Equity Research Report[1].

EQUITY RESEARCH BY WAY OF FUNDAMENTAL ANALYSIS

2008 FACULTY GUIDE:

COMPANY GUIDE:

PURVA SOMANI

PROF. A. K. MITRA

MR. S. P. TULSIAN

(07BS3100)

PROFESSOR

CEO& EDITOR

ICFAI BUSINESS SCHOOL

PREMIUM INVESTMENTS

GURGAON

MUMBAI

IBS GURGAON

A REPORT ON “EQUITY RESEARCH” BY WAY OF FUNDAMENTAL ANALYSIS

BY: PURVA SOMANI (07BS3100) A report submitted in partial fulfillment of the requirements of MBA Program Distribution list: Prof. A. K. Mitra

Mr. S. P. Tulsian CEO& Editor

IBS Gurgaon

Premium Investments

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

1.2. Methodology

3

1.3. Limitations

9

1.4. Company Profile

10

II. Union Budget Analysis

12

III. Company Analysis

16

3.1 Kernex Microsystems

17

3.2 Reliance Power IPO

40

3.3 India Glycols

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 26 Margin

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

Particulars

Page No

Particulars

Page No

Issue Details

46

Gap between 44 energy requirement and supply in India

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

Particulars

Page No

Particulars

Page No

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

Particulars

Page No

GDP

77

Commercial Property Capital Values

86

Particulars

Page No

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 Ratios

114

Financial Performance

113

Shareholding Pattern

115 vi

DLF Ratios

121

Financial Performance

119

Shareholding Pattern

122

OMAXE Ratios

127

Financial Performance

126

Shareholding Pattern

128

BRIGADE ENTERPRISE Ratios

130 KOLTE PATIL

Ratios

133

Shareholding Pattern

134

AKRUTI CITY Ratios

139

Financial Performance

138

Shareholding Pattern

140

IVR PRIME Ratios

144

Financial Performance

142

Shareholding Pattern

145

ORBIT CORPORATION vii

Ratios

148

Financial Performance

147

Shareholding Pattern

149

INDIA BULLS REAL ESTATE Ratios

153

Financial Performance

152

Shareholding Pattern

154

COMPETITION Herfindahl Index

158

Michael Porter Analysis

161

Peer Comparison

164

Michael Porter

160

Relative Index

165

MARKET PERFORMANCE IPO Rates

166

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

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 200809.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.

1

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.

2

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. 3

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

Price Conditions Economy Employment Personal Disposable IncomePersonal Savings Interest Rates Balance of Trade Strength of Rupee in Forex Market Corporate Taxation

Growth Decline Stable Inflation Boom Recession Increase Decrease Increase Decrease Increase Decrease Low High Positive Negative Strong Weak (Direct & Taxes) Low High

GNP

-

4

Impact on market Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable

Indirect - Favorable - Unfavorable

the

stock

 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 5

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.

6

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

7

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.

8

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.

9

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.

10

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

11

II. BUDGET „08 ANALYSIS INDUSTRY 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. 2/3 WHEELRS Excise duty reduce from 16% to 12% 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.

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.

BUDGET IMPACT ON COMPANIES Ashok Leyland, Tata Motors, Eicher & M&M

Hero Honda, Bajaj Auto, TVS Motors & Kinetic Motor

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

ACC, Ambuja, Ultra Tech, Grasim & India Cement

12

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%. 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%

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

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 premixes removed.

HUL,ITC,Marico

13

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 HOSPITALS 5 year Tax Holiday to set up hospitals in Tier II & III cities. Allocation of Rs.16,534 crore for Health care sector POWER 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 OIL EXPLORATION Foreign investments of $3.5 billion to $8 billion expected for exploration and development of new oil blocks in NELP VII 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.

