LANCO INFRATECH LIMITED

BUY Target Price:Rs.54.00 CMP: Rs.42.00 Market Cap: Rs.101127.8mn.

Date: 5 Feb,2010.

Key Ratios:

Particulars FY09 A FY10E FY11E

OPM(%) 16 18 18

PAT(%) 6 8 8

ROE(%) 13 18 18

ROCE(%) 24 29 29

P/BV(x) 0.44 3.87 3.17

P/E(x) 3.29 21.38 17.53

EV/EBDITA(x) 0.98 8.27 7.87

Debt Equity(x) 0.64 0.57 0.52

Key Data:

Sector Infrastructure

Face Value 1.00

52 wk. High/Low (Rs.) 60.70/10.86

Volume (2 wk.

Avg.)(lakh)

22.05

BSE Code 532778

SYNOPSIS

• Lanco Infratech Limited is one of India’s top

business conglomerates and among the fastest

growing. Lanco Infratech has subsidiaries and

divisions across a synergistic span of verticals.

• These include construction, Power, EPC,

Infrastructure and Property Development. Lanco

Infratech’s projects, operational and underway, are

spread across India.

• At present, the power portfolio includes an

operating capacity of 1,044 MW and additional

capacities under various stages of implementation

aggregating to more than 10,000 MW.

• The Construction and EPC division of the company

is executing various orders worth more than Rs 209

billion.

• The company is developing 163 Kms of National

Highways on BOT basis.

• The topline of the company is expected to grow at a

CAGR of 38% over 2008A to 2011E.

Share Holding Pattern:

V.S.R. Sastry

Vice President

Equity Research Desk

91-22-25276077

vsrsastry@firstcallindiaequity.com

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

drsastry@firstcallindia.com

Table of Content

Investment Highlights ................................................................................................................................... 3

Peer Group Comparison .............................................................................................................................. 10

Financials ..................................................................................................................................................... 13

Charts .......................................................................................................................................................... 15

Outlook and Conclusion .............................................................................................................................. 18

Industry Overview ....................................................................................................................................... 18

Investment Highlights

• Results Updates (Q3 FY10)

The bottomline of the company for the quarter increased at 34% yoy that is Rs.1068.40mn

from Rs.798.78mn of same period of last year. Total revenue for the third quarter stood at

Rs.16107.10 mn from Rs.18202.31 which is 11.5% decreased than that of a year ago period.

EPS for the quarter stood at Rs.4.48 per equity share of Rs.10.00 each.

Expenditure of the company decreased 19% YoY to Rs.13007.4mn from Rs.16114.84mn of

same period of last year. Interest expenses for the quarter stood at Rs.568.9mn. OPM &

NPM for the quarter stood at 21% and 7% respectively.

Quarterly Results – Consolidated (Rs in mn)

As at Dec - 09 Dec - 08 %Change

Net Sales 16,107.10 18,202.31 (11.5)

Net Profit 1068.40 798.78 34

Basic EPS 4.48 3.63

Equity Capital 2382.50 2197.93

Segment-wise Revenue (Rs in mn)

As at Dec - 09 Dec - 08 %Change

Construction 13135 10434 26

Power 5152 9101 (43)

Property Dev 9 445 (98)

Unallocated 25 27 (7)

Decline in Power revenue is primarily on account of lower Power trading revenue and “Nil”

naphtha based generation at Kondapalli I.

Operational data for the major operating units and trading arm for the quarter is provided below:

Projects

Capacity

(MW)

Units

Generated

(MUs)

Net Sales

(Rs Mn)

Kondapalli I 366 672 1,645

Kondapalli II 233* 78 442

Amarkantak 300 483 -

Aban 120 186 522

Vamshi Hydro 10 2 6

*Open Cycle is in operation since December’09. Total Capacity of the plant will be 366 MW

after operation of combine cycle.

