Parkway

Brigade Elite2 Brigade Regal

Brigade Gardenia Brigade Residency

Brigade Hallmark Brigade Retreat

Brigade Heritage Brigade Royal

Brigade HillView Brigade Tranquil

Brigade Jacaranda

Komarla Brigade

Residency

Brigade Lavelle

Brigade Legacy

Brigade Manor

Brigade Mayfair

Brigade Millennium

Brigade Nest

Brigade Orchid I&II

Brigade Palace

Brigade Park View

Brigade Rathna

Brigade Regency

Brigade Vintage

Brigade Vista

132

COMMERCIAL

BENGALURU

Brigade Chambers

Brigade Court

Hulkul-Brigade Centre

Brigade Links

Brigade Majestic

Brigade MLR Centre

Brigade MM

Brigade Plaza

Brigade Point

Brigade Seshamahal

Brigade Software Park

Brigade South Parade

Brigade Square

Brigade Terraces

Source: www.brigadegroup.com

RECENTS NEWS

Brigade Enterprises Ltd has informed BSE that the Brigade Hospitality Services

Pvt Ltd, a 100% subsidiary of the Company, announced that they have signed a

management agreement with Sheraton Hotels and Resorts to manage a new-

build Sheraton Hotel in Mysore.

Sheraton Mysore Hotel will be part of a 4 acre development that will include

commercial space, in addition to the hotel. The 220-room hotel will include

over 15,000 square feet of meeting space, four restaurants with an all day dining

outlets, lobby lounge and pub, a bar, health club, spa and business center.

Partnership with Starwood Group for the development of the Sheraton Mysore

Hotel. Mysore being one of the prominent cities of Karnataka, promises

considerable growth potential in travel and tourism.

http://www.brigadegroup.com/

133

VIII. KOLTE – PATIL DEVELOPERS

ABOUT THE COMPANY

Kolte-Patil Developers Limited a Pune based real estate developer. Having 39.78

million sq.ft saleable areas out of which 92% is located in Pune while 8% is in

Bengaluru.

Amount raise from IPO proceeds is Rs.2755.43 million. The company got listed on 13th

December, 2007 at Rs.145 on BSE and NSE.


We have only information of 3rd

Quarter that is OND‘07.

Net Sales of the company was Rs.127.35 crores.

Profit after Tax was Rs.35.7 crores.

RATIOS


YEAR PBDIT CAPITAL

EMPLOYED ROCE

Year Ended 06-07 929.88 776.07 119.82

Year Ended 05-06 61.11 574.48 10.64



Year Ended 06-07 835.10 1802.49 46.33

Year Ended 05-06 28.02 185.3 15.12

Year Ended 04-05 24.25 160.4 15.12

DEBT EQUITY RATIO


RATIO

Year Ended 06-07 859.98 1802.49 0.48

Year Ended 05-06 718.55 185.30 3.88

Year Ended 04-05 228.70 160.40 1.43

134


YEAR EPS

BASIC







135

COMPLETED PROJECTS

Residential Projects in PUNE

Greenfields Maestros

Patil Regency Rose Parade

Patil Heritage Sovereign

Orchids Pink City

Precious Gem Lapis Lazuli

Ragdari – Conifer Mayur Pankh (residential and commercial)

Misty Moors Floriana Estate( residential and commercial)

Hills & Dales Green Acres (residential and commercial)

Residential Projects in BENGALURU

Projects Locations

Floriana Estate Koramangala

Surabhi Bannerghatta Road

Whispering Meadows RMV Extn.

Shubha Bannerghatta Road

IT Park in PUNE

Giga Space IT Park

E-Space


Residential Projects in PUNE

Projects Locations

Golden Towers PimpleNilakh

Kharadi Residential Kharadi

Residential Projects in BENGALURU

Projects

Hosur Road

Richmond Road

Koramangala

136

IT Spaces in PUNE

Hinjewadi

Bavdhan

Source: www.koltepatil.com

http://www.koltepatil.com/

137

IX. AKRUTI CITY LTD

ABOUT THE COMPANY

Akruti City Limited (formerly known as Akruti Nirman Limited) is a leading real

estate developer in Mumbai city. The company is deeply committed to the city and

is involved in many projects that will fundamentally change the face of the city and

the lives of its citizens. Akruti‘s commitment is often called the ―3C‘s‖. A

commitment to the city, to its customers and to citizens. The numerous Slum

Redevelopment Projects that the company has undertaken best exemplify this

commitment.