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

Apollo Hospitals & Fortis Health Care

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

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

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

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

14

National Calamity Contingent Duty of 1% on polyester yarn abolished. EDUCATION Increased allocation by 20% for FY09 PAPER & PAPER PRODUCTS Reduction in excise duty on paper and paper products from 12% to 8% 20% increase in Fund Allocation for education TEA Special purpose Tea fund to get Rs.40 crore. Crop Insurance Scheme for Tea. FERTILISER Subsidies to continue shift to nutrient based subsidiary. This negative will remain till Regulator is appointed. AGRICULTURE Increased allocation for irrigation and farmer oriented policies CIGARETTES Excise duty on Filter & NonFilter Cigarettes bought at par RETAIL Increase in Exemption Limit will lead to a spurt in Consumers purchasing power. DEFENCE Increase outlay for defence will increased the demand for Defence related Equipments

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

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

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

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

Jain Irrigation, Finolex,United Phosphorus,KSB Pumps

ITC, Godfrey Phillips, GTC, VST Industries

Pantaloon, Vishal Retail, Koutons, Shoppers Stop, Pyramid

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

15

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)

16

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

17

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

18

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‖.

19

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 anticollision devices for use in Railways. His main area of interest is railway safety and signal systems.

20

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

-

Pilot Project Execution

-

Time and cost estimation

-

Configuration

-

Positional Survey

-

Inter

ACD

Customization Radio

communication Survey -

and

Point Survey at Stations

-

Warranty Maintenance

-

Post

Warranty

Maintenance

21

Annual

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

22

SALES

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 .

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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%.

24

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.

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OPERATING PROFIT MARGIN OPERATING PROFIT MARGIN ITEMS NET SALES (Rs. Mn)

Sep.06

Dec.06

March.07 June.07

Sep.07

Dec.07

55.17

55.63

54.18

46.69

50.19

58.90

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

OPERATING

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.

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7. FINANCIAL PERFORMANCE ITEMS PAT

Sep.06 Dec.06 March.07 June.07 Sep.07 Dec.07 14.07

12.04

8.74

14.56

13.15

14.02

14.07

12.04

8.74

14.56

13.15

14.02

55.17

55.63

54.18

46.69

50.19

58.90

25.50

21.64

16.13

31.18

26.20

23.80

NET PROFIT NET SALES NET PROFIT MARGIN

27

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.

28

RATIOS  RETURN ON CAPITAL EMPLOYED (ROCE) CAPITAL YEAR

PBDI

EMPLOY

ROC

T

ED

E

141.22

1371.00

10.30

147.76

1351.00

10.94

167.37

255.00

65.64

Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

 RETURN ON EQUITY (ROE) NET

NET

YEAR

PROFIT

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 DEBT TOTAL

EQITY

YEAR

DEBT

EQUITY

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

29

 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.

30

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.

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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

32

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.

33

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 34

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

35

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.

36

12. SYNTHESIS  Kernex Microsystems is engaged into manufacturing of Networked AntiCollision 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.

37

 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. 38

 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

39

3.2 RELIANCE POWER IPO

CONTENT PRE - IPO 1. 2. 3. 4. 5. 6. 7. 8. 9.

ABOUT THE COMPANY……………………………………………..41 HIGHLIGHTS………………………………………………………….42 KEY RISKS…………………………………………………………….43 INDUSTRY OVERVIEW……………………………………………..44 ISSUE DETAILS ………………………………………………………46 OBJECT OF THE ISSUE……………………………………………...47 UTILIZATION OF ISSUE PROCEEDS……………………………...48 IPO GRADING………………………………………………………….48 PAYMENT METHOD………………………………………………….49

POST - IPO 1. 2. 3. 4. 5. 6. 7.

IPO DETAILS…………………………………………………………...50 DISCOVERY OF PRICES……………………………………………...51 LISTING………………………………………………………………….52 SHARE PRICE TRENDS ……………………………………………….53 ANALYSIS OF BONUS/IMPLICATIONS……………………………..55 WHY IPO DID NOT DO WELL?.............................................................57 PRESENT SCENARIO…………………………………………………..59

40

PRE – IPO

1. ABOUT THE COMPANY Reliance Power Limited is a part of the Reliance Anil Dhirubhai Ambani Group (RADAG). 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 subcritical (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.

41

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.

42

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.

43

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 44

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

45

5. ISSUE DETAILS IIA Power – Generation

Industry 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

46

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.