• In respect of Kondapalli ‐I Power Station even though the generation has increased

compared to the corresponding quarter in the previous year, the sales realisations have not

increased comparably due to the fact that last year in same quarter plant was required to

generate on naphtha.

• Kondapalli II started generation in December’09 and generated 78 Mn units and booked

sales of around Rs. 442 mn, an average realization of Rs. 5.6 per unit.

• Net Sale of Aban includes sale on account of carbon credit to the tune of Rs. 127 mn.

• Name of Lanco Electric Utility has been changed to Lanco Power Trading Ltd. and it has

traded 718 mn units during the current quarter against 946 mn units in the corresponding

quarter of previous year.

Important Developments in Power Business:

• Lanco has bought 5.44% stake in Amarkantak Power project from International Financial

Corporation.

• Lanco Anpara, a group company of Lanco Infratech Ltd., also entered into an MoU with the

Government of Uttar Pradesh, to enhance the existing capacity of Lanco Anpara by 660

MW, from 1,200 MW to 1,860 MW.

• In line with the policy of Uttar Pradesh, Lanco Anpara, a group company entitled to sell 100

MW to third parties out of 1,200 (2 x 600) MW that is under construction and expected to

be on stream in 2011.Lanco Infratech Limited has entered into a Memorandum of

Understanding (MoU) with the Government of Uttar Pradesh to setup a 2 x 660 MW coal

fired power plant at Fatehpur.

• The Board of Lanco Infratech Ltd., has also resolved to transfer all of its holdings in various

power SPVs to a wholly owned power subsidiary of Lanco Infratech Ltd. Lanco Infratech

shall approach its shareholders for seeking necessary approvals in due course.

Status of Projects under different Verticals

As of 31st December 2009 capital expenditure incurred in power and Road projects and

debt utilized for the same are as follows:

Rs Million

Projects Capex Debt

Anpara 26,168 19,617

Udupi 44,421 31,687

Amarkantak 26,970 18,519

Lanco Energy ‐ teesta 8,269 4,733

Lanco Green ‐ Budhil 3,183 2,177

Lanco Hydro Energy ‐ Uttranchal 1,966 1,374

Kondapalli II ‐ expension 10,699 6,169

Vamshi Industrial 904 591

Kondapalli III ‐ expension 682 -

122,579 84,867

Total Power Projects

Road Projects

Devihalli 3,260 1,300

Hoskote 4,792 2,030

Total Road

Projects 8,052 3,330

Construction and EPC Business (Orders in Hand):

The Construction and EPC order book position as on December 31st 2009 is Rs.209,024 million.

The break‐up of the current order book is as follows:

Projects Rs Million

Power Projects

Amarkantak – I & II 1,043

Amarkantak – III & IV 55,240

Teesta VI – Sikkim 18,340

Anpara 14,163

Udupi (Nagarjuna) 8,141

Kondapalli Expansion 1,073

Kondapalli (Phase III) 21,060

Vidharbha 56,760

Others 4,577

Total Power Projects 180,398

Building Projects 18,448

Road Projects 4,454

Irrigation Projects 621

Transmission Line Projects 4,566

Chimneys 536

Total Order Book 209,024

• Award of Contracts

Lanco Infratech Ltd was awarded Contracts totalling value of Rs 5,675 Crores (Rupees Five

Thousand Six Hundred and Seventy Six Crores)

(a) One Contract for Offshore Supplies equivalent to Rs. 2,160.00 Crores

(b) The Second for Civil Works of Rs. 1,021.68 Crores,

(c) The Third for Onshore Supplies of Rs. 1,756.44 Crores

(d) The Fourth for Services of Rs. 283.80 Crores

(e) and the Fifth for Non‐EPC of Rs. 454.08 Crores by Lanco Mahanadi Power Pvt. Ltd, a

Subsidiary of the Company, in connection with the setting up of their Pulverized Coal Fired

Power Plant of 2 x 660 MW Capacity to be located in the State of Maharashtra.