The company is promoted by Mr.Hemant Shah – the Chairman, and a Civil

Engineer; and Mr. Vimal Shah, the Managing Director and a Chartered Accountant.

The company has been awarded the ISO 9001 certification. On the financial front,

the company has been awarded a real estate developer‘s rating of DA2 by CRISIL –

The Credit Rating Information Service of India. Akruti is the first in the industry to

receive this twin distinction. The DA2 rating reflects the professional management,

strong project management capabilities, well defined workflow processes, excellent

track record of completing projects on schedule and strong financial profile

The company got listed on 7th

February, 2007 at Rs.540 on BSE and NSE.

138



UTILISATION OF THE FUNDS

Details of utilisation of fund received from IPO of equity shares:-

(Rs in

millions)

Particulars Estimated Utilisation

Amount

Actual Utilisation upto

December,2007

- Acquisition of

Land/rights in land

1800 1800

- Repayment of Loan 570 570

- Development and

construction cost

550 550

- Expenses relating to IPO 310 310

- General corporate

purposes

390 390

3620 3620


139

RATIOS



Year Ended 06-07 1027.76 7132.84 14.41

Year Ended 05-06 757.52 1714.71 44.18



Year Ended 06-07 758.67 5018.3 15.12

Year Ended 05-06 630.68 1067.53 59.08

Year Ended 04-05 129.19 509.61 25.35

DEBT EQUITY RATIO


Year Ended 06-07 2817.55 667.00 4.22

Year Ended 05-06 844.96 480.00 1.76

Year Ended 04-05 1454.14 20.00 72.71


YEAR EPS

BASIC




PRICE EARNING RATIO (P/E)


FY 07 405.85 11.37 35.68

140




141

COMPLETED PROJECTS

Residential

Name of the Project Location Akruti Aditi Jogeshwari (E),Mumbai

Akruti Aditya Grant Road (W),Mumbai

Akruti Niharika Andheri (W),Mumbai

Sai Akruti Bandra (E),Mumbai

Akruti Aneri Andheri (E),Mumbai

Akruti Astha Walkeshwar,Mumbai

Akruti Classic Mulund (E),Mumbai

Akruti Laxmi Dadar T.T,Mumbai

Akruti Erica Vile Parle (E),Mumbai

Akruti Elegance Mulund (E),Mumbai

Akruti Orchid Park Andheri (E),Mumbai

Akruti Lake Woods Thane (E),Mumbai

Commercial & IT

Name of the Project Location Akruti Softech Park Andheri (E),Mumbai

Akruti Centre Point MIDC,Andheri (E)

Akruti Orion Vile Parle (E),Mumbai

Akruti Arcade Andheri (W),Mumbai

Akruti Business Port Andheri (E),Mumbai

Akruti Trade Centre Mumbai


Commercial & IT

Name of the Project Location Akruti Topaz Bandra (E),Mumbai

Akruti Corporate Park Kanjurmarg (W),Mumbai

Akruti Trade Point Jogeshwari (E),Mumbai

DLF Akruti Infotech Park Pune

IRIS Andheri (E),Mumbai

Akruti Star Andheri (E),Mumbai

Akruti Sapphire Andheri (E),Mumbai

Retail

Name of the Project Location Akruti SMC MSRTC,Thane (W)

Akruti City World Thane (W)

Akruti Elite Plaza Mahalakshmi

Source: www.akruticity.com

http://www.akruticity.com/

142

X. IVR PRIME

ABOUT THE COMPANY

IVR Prime Urban Developers Ltd. was established as the Urban Development arm of

the hugely successful and renowned infrastructure giant IVRCL Infrastructures &

Projects Ltd.

IVR Prime has the backing of IVRCL Infrastructures & Projects Ltd, a profit making,

dividend paying, Rs. 2500 Cr (US $625 million) turnover Company, listed on the

Indian Stock Exchanges Since year 1995.

The company went public in August 2007. It came with IPO worth Rs.7782.5million.



Analysis:-

We see that with the increase in sales there has been an increase in the profits and the Net profit

margin also. This shows that the company is able to minimize its cost while expanding its sales.