PROJECTS 600 MW Rosa Phase I 600 MW Rosa Phase II 300 MW Butibori 3,960 MW Sasan 1,200 MW Shahapur Coal 400 MW Urthing Sobla

LOCATIONS Uttar Pradesh Uttar Pradesh Maharashtra Madhya Pradesh Maharashtra Uttarakhand TOTAL

2. General corporate purposes. 3. Achieve benefits from listing of the equity shares.

47

(Rs. in millions) AMOUNT 3931.5 6149.5 4114.2 54613.5 11458.0 6157.6 86424.3

7. UTILIZATION OF ISSUE PROCEEDS (Rs. in millions) Annual funding schedule Identified

Fiscal

Fiscal

Fiscal

Fiscal

Fiscal

Subsidiaries

2008

2009

2010

2011

2012

Total

Generating Plant (MW)

RPSCL

36.9

1,645.80

2,249

0

0

3,931.50

300*2 = 600

Rosa Phase II

RPSCL

584.4

1,129.30

2,024.50

2,411.30

6,149.50

300*2 = 600

Butibori

VIPL

375.3

855

2,286

597.9

4,114.20

150*2=300

Sasan

SPL

15,000

7,072.80

5,415

17,904

9,221.70

54,613.50

660*6=3960

Shahapur Coal

MEGL

4,375

480.8

742.5

2,492.50

3,367.30

11,458.10

600*2=1200

Urthing Sobla

USHPPL

75

225

426.6

1050

4,381

6,157.60

100*4=400

Projects Rosa Phase I

Estimated date of commissioning Unit 1 : December 2009 Unit 2 : March 2010 Unit 1 : June 2010 Unit 2 : September 2010 Unit 1 : March 2010 Unit 2 : June 2010 Unit 1 : May 2013 Others : April 2016 Unit 1 : September 2011 Unit 2 : December 2011 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.

48

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.

49

POST – IPO 1. IPO DETAILS. SUBSCRIPTION DETAILS AS ON THE CLOSURE OF THE ISSUE (18 TH 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 Non Institutional Investors

22973295

2 2(a)

22800000

4332525630

Corporate Individuals (Other than RIIs)

1851688320

96195285

3

Others Retail Individual Investors (RIIs)

3(a)

Cut Off

971736060

3(b)

Price Bids

45482325

2(b) 2(c)

190.0231

2384642025

68400000

1017218385

50

14.8716

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.

51

3. LISTING DETAILS The details pertaining to the listing of the IPO on the Stock Exchanges is as follows:

BSE DETAILS Listed on Issue Price Open High Low Close BSE Script Code BSE Symbol :

11/02/2008 450 547.80 599.90 355.05 372.5 532939 RPOWER

NSE DETAILS Listed on Issue Price Open High Low Close NSE Script Code NSE Symbol :

11/02/2008 450 530 530 355.3 372.3 201879 RPOWER

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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.

53

 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 14 th 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.

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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 1 07.74 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 55

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 1 st week of April, considering about 24 days for postal ballot and 14 days for record date. After declaring of Bonus on 24 th 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.

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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 11 th 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 31 st 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.

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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.

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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:

Anil Ambani Reliance Energy Public Shareholders

Pre – Bonus 45% 45% 10%

Post – Bonus 40% 45% 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. 59

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.moneycontrol.com www.myiris.com Capital Market Magazine (Aug 27 – Sep 09,2007)

Red Herring Prospectus

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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

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1. ABOUT THE COMPANY 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 Late M.L.Bhartia S.K.Sood Lalit Kumar Sharma U S Bhartia

DESIGNATION Chairman & Managing Director President – Finance Company Secretary Managing Director

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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

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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

MNCs

PSUs Large &xcbcb zSSSM

OVERSEAS

SMEs

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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.

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 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.

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 OPERATING PROFIT MARGIN

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.

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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.

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RATIOS  RETURN ON CAPITAL EMPLOYED

YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

CAPITAL PBDIT EMPLOYED ROCE 1210.98 8651.84 1234.98 7836.40 1540.31 6041.20

14.00 15.76 25.50

NET PROFIT NET WORTH ROE 410.53 3161.62 585.76 2860.25 789.74 2411.66

12.98 20.48 32.75

 RETURN ON EQUITY YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05  DEBT EQUITY RATIO

YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

TOTAL DEBT EQUITY 5509.14 4992.57 3699.31

DEBT EQITY RATIO 278.82 19.76 278.82 17.91 278.82 13.27

 EARNING PER SHARE YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

EPS 14.72 21.01 28.32

 P/ E RATIO YEAR FY 07 FY 06 FY 05

C .M. P* 104.65 151.05 146.15

EPS 14.72 21.01 28.32

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

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P/ E 7.11 7.19 5.16

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.