• Lanco signs MOU for 1980MW coal fired power plants

Lanco Infratech Ltd has entered into a Memorandum of Understanding(MOU) with the

Government of Uttar Pradesh to set up a 2x660 MW coal fired power plant at Fatehpur.

Lanco Anpara, a group company of Lanco Infratech Ltd, has also entered into an MOU with

the Government of Uttar Pradesh to enhance its existing capacity by 660MW.From its

earlier capacity of 1200 mw, Lanco Apna will now have a total capacity of 1860mw which it

will be developing in two phases.

According to the MOU and the UP Power policy, Lanco Anpara is entitled to sell 1430 mw

to UP Power Corporation and 430mw to third parties.

The signing of the MOU with the UP Government will enhance our power generation

capacity and this will enhance the power generation capacity and this will further add to

the growth and the bottom line of the company.

• Award of Contracts

The Company was awarded Three Contracts totalling value of Rs. 2,106 Crores (Rupees Two

Thousand One Hundred and Six Crores) –

(1). One Contract for Supply of Rs. 1,640 Crores,

(2). The Second for Services of Rs. 216 Crores,

(3) and the Third for Civil and Construction Works of Rs. 250 Crores ‐‐ by Lanco Kondapalli

Power Pvt. Ltd., a Subsidiary of the Company, in connection with their Stage‐III Expansion

of the Power Project of 2 x 371 MW, at Kondapalli, Near Vijayawada, Andhra Pradesh

• Approves stock spilt

Recently the board of directors of the company approved the Sub‐division of One Fully paid

up Equity Share of Face Value of Rs. 10/‐ each into Ten (10) Equity Shares of Face Value of

Re. 1/‐ (Rupee One Only) each fully paid up.

Company Profile

Lanco Infratech Limited's principal activities are construction and development of

infrastructure facilities, property development, generation of power and trading in power. It

operates in three business segments, Construction, Power, Property Development and

Infrastructure development. The Construction segment involved in development of

infrastructure facilities like water supply, mass housing, industrial structure, institutional

buildings and expressways. The Power segment consists of generation of power. The Property

development segment involved in development of IT park, residential buildings, retail and

commercial complex.

Lanco’s operations have always been marked by creation of synergies, backward and forward

integrations and strategic innovations for competitive edge. Today, Lanco Infratech, through

twenty‐two subsidiaries has operations across a synergistic span of verticals.

The Major business segments of Lanco infra are as follows

Construction

Lanco Infratech Ltd has an excellent track record in Construction projects. Its project

expertise spans:

Power plants based on Gas, Coal, Bio‐mass, Hydro and Wind.

Irrigation and water supply projects, including dams, tunnels, lift irrigation, sewerage

schemes and marine works.

Civil construction including commercial and residential buildings, mass housing projects and

townships, industrial structures, information technology parks, Corporate offices, Hospitals

and more and transportation engineering projects including roads, highways, bridges and

flyovers.

Major business segments

Construction

Power

EPC

Infrastructure

Property development

Wind energy

Power

Lanco has proven expertise in power generation from conventional and non‐conventional

sources of energy including gas, coal, biomass, hydro and wind. Lanco has operational and

under execution projects amounting to over 8000MW.

EPC

The EPC group at Lanco ensures project delivery cycles, greater capital expenditure control,

sourcing the best service and technology providers and most importantly allows its clients to

focus on their core business.The core competence of Lanco is its experienced team for

managing contracts during all phases of a project, while meeting the highest international

standards.

Lanco provides engineering, procurement, construction, project management and

commissioning services on a Turnkey basis to the Power Sector leveraging on the experience

and expertise of its Group companies, its construction capability and competent manpower.

Lanco has ongoing projects across India and has in place an established network of

resources. The completed list of power projects includes Thermal, Hydro and Non

conventional Energy.