143

UTILISATION OF THE FUNDS:

The company came with an IPO worth Rs. 7782.50million. It has been utilized in the following

manner:

Particulars` Amount (Rs. Millions)

Repayment of loan to parent company 1471.80

Repayment of loan to Karnataka Bank Ltd 419.67

Repayment of Development right costs 857.06

Development and construction cost of projects 369.52

General corporate purposes 1164.45



144

RATIOS:



Year Ended 06-07 375.43 3953.83 9.50

Year Ended 05-06 135.41 1158.58 11.69

Year Ended 04-05 12.18 1376.93 0.88

RETURN ON EQUITY


Year Ended 06-07 230.16 798.91 28.81

Year Ended 05-06 102.78 483.94 21.24

Year Ended 04-05 -1.48 281.03 LOSS DEBT EQUITY RATIO


Year Ended 06-07 3155.91 798.91 3.95

Year Ended 05-06 675.14 483.94 1.40

Year Ended 04-05 1095.90 281.03 3.90

EPS


Year Ended 06-07 230.16 50 4.60

Year Ended 05-06 102.78 40 2.57

Year Ended 04-05 -1.48 30 LOSS



145



RECENT UPDATES:

IVR Prime Urban Developers is planning to set up mini resorts of 100 to

125 rooms each in 10 locations across the country at an estimated cost

of Rs 5 billion.

It plans to have a 1,000-room hospitality business in a few years down

the line. It has tied-up with Compass Hospitality, Singapore, for

operating the resorts.

IVR Prime has already acquired the land for building the resorts at

Hyderabad, Pune, Bangalore, Chennai, Delhi, Dehradun, Pondicherry,

Baddi (Himachal Pradesh) and Visakhapatnam. The company will be

setting up two resorts each in Chennai and Delhi. IVR Prime`s main

areas of operation include residential projects, commercial projects and

integrated townships. It has a land reserve of around 2,850 acres in Tier

I cities including Chennai, Hyderabad, Pune, Bangalore, Visakhapatnam

and Noida.

Source:

i. www.myiris.com







146

XI. ORBIT

ABOUT THE COMPANY

Under the Aggarwals' tutelage, Orbit Corporation Limited continues to fulfill its

mission to build unique, modern and high quality living and working spaces The

promoters, through their various ventures have developed properties spanning over 1.5

million square feet worth several hundred crores, in the prime areas of South Mumbai

like Babulnath, Tardeo, Worli, Prabhadevi, Gamdevi.

The Company has extensive expertise in redevelopment projects in South Mumbai.

The company came with an IPO in April 2007 worth Rs.1001.00 Million. The face

value of each share was Rs. 10.

147



Analysis:-

We see that as the profit is increasing, the Net Profit margin also increases for the first

two quarters but in the last quarter, where the sales have surged up to approximately

twice its value in the earlier quarter, the NP margin has come down. This is because of

the rise in expenses by around thrice of the earlier quarter.

UTILIZATION OF THE FUNDS:

The company came with an IPO worth Rs.1001.00million of which only Rs. 747.40 million

was utilized for the following purposes:

Particulars Proposed amount

(Rs. Millions)

Utilized

amount(Rs.

Millions)

Advances towards Acquisition of New Project 500.00 500.00

Project Development Cost for the current

projects and investment in wholly owned

subsidiaries for projects developed by subsidiaries

422.81 205.00

IPO Issue Expenses 78.19 42.40

Total 1001.00 747.40



148

RATIOS:



Year Ended 06-07 88.68 1452.79 6.10

Year Ended 05-06 2.35 715.47 0.33

Year Ended 04-05 44.62 132.73 33.62

RETURN ON EQUITY


Year Ended 06-07 77.71 1524.16 5.10

Year Ended 05-06 0.92 984.88 0.09



Year Ended 06-07 213.68 1524.16 0.14

Year Ended 05-06 15.65 984.88 0.02

Year Ended 04-05 34.40 150.35 0.23

EPS


Year Ended 06-07 77.71 27.17 2.86

Year Ended 05-06 0.92 21.60 0.04

Year Ended 04-05 28.55 11.00 2.60

149




150

PROJECTS:

COMPLETED PROJECTS:

Shivam

Babulnath

Pujit Plaza

Jindal Enclave

The Angel

Daulat Bhavan

ONGOING PROJECTS:

Residential

Orbit Heights, Tardeo Road

Villa Orb, Napeansea Road

Orbit Arya, Napeansea Road

Orbit Eternia, Lower Parel

Orbit Enclave, Prarthana Samaj

Commercial

Orbit WTC Bandra Kurla Complex

JSW House, Lower Parel

Orbit Plaza, Bandra Kurla Complex (Kalina)

FUTURE PROJECTS:

Orbit Haven, Napeansea Road

Orbit Grand I & II, Lower Parel

Source: www.orbitcorp.com

http://www.orbitcorp.com/

151

RECENT UPDATES:

15% second interim dividend:

Orbit Corporation net rises 10.58 times in Dec`07 qtr. Orbit

Corporation disclosed a phenomenal jump in net profit for the quarter

ended December 2007. During the quarter, the company experienced a

10.58 times rise in profit to Rs 196.18 million from Rs 18.54 million in

the quarter ended September 2007. Net sales for the quarter rose 5.54

times to Rs 725.61 million compared with Rs 131.09 million in the

previous quarter.

Total income rose 5.42 times to Rs 739.19 million for the quarter-ended

December 2007 from Rs 136.48 million for the quarter ended September

2007.

Source:

i. www.myiris.com






152

XII. INDIA BULLS REAL ESTATE




153

RATIOS



Year Ended 06-07 57.45 3733.41 1.54

RETURN ON EQUITY


Year Ended 06-07 131.14 5432.05 2.41

DEBT EQUITY RATIO


RATIO

Year Ended 06-07 2971.65 5432.05 0.55


YEAR EPS

BASIC


PRICE EARNING RATIO (P/E RATIO)


FY 07 298.1 0.729873382 408.43

154




155

COMPLETED PROJECTS

JUPITER MILLS – COMMERCIAL

Covering an area of 10 acres , comprise 2 towers of 16 storeys and 2 of 14

storeys it will include a large central landscaped plaza, fine dining restaurants,

food courts, club house and recreation areas and also world class corporate

offices.

RAIGARH SEZ

It is a multi – product SEZ with an area of 6,000 acres which is divided into

2,100 acres of industrial processing area, 900 acres of commercial area, 1,500

acres of residential area and 1,500 acres of open spaces.

GOA LUXURY RESORT

The resort is developed on a property over 21 acres along the Vagator Beach at

Goa.

NASHIK SEZ

It is also a multi – product SEZ admeasuring 3,000 acres which is divided into

1,050 acres of industrial area, 750 acres of residential area, 450 acres of

commercial area, 300 acres dedicated to green spaces and 450 acres for road

and amenities.

THANE SEZ

It is also a multi – product SEZ spans over 6,000 acres in Thane district,

Maharashtra. It will consist of captive power plant, water filtration plant,

warehousing & cold storage facilities and an International Business Center.

CHENNAI HOUSING

It is a 50 acre site for an exclusive housing enclave in Chennai. Out of 50 acres,

16 acres have already been acquired.

CHENNAI TOWNSHIP

It is a property spread over 241 acres for commercial & residential

development.

MUMBAI TOWNSHIP

It is an integrated township development in Panvel spans over 600 acres which

is located along the Mumbai – Pune expressway. Out of these 600 acres, 240

acres will be for residential purpose and 150 acres will be parks and open

spaces; industrial and commercial areas, roads and amenities will be 30 acres,

60 acres & 120 acres respectively.

156


ELPHINSTONE MILLS

It is located on 7.76 acres of land in Lower Parel, in close proximity to the

Jupiter Mills site.

It is design for Corporate Offices and it will also have restaurant are , food court

area, club house area and parking spaces for 3,000 car parks .

Construction is likely to complete by September 2008.

SONEPAT TOWNSHIP

It is a residential and commercial project near Delhi, spread over 150 acres.

Housing project will comprise of 108.87 cares, 6 prime commercial lots

aggregating 24.85 acres and an Info – Tech Park entailing 16.88 acres.

Work is likely to complete in phases over next three years.

CASTLEWOOD

It is located adjacent to prime residential of South Delhi comprising of 3,500

houses for slum dwellers over 35.8 acres of land.