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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%.

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 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.

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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.

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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 31 st 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%. 74

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 31 st 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

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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. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII.

UNITECH……………………………………………………91 HINDUSTAN CONSTRUCTIONS (HCC)…………………96 PARSVNATH DEVELOPERS……………………………..103 HOUSING DEVELOPEMENT & INFRASTRUCTURE LTD (HDIL)….……………………………………………...112 DLF………………………………………………………….118 OMAXE……………………………………………………..125 BRIGADE ENTERPRISE…………………………………..130 KOLTE PATIL DEVELOPERS…………………………….133 AKRUTI CITY……………………………………………....137 IVR PRIME URBAN………………………………………...142 ORBIT CORPORATION……………………………………146 INDIA BULLS REAL ESTATE…………………………….152

7. COMPETITION………………………………………………………..158 8. MARKET PERFORMANCE...………………………………………..165 9. KEY HIGHLIGHTS OF METROS ………………………………….167 10. SYNTHESIS……………………………………………………………169

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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: GDP (in %) Year 2007-08 2006-07 2005-06 2004-05

9.1 9.4 9.0 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

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 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.

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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.

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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 threeyear 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.

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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 favoura ble 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 82

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

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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 84

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.

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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 PLACES

RATES AS ON 03/04/2008

(RS./SQ.FT) 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

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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 NEHRU PLACE 35,625 B CAMAJI PLACE 29,250 OKHLA INDL AREA 13,875 GURGAON 13,400 NOIDA 12,250 MC AREA 11,250

42,250 35,625 29,250 13,875 13,400 12,250 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 BANER

4,750 5,000 4,500 4,750

NAGAR ROAD 4,500 4,750 HADAPSAR 4,500 4,750

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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.

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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.

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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.

91

RATIOS: RETURN ON CAPITAL EMPLOYED YEAR PBDIT CAPITAL EMPLOYED ROCE Year Ended 06-07 13956.79 42491.56 Year Ended 05-06 1327.81 6309.02 Year Ended 04-05 549.98 3332.24

32.85 21.05 16.50

RETURN ON EQUITY YEAR NET PROFIT NET WORTH ROE Year Ended 06-07 9835.58 11610.02 Year Ended 05-06 696.43 2245.34 Year Ended 04-05 299.16 1739.08

84.72 31.02 17.20

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

DEBT EQUITY RATIO 11610.02 3.11 2245.34 3.07 1739.08 1.87

TOTAL DEBT EQUITY 36070.83 6887.55 3258.85

EPS YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

PAT

No. of outstanding shares EPS 9835.58 811.69 696.43 62.44 299.16 62.44

12.12 11.15 4.79

P/E YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

MPS 387.35 2785.45 337.35

EPS 12.12 11.15 4.79

92

P/E 31.97 249.74 70.41

SHAREHOLDING PATTERN:

Source: www.bseindia.com

93

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

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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

95

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.

96

FINANCIAL PERFORMANCE:

Source: www.bseindia.com

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.

97

RATIOS RETURN ON CAPITAL EMPLOYED YEAR PBDIT CAPITAL EMPLOYED ROCE Year Ended 06-07 2461.00 22264.95 Year Ended 05-06 1857.43 20611.81 Year Ended 04-05 1652.63 7194.97

11.05 9.01 22.97

RETURN ON EQUITY YEAR NET PROFIT NET WORTH Year Ended 06-07 1218.00 Year Ended 05-06 1247.98 Year Ended 04-05 740.20

13.47 14.03 20.97

ROE 9040.75 8898.14 3529.84

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

DEBT EQITY RATIO 9040.75 1.72 8898.14 1.46 3529.84 1.21

TOTAL DEBT EQUITY 15510.60 12978.39 4256.82

EPS YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

PAT 1218 1247.98 740.2

P/E YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

MPS 89.45 173.15 478.75

No. of outstanding shares 256.25 256.25 229.36

EPS 4.75 4.87 3.23

Source: www.myiris.com

98

EPS 4.75 4.87 3.23

P/E 18.82 35.55 148.35

SHAREHOLDING PATTERN:

Source: www.bseindia.com

99

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

100

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

101

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

ii.

www.bseindia.com

iii.

Various newspapers

iv.

Various journals

102

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 30 th November, 2006 at Rs.300 on BSE and NSE.