Infrastructure

Lanco Infratech Ltd has executed many challenging infrastructure projects across India

including Highways. Lanco is currently executing the Varanasi Non Metro Airport Project and

has emerged winner for the Vizhinjam Trans shipment Port Project in Kerala, India

Property development

Lanco's property development is all set to change the skyline of major metros with some of

the finest mixed property townships and realty projects incorporating state of the art

features and amenities. Lanco Hills, one such project, is a 100 acre township coming up in

Hyderabad. Lanco Ville in the IT corridor of Chennai is scheduled to commence shortly

Wind energy

Lanco has undertaken wind‐turbine manufacturing and project development activities in

India, Europe and the AmericasIt is launching its best‐in‐class 2 MW wind turbine in April

2009 with technology from a German engineering company of international repute.On the

project development front, Lanco has already acquired quality wind sites for development of

wind farms in excess of 6,000 MW and aims to achieve 15,000 MW over the next three

years.

Peer Group Comparison

Name of the

company

CMP

(As on 5

Feb, 2010)

Market

Cap.

(Rs. Mn.)

EPS

(Rs.)

P/E

(x)

P/BV

(x) Dividend(%)

Lanco Infratech

Ltd 42.00 101127.8 2.03 20.69

5.37 ‐

GVK Power &

Infra Ltd 42.65 67353.3 0.13 328

3.84 ‐

GMR

Infrastructure Ltd 52.40 192169.4 0.07 748.5

3.37 ‐

Reliance

Infrastructure Ltd 1034.55 233053.3 53.2 19.4

2.21 70

Key Concerns

• Rise in the prices of petroleum products and the increasing cost of power

• Highly competitive with diverse players

• Government policies.

• The increase in the excise duty on cement, will affect construction players.

• Delay in power projects

Financials

12 Months Ended Profit & Loss Account (Consolidated)

Particulars FY 08 A FY 09 A FY 10 E FY11 E

(Rs.Mn) 12m 12m 12m 12m

Net Sales 32,412.57 60,719.62 74721.87 85930.15

Other Income 952.93 562.44 1019.63 1121.59

Total Income 33,365.50 61,282.06 75741.50 87051.74

Expenditure ‐25507.41 ‐51846.05 ‐62425.89 ‐71789.77

Operating Profit 7,858.09 9,436.01 13315.61 15261.97

Interest ‐832.19 ‐1,772.89 ‐2307.31 ‐2538.04

Gross Profit 7,025.90 7,663.12 11008.29 12723.92

Depreciation ‐775.74 ‐1,073.39 ‐1435.30 ‐1578.8

Exceptional Items ‐ ‐1,059.61 ‐625.55 ‐656.8

Profit before Tax 6,250.16 5,530.12 8947.45 10488.27

Tax ‐1,404.52 ‐1,690.40 ‐3309.05 ‐3775.8

Profit after Tax 4,845.64 3,839.72 5638.40 6712.49

Minority Interest ‐1303.93 ‐1036.15 ‐957.46 ‐1005.34

Net Profit 3,541.71 2,803.57 4680.94 5707.16

Equity Capital 2,197.93 2,198.34 2,382.50 2,382.50

Reserves 16,135.48 18,777.85 23,458.79 29,165.94

*Face Value 10 10 1 1

EPS 16.11 12.75 1.96 2.40

*Face value has been changed from Rs.10/‐ to Re.1/‐

Quarterly Ended Profit & Loss Account (Consolidated)