Project is likely to complete by June 2008.

GURGAON HOUSING

It is located in NCR, Delhi covering a total area of 1.97 million sq.ft.

Consisting 1.35 million sq.ft residential and .62 million sq.ft commercial.

Project is likely to complete by June 2010.

Source: www.indiabulls.com/realestate

http://www.indiabulls.com/realestate

157

RECENT NEWS

India bulls has acquire 9% stake in Piramyd retail an Ashok Piramal group for

Rs.208 crore.

India bulls Real estate‘s subsidiary, India bulls Power Generation receives LoI

for Bhaiyathan TPP project in Chhattisgarh by Chhattisgarh State Electricity

Board (CSEB). CSEB had invited bids for procurement of power produced on

long term basis for the project comprising building, owning, operating,

maintaining of a coal fired thermal power project at Bhaiyathan in Chhattisgarh.

The project includes development of captive coal mines containing proven

reserves of 349 million tons in Chhattisgarh to provide low cost coal supply to

the power project.

Global investor George Soros acquired 2.5% stake in India bulls Real Estate at

about Rs 2.76 billion. Soros` hedge fund Quantum acquired over 6 million India

bulls Real Estate shares through open market transactions on Tuesday at about

Rs 455.8 a share. There has been no dilution of promotes stake as the

transaction involved an exchange of stakes between Quantum and Morgan

Stanley.

India bulls Real Estate, have purchase 100% of the ordinary shares in Dev

Property Development, an Isle of Man registered company listed on the London

Stock Exchange`s AIM.IBREL will issue new shares in the form of GDRs (to

be listed on the Luxembourg Stock Exchange`s Euro MTF). It is offering

0.12091 of a global depository receipt for each share of London-listed Dev

Property. India bulls have valued Dev Property at around Rs 11 billion.

158

7. COMPETITION:

Herfindahl Index

Michael Porter Analysis

PEST Analysis

Peer Comparison

HERFINDAHL INDEX

It measures industry concentration. It is arrived as under:

HI = ∑ (Market Share of each player)2

•For a pure monopoly it will come 10000.

•Where there are only two players with equal market share the index value shall stand as 5000.

•Lesser the concentration lesser is the Index Value i.e. if there are 100 players each having 1%

market share the Index value shall come as 100.

HERFINDAHL INDEX FOR REAL ESTATE COMPANIES

COMPANIES SALES* MARKET SHARE HI

UNITECH 24417.35 24 563

HCC 23576.2 23 525

PDL 12361.36 12 144

HDIL 12034.48 12 137

DLF 11335 11 121

OMAXE 9408.84 9.14 84

BRIGADE ENT. 3781.7 4 14

KOLTE PATIL DEVELOPERS 2293.68 2 5

AKRUTI NIRMAN CITY 1778.88 2 3

IVR PRIME 1477.62 1 2

ORBIT CORPORATION 308.89 0.30 0.09

INDIA BULLS REAL ESTATE 133.25 0.13 0.02

102907.25 1597

* Sales as on 31st March, 2007 in million.

159

Value of Herfindahl index for Indian Real Estate Companies is 1597

It implies moderate concentration of pricing power and competition in the

Industry. The major players in the Realty segment are Unitech, HCC, PDL, HDIL, DLF

& OMAXE holding 24%, 23%, 12%, 12%, 11% and 9% respectively.

160

MICHAEL PORTER ANALYSIS

The Michael Porter‟s five forces model is as follows:

The figure is self explanatory.

It says that an industry, and an individual company, profitability and the intensity of

competition in an industry are a function of five competitive forces as presented in the

model above.

161

The Michael Porter‟s analysis for the Realty Industry can be done as follows:

Threat Of New Entrant: High

Large untapped market segment

Not so highly regulated market

Bargaining Power Of Suppliers: High

• Land etc. Not easily available

Competitive Rivalry: High

• Competition hots up in RESIDENTIAL as well as COMMERCIAL sector

Bargaining Power Of Buyers: Low

Customers do not have much market knowledge

Threat Of Substitute: Low

• No alternative option In Residential sector • Commercial sector have the ball in their court

162

PEST ANALYSIS

POLITICAL FACTORS

In Political factors we have to look at following factors

1. How stable is the political environment? 2. Will government policy influence laws that regulate? 3. What is government’s policy on the economy? 4. Does the government have view on culture and religion? 5. Is the government involved in trading agreements such as EU,NAFTA, ASEAN, or

others?