Particulars June 09 A Sep 09 A Dec 09 A Mar 10 E

(Rs.Mn) 3m 3m 3m 3m

Net Sales 21,953.50 19,265.60 16,107.10 17395.67

Other Income 376 187.3 222.6 233.73

Total Income 22,329.50 19,452.90 16,329.70 17629.40

Expenditure ‐19184.8 ‐16143.2 ‐13007.4 ‐14090.49

Operating Profit 3,144.70 3,309.70 3,322.30 3538.91

Interest ‐605.2 ‐518.8 ‐568.9 ‐614.41

Gross Profit 2,539.50 2,790.90 2,753.40 2924.49

Depreciation ‐328.3 ‐332.3 ‐377.9 ‐396.80

Exceptional Items ‐29.2 ‐207.8 ‐204.5 ‐184.05

Profit before Tax 2,182.00 2,250.80 2,171.00 2343.65

Tax ‐813.2 ‐769.3 ‐859.4 ‐867.15

Profit after Tax 1,368.80 1,481.50 1,311.60 1476.50

Minority Interest ‐210.3 ‐255.9 ‐243.2 ‐248.06

Net Profit 1,158.50 1,225.60 1,068.40 1228.44

Equity Capital 2,198.30 2,382.50 2,382.50 2382.50

*Face Value 10 10 10 1

EPS 5.27 5.14 4.48 0.52

*A=Actual, E=Estimated

*Face value has been changed from Rs.10/‐ to Re.1/‐

Charts

Comparative Graph

LANCO INFRATECH BSE SENSEX

Outlook and Conclusion

• At the current market price of Rs.42.00, the stock trades at a P/E of 21.38x and 17.53x for

FY10E and FY11E respectively.

• On the basis of EV/EBDITA, the stock trades at 8.27x and 7.87x for FY10E and FY11E

respectively.

• Price to Book Value of the stock is expected to be at 3.87 and 3.17 respectively for FY10E and

FY11E.

• The Sub‐division of One Fully paid up Equity Share of Face Value of Rs. 10/‐ each into Ten

(10) Equity Shares of Face Value of Re. 1/‐ (Rupee One Only) each fully paid up.

• The Net sales of the company are expected to grow at a CAGR of 38% over 2008 to 2011E.

• Lanco Infratech Ltd has entered into a Memorandum of Understanding (MOU) with the

Government of Uttar Pradesh to set up a 2x660 MW coal fired power plant at Fatehpur. The

signing of the MOU with the UP Government will enhance our power generation capacity

and this will enhance the power generation capacity and this will further add to the growth

and the bottom line of the company.

• We recommend ‘BUY’ in this particular scrip with a target price of Rs.54.00. for Medium to

Long Term Gains.

Industry Overview

The Infrastructure sector is currently going through tough phase due to the global slow

down. As the sector’s dependency on other sectors are much more, any slow down in other

sectors will affect the performance of this sector. Decline in the price of commodity and

easing interest rates will help the companies to come out from the troubles created by the

slowdown. But we expect that the effects of these factors will be seen only from the last

quarter of the current fiscal. Slow execution of orders is the main concern for the companies

in the sector. Even some companies in the sector are facing order cancellation also.

As a positive indication towards this, the country has witnessed a rapid increase in private

investment in infrastructure over the last five years. The estimated investment in

infrastructure has now been pegged at USD 500 billion by the end of the Eleventh Five Year

Plan. This is both a challenge and an opportunity for the Government as well as for the

private sector

The General Index for the month of November grew by 2.4% as compared to the level in the

month of November 2007. The cumulative growth for the period April‐November 2008‐09

stands at 3.9% over the corresponding period of the pervious year.

Hit by the global financial meltdown, the key infrastructure sector industries showed poor

performance during December, registering a dismal growth of 2.3 per cent, a trend which

economists feel is likely to continue during the remaining part of the fiscal year. With steel

and crude oil showing negative growth during the month, six infrastructure industries in

December recorded the second‐lowest growth during

2008‐09, marginally up from 1.8 per cent in November. For the nine‐month period of April‐

December, the growth of the infrastructure sector ‐ crude oil, petroleum refinery products,

coal, electricity, cement and finished steel ‐dropped to 3.5 per cent from 5.9 per cent in the

same period of 2007‐08.

However, now that the infrastructure sector is struggling with liquidity problem, high

interest rates and financing constraints.On the positive side, the government’s investment in

infrastructure sectors can receive a boost from the fiscal stimulus announced as part of the

package to boost economic growth.Despite strong estimated revenue growth of about 25‐30

per cent in Q4, net profit growth in the construction sector will only be about 8‐10 per cent.

This is primarily on the back of higher cost of funds of about 13‐14.5 per cent compared to

11‐12 per cent earlier.

Meanwhile, there is enough visibility in the infrastructure sector given the order book of 3‐

3.5 times FY08 revenue. Also, as interest rates are on a downtrend and liquidity is improving,

the funding and visibility of the projects could improve. Lastly, the lag effect of lower

commodity prices should reduce the pressure on the margins in the coming quarters.

The Indian construction industry

Construction activity is an integral part of a country’s infrastructure and industrial

development. It includes hospitals, schools, townships, offices, houses and other buildings;

urban infrastructure (including water supply, sewerage, drainage); highways, roads, ports,

railways, airports; power systems; irrigation and agriculture systems; telecommunications

etc. Covering as it does such a wide spectrum, construction becomes the basic input for

socio‐economic development. Besides, the construction industry generates substantial

employment and provides a growth impetus to other sectors through backward and forward

linkages. It is, essential therefore, that, this vital activity is nurtured for the healthy growth of

the economy.

With the present emphasis on creating physical infrastructure, massive investment is

planned during the eleventh Plan. The construction industry would play a crucial role in this

regard and has to gear itself to meet the challenges. In order to meet the intended

investment targets in time, the current capacity of the domestic construction industry would

need considerable strengthening.

In India, construction is the second largest economic activity after agriculture. Investment in

construction accounts for nearly 11 per cent of India’s Gross Domestic Product (GDP) and

nearly 50 per cent of its Gross Fixed Capital Formation (GFCF). Fund injection into the sector

could go up to US$ 124.65 billion by FY2010. Construction accounts for nearly 65 per cent of

the total investment in infrastructure and is expected to be the biggest beneficiary of the

surge in infrastructure investment over the next five years.

The Indian construction industry recorded a consistent double‐digit year‐on‐year growth

(12%) during 2000‐2005, and is expected to grow at 25‐30% during 2005‐2010. The key

drivers of this growth are government investment in infrastructure creation and real estate

demand in the residential and industrial sectors.

The industry is experiencing increasing polarisation between large and small players. These

players are increasing their market share through large‐scale contracts, joint ventures, and

foreign operations. Though an increasing number of small players are also entering the

market, most of them do not have the resources to bid for big contracts.

The construction segment constitutes a significant part of infrastructure development in the

economy. The following table shows the construction investments figures in the various

areas of infrastructure development:

(Rs. in billion)

FY02‐FY06 FY07‐FY11

Roads 1167 2306

Urban infrastructure 536 1150

Power 578 861

Irrigation 514 744

Railways 225 639

Others 193 429

Total 3,213 6129

Demand for construction has resulted in the following macro trends:

The increasing spend in the infrastructure sector has resulted in an increased order book for

construction companies thereby easing the supply – demand competitive pressure.

Margins of construction companies were adversely impacted by increase in prices of inputs

in the past especially steel, aggregate and now cement. Whilst commodity prices continue

to exhibit volatility, price escalation clauses are being used to allow for some protection.

Whilst partly mitigated, this remains an area of concern.

Construction companies are moving towards public‐private partnership, raising funds from

the market to finance these projects. Whilst some participants, especially the smaller ones,

have adopted a fragmented approach to the market, bidding aggressively, the more

established players who have financial strength, experience and access to technology and

an appetite to undertake large contracts are adopting a selective approach in their order

mix and client selection, leading up to risk management on margins. To accelerate and

increase public private partnerships in infrastructure, two major initiatives have been taken

by the GoI provision of viability gap funding and Establishment of India Infrastructure

Finance Company Limited.