ECONOMIC FCATORS

In Economic factors we have to look at following factors

1. Interest rates 2. The level of inflation Employment level per capita 3. Long – term prospects for the economy Gross Domestic Product (GDP) per capita,

and so on.

SOCIOCLUTURAL FACTORS

In Sociocultural factors we have to look at following factors

1. What is dominant religion? 2. What are attitudes of foreign products and services? 3. Does language impact upon the diffusion of products onto markets? 4. What are the roles of men and women within society? 5. How long are the population living? Are the older generations wealthy? 6. Do the population have a strong/weak opinion on green issues?

163

7. Long – term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

TECHNOLOGICAL FACTORS

In Technological factors we have to look at following factors

1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?

2. Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?

3. How is distribution changed by new technologies? 4. Does technology offer companies a new way to communicate with consumers?

PEST ANALYSIS ON REALTY SECTOR

POLITICAL FACTORS

Property Tax.

Launch of Real Estate Mutual Funds (REMFs)

100% FDI is permitted in hotels and tourism as well as real estate

Government working on Revenue Sharing Model

ECONOMIC FACTORS

Housing Loan bracket to be increase from Rs.20 lakhs to Rs.30 lakhs

EMI Facility which help people to purchase house easily.

SOCIOCULTURAL FACTORS

Developers are building Slum Rehab Projects .Recently Omaxe announce to invest Rs.200 crore in slum rehab projects.

Disposable income of people increases.

NRI investing In India Real estate.

Youngsters are looking for luxury houses with facilities like Gym, Swimming pool and many more.

TECHNOLOGICAL FACTORS

Websites like www.magicbricks.com, www.makkan.com,www.99acres.com and many more helping an individual and organization to find places allover the world by just one click.

Indian Real estate firm hiring foreign architects

164

PEER COMPARISON:

COMPANY

Last

Price*

(Rs.)

Market

Cap*

(Rs. MN.)

Sales (Rs.

MN.)

(2007)

EBITDA

(Rs. MN.)

(2007)

Net Income

(Rs. MN.)

(2007)

Return of

Equity (%)

(2007)

Return on

Assets (%)

(2007)

P/E (%)

(2007)

Parsvnath

Developer

s 224.85

421,400 12361.36 3614.53 4874.46 18.58 8.32 17.6

HDIL 731.95

1,554,600 12034.48 6537.75 12065.09 69.83 28.28 NA

India Bulls

Real

Estate 555

1,268,300 133.25 57.45 133.25 2.41 1 408.43

Brigade

Enterprise 197.95

214,100 3781.7 1198.62 3897.78 49.53 10 NA

Kolte Patil

Developer

s 109.75

83,600 2293.68 929.88 2319.57 46.33 15.6 NA

Akruti City 1100.3

735,900 1778.88 1027.76 1788.79 15.12 8.78 35.68

DLF 668.15

11,503,500 11335 7083 11348 39.29 4.19 NA

HCC 125.3

336,400 23576.2 2461 23832.1 13.47 3.55 18.82

Unitech 288.85

4,621,000 24417.35 13956.79 24515.99 84.72 10.91 31.97

Omaxe 231.3

407,000 9408.84 2096.7 9413.14 13.47 6.98 NA

Orbit

Corporati

on 490.4

174,600 308.89 88.68 314.96 5.1 1.79 NA

IVR Prime 221.6

146,100 1477.62 375.43 1478.01 28.81 2.15 NA

*data as on 25/04/08

165

8. MARKET PERFORMANCE:

RELATIVE PERFORMANCE

In this relative performance we have shown the comparison of Sensex with Realty

Sector.


Analysis:-

On January 1, 2008 the realty index of BSE was quoted at 13,037.89 points and it

tumbled to 7,554.80 points, a fall of 5,483.09 points or 42.05 %, as on March 31, 2008.