These initiatives are designed to implement public projects to make them financially

feasible and involve either a one‐time grant or a deferred grant of funds to aid in the

respective project.The Indian construction industry is facing the challenges of outdated land

and property ownership regulations, infrastructural bottlenecks, and a shortage of civil

engineers.

The construction sector has major linkages with the building material industry since

construction material accounts for sizeable share of the construction costs.These include

cement, steel, bricks/tiles, sand/aggregates, fixtures/fittings, paints and chemicals,

construction equipment, petro‐products, timber, mineral products, aluminum, glass and

plastics.

Power

As the Indian economy continues to surge ahead, its power sector has been expanding

concurrently to support the growth rate. The demand for power is growing exponentially

and the scope of growth of this sector is immense.

India's total installed capacity of electricity generation has expanded from 105,045.96 MW

at the end of 2001–02 to 150,323.41 MW at the end of June 2009. In fact, India ranks sixth

globally in terms of total electricity generation.

Source‐wise, thermal power plants account for an overwhelming 63.9 per cent of the total

installed capacity, producing 96,044.24 MW. Hydel power plants come next with an

installed capacity of 36,916.76 MW, accounting for 24.6 per cent of the total installed

electricity generation capacity.

Besides thermal and hydel power, renewable energy sources contribute 8.8 per cent to the

total power generation in the country producing 13,242.41 MW.

Nuclear energy makes up the balance 2.7 per cent contributing 4,120 MW.

Growth Potential

According to a report by KPMG and CII, India's energy sector will require an investment of

around US$ 120 billion‐US$ 150 billion over the next five years.

The government has revised its target of power capacity addition to 90,000 MW in the 11th

Five‐Year‐Plan (2007‐12), up by 11,423 MW from the earlier estimate of 78,577 MW to

sustain the growth momentum of the economy.

Further, according to the Planning Commission estimates, renewable energy (RE) projects

worth US$ 16.50 billion, for the generation of 15,000 MW power, would come up in the

11th Plan.

Moreover, the government has earmarked a total capital subsidy of US$ 6.88 billion for

providing electricity connections and for the distribution of infrastructure to rural

households.

The Indian Real Estate Industry

Size

• Real Estate and Construction is a US$50 billion (2008) industry in India

• Rapid growth in the industry in the past few years

• FDI it is expected that the sector would witness inflows to the tune of US$ 8‐10 billion by FY

2010

• High demand growth has led to prices doubling over 3 years in many cities.

Outlook

• The Real Estate market is projected to grow to US$60 billion by 2010 at a CAGR of 40%

• Real Estate companies have been successfully tapping the country’s booming capital

markets for funds

• Companies have also raised equity internationally at the AIM in London

• Tier 2 cities (non metros) likely to experience faster growth in the future.

Opportunity

• Commercial and office complexes mushrooming in major Indian metros

• Over 20 million new housing units required in 5 years

Potential

• Several factors are expected to contribute to the rapid growth in Real Estate

• Large demand‐supply gap in affordable housing, with demand being fuelled by tax

incentives and a growing middle class with higher savings.

• Increasing demand for commercial and office space especially from the rapidly growing

Retail, IT/ ITeS and Hospitality sectors.

• The recently announced JNNURM expected to provide further impetus

• Investment opportunities exist in almost every segment of the business

• Housing: About 20 million new units expected to be built in five years

• Office space for IT/ITeS: Five‐fold increase in office space requirement over the next 3 year

• Commercial space for organized retailing: 200 million sq. ft. by 2010

• Hotels & Hospitality: Over 40,000 new rooms in the next 5 years.

• Investment opportunity of over US$75 billion in the next five years.

_______________________________________ _____________

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but we do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-

offs, valuation of business, corporate restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &

Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures

Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs,

GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore

Stock Exchanges and other international stock exchanges.

For Further Details Contact:

3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071

Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089

E-mail: info@firstcallindiaequity.com

www.firstcallindiaequity.com