166

IPO RATES:

Company

Name

F.V Issue Listed on BSE 52 Week Today Gain / Loss From

Re. Price List Date List Close High Low Close Issue Price List Close

AKRUTI

CITY LTD 10 540 7/2/2007 564 1,399.00 322 1,103.35 104.32% 95.63%

BRIGADE

ENTERPRISE

S LTD 10 390 31/12/2007 378.55 428 151 190.75 -51.09% -49.61%

DLF LTD(2) 2 525 5/7/2007 570.05 1,225.00 505.6 674.75 28.52% 18.37%

HOUSING

DEVELOP

INFRA

(HDIL) 10 500 24/07/2007 558.6 1,432.00 473.5 725.55 45.11% 29.89%

INDIABUL

REAL(2) 2 SCHEME 23/03/2007 325.65 847.8 300 526.6 _ 61.71%

IVR PRIME

URBAN 10 550 16/08/2007 418.15 509.9 152.2 227.75 -58.59% -45.53%

KOLTE-

PATIL

DEVELOPER

S LTD 10 145 13/12/2007 181.45 272 75.25 111.05 -23.41% -38.80%

OMAXE LTD 10 310 9/8/2007 349.95 613 180 234.5 -24.35% -32.99%

ORBIT

CORPORATI

ON 10 110 12/4/2007 127.95 1,079.95 156 481.5 337.73% 276.32%

PARSVNATH 10 300 30/11/2006 526.3

598 170.2 228.15 -23.95% -56.65%

Source: - www.sptulsian.com


167

9. KEY HIGHLIGHTS OF METROS:

MUMBAI

Residential prices are still moving up. There is a yawning gap between what

most consumers can pay and what developers are asking for.

There is a slowdown in some pockets in suburbs such as Andheri and

Ghatkopar. While prices haven‘t fallen, sales volume are slowing down.

Demand for office space has slowed down.

Though fresh retail space got added in 2007, affordability remains a key issue.

Retailers say that it will be difficult to make decent margins at current rentals.

NCR

In some pockets, especially south Delhi, residential prices will stay firm.

Suburbs like Noida and Gurgaon could see a softening. Add-ons like free

furniture and furnishings will be commonplace.

The drop in prices of apartments in Gurgaon and Noida is sharper than that of

those in the city. In some south Delhi localities, even rentals have come down.

Rentals for high street retail will continue to rise due to paucity of supply and a

lack of legally compliant buildings. Expect major correction in mall rentals due

to oversupply.

BANGALORE

Builders are offering 10-15% cash discounts as property registration dropped

45% in 2007-08.

In 2007, an estimated 26000 homes were sold against 33500 in 2006.

Commercial property prices are holding firm; 12 million sq. ft of commercial

space was transacted in 2007 as compared to 11 million sq. ft in 2006.

CHENNAI

Residential prices are stagnating, and deals for luxury apartments are being

sweetened with offers such as free car parking.

The drop in prices of apartments in suburbs is sharper than that of those in the

city.

There is a strong demand for office space from non-IT companies in the city but

supply is negligible, and as a result rentals are expected to rise.

No retail space was added in 2007, which means rentals are likely to go up this

year.

168

HYDERABAD

Residential prices are stagnating at the moment and deals for luxury apartments

are being sweetened with offers such as modular kitchens.

Demand for office space from IT companies is stagnant. However there is

limited supply as well. So, prices are unlikely to fall and rentals are expected to

remain stagnant.

During 2007, no new malls came up in the city, but fresh space is likely this

year. Rentals are however, expected to appreciate till end of 2008 due to limited

supply.

KOLKATA

Residential and commercial prices are more or less stable. There has not been

any major correction, because prices had not risen astronomically as in other

metros.

In case of luxury apartments and bungalows, freebies like parking spaces and

gardens are being offered.

The stock of properties (residential, commercial or retail) remains modest and

stable, compared to other cities.

Substantial demand is being generated by players like call centre operators,

insurance companies, information processing outfits, restaurants and retailers.

Large developers like DLF, Unitech and Reit-Eden are making their presence

felt in the suburban areas of Kolkata.

169

10. SYNTHESIS:

Indian Real Estate Industry has witnessed immense growth in the past couple of

years.

The main reasons for its growth were easy access to funds, FDI been allowed

and the phenomenal increase in the real estate demand.

The ever increasing momentum has paved the way for exciting opportunities for

both domestic as well as international investors.

Going forward, we expect the Indian Real Estate market to witness greater

mergers and acquisitions (M&A) driven by consolidation and growing maturity

of the market.

But the demand for luxury homes etc. would come down because the property

prices have escalated 40-45% whilst the salary levels have grown by 14-15%

only. So now these companies can concentrate on providing residence to the

middle and lower middle income group. Although the margins may be low but

the boom in the realty sector has left this area untouched and hence profits can

be generated out of this area.

The commercial area is giving the profits and will continue to do so for some

more time.

170

V. APPENDICES

Calculation of Excel Sheets

VI. REFERENCES

Newspapers

The Economic Times

- “New hotels may be built on revenue share model” dated

3 April, 2008

- “Multiple FDI projects may bring relief to Realty players”

dated 1 April ,2008

- ET REALTY edition

o 1 May,2008

o 17 April,2008

o 3 April,2008

Mint

- “Lack of takers puts pressure on luxury home prices in

metros” dated 3 April,2008

Articles

Realty stocks to face tough times: Citigroup

Magazines and Books

Business Times – 18 May,2008

Money Life- 24 April,2008

Corporate India-15 April,2008

Capital Market

Indian Stock Market – Sandipa Lahiri Anand

100 World Famous Stock Market Technique – Richard Maturi

Fundamentals of Investing – Gordan J. Alexandar & Jaffery V.

Bailey.

Investing in Real Estate – Andrew Mclean & Gary W. Eldred

171

Prospectus and Annual Report

Kernex Microsystems- Annual Report (31st March, 2007)

Reliance Power- DRHP

DLF- DRHP

Parsvnath Developers- DRHP

Websites

www.sptulsian.com

www.bseindia.com

www.nseindia.com


www.myiris.com

Various company sites



http://www.nseindia.com/



172

VII. GLOSSARY

Bid – An indication to make an offer during the Bidding period by a

prospective investor to subscribe for or purchase the company‘s equity share at

a price within the price band, including all revision and modifications there to.

BRLM – Book Running Lead Managers

CAGR – Compound Annual Growth Rate

CMP- Current Market Price

DRHP – Draft Red Herring Prospectus

EBITDA- Earning Before Interest, Tax, Depreciation and Amortization

Face Value - The value printed on the face of a stock, bond, or other financial

instrument or document

FDI – Foreign Direct Investment

FII - Foreign Institutional Investors

FY – Fiscal or Financial Year

HNI- High Network Individual

IPO – Initial Public Offering

M&A- Mergers and Acquisitions

Market Capitalisation - Market Capitalization or "market cap" is a measure of

a company's size and financial strength. It consists of a company's global assets

less it's liabilities. The valuation, if it's a public company, ebbs and flows

depending on what the marketplace thinks the company are worth. The

calculation is the company's share price multiplied by the number of shares in

issue.

Market Value - The current quoted price at which investors buy or sell a share

of common stock or a bond at a given time is known as "market price". The

market capitalization plus the market value of debt. Sometimes referred to as

"total market value".

NII – Non Institutional Investors that are not QIB or Retail Investors and have

bid for an amount more than Rs.1, 00,000.

OPM- Operating Profit Margin

Q1- Quarter 1, i.e. April, May, June

Q2- Quarter 2, i.e. July, August, September

Q3- Quarter 3, i.e. October, November, December

Q4- Quarter 4, i.e. January, February, March

QIB – Qualified Institutional Buyers

QoQ- Quarter on Quarter i.e. March,2008(Q4) in comparison with

March,2007(Q4)

Relative Market Index- Comparison of the Company‘s share price with the

Sensex during the same period

Retail Investors – Investors (including HUF) who have bid for equity shares of

an amount less than or equal to Rs.1,00,000

173

SEZ – Special Economic Zone

Tier I – Cities in India with a population exceeding 5 million. Cities like

Bangalore, Delhi & Mumbai.

Tier II – Cities in India with a population between 2 to 5 million. Cities like

Ahmedabad,Chandigarh,Hyderabad,Indore,Kolkata,Nagpur & Pune

Tier III – Cities in India with a population less than 2 million. Cities like

Ghaziabad, Jaipur &Kochi

YOY- Year on Year i.e. 2008 in comparison with 2007

Equity Research Report[1].

Documents

Transcript of Equity Research Report[1].