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FINANCIAL PERFORMANCE

Source: www.bseindia.com

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 1 st Quarter to 3rd Quarter. Other Income in 3 rd Quarter has increase tremendaiously from Rs.10.98 crores in 1 st Quarter to Rs.31.78 crores in 3rd Quarter.

104

RATIOS RETURN ON CAPITAL EMPLOYED YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

RETURN ON EQUITY YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

PBDIT 3614.53 1477.65 745.05

CAPITAL EMPLOYED 24392.67 4282.06 2180.69

ROCE 14.82 34.51 34.17

NET PROFIT 2717.76 1062.46 656.65

NET WORTH 14626.8 2011.51 1015.71

ROE 18.58 52.82 64.65

EQUITY 14626.80 2011.51 1015.71

DEBT EQUITY RATIO 0.69 1.17 1.19

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

TOTAL DEBT 10090.00 2350.70 1207.00

EARNING PER SHARE YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

EPS BASIC 14.71 10.74 79.66

P/E RATIO YEAR FY 07

C .M. P 259

EPS 14.71

105

P/ E 17.61

SHAREHOLDING PATTERN AS ON 31ST DECEMBER,2007

Source: www.bseindia.com

106

COMPLETED PROJECTS Areas RESIDENTIAL COMMERCIAL DMRC

No. of Projects 12 12 7 31

TOTAL  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 5 Star 4 Star 3 Star Serviced Apartments TOTAL

No‟s 9 2 5 1 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.

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Status of Hotels Locations Mohali Chandigarh Film City Chandigarh IT Park Shirdi Jodhpur –1 Jodhpur – 2 Ahmedabad Hyderabad Goa Kochi Airport Kochi Beach Indore Ujjain Ranchi Lucknow New Delhi Bhiwadi

Status Construction Started Construction will start soon Construction will start soon Construction Started Construction will start soon Construction will start soon Construction Started Construction Started Construction will start soon Construction will start soon Construction will start soon Construction will start soon Construction will start soon Construction will start soon Construction will start soon Construction will start soon 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.

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FORTHCOMING PROJECTS Group Housing Projects Parsvnath Premium Parsvnath Royal Villas Parsvnath Prominence Project Located at Noida Projects Located at Jammu Project Located at Ranchi Project Located at Siligudi Project Located at Panipat Project Located at Jam Nagar Project Located at Khekhra

-

Pune

-

Goa

-

Bhiwadi

-

Uttarpradesh

-

Jammu & Kashmir

-

Jharkhand

-

West Bengal

-

Haryana

-

Gujarat

-

Uttarpradesh

-

Jaipur

-

Malerkotla Saharanpur Rohtak

-

Lucknow

-

Kundli Kurukshetra Karnal

-

Amritsar

-

Sonepat

-

Sonepat

-

Kukatpally (Hyderabad)

Townships Parsvnath Narain City Parsvnath City Parsvnath City Parsvnath City Royal Floors Parsvnath City Parsvnath City Parsvnath City Parsvnath City

Commercial Projects Parsvnath Mall Parsvnath City Centre Parsvnath City Mall Parsvnath Mall

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Parsvnath City Mall Parsvnath Mall Parsvnath Mall Parsvnath Mall Parsvnath Mall Parsvnath Mall

-

Amritsar

-

Chandigarh Mumbai Dwarka Siligudi (West Bengal) Ranchi (Jharkhand)

IT Park IT Park

-

Chennai Gurgaon

Hotel I Hotel II Hotel

-

Hotel

-

Hotel Hotel Hotel Hotel Hotel Hotel Hotel

-

Jodhpur Jodhpur Seelampur, New Delhi Rajiv Gandhi Chandigarh Technology Park, Chandigarh Indore, Madhya Pradesh Lucknow, Uttar Pradesh Ujjain, Madhya Pradesh Goa Film City, Chandigarh Ranchi Cochin

IT Parks

Hotels

Source: www.parsvnath.com

110

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.

111

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 24 th July, 2007 at Rs.500 on BSE and NSE.

112

FINANCIAL PERFORMANCE

Source: www.bseindia.com

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 1 st Quarter to 3rd Quarter. Other Income has also increase tremendaiously from Rs.25.6 million to 198.9 million.

113

RATIOS RETURN ON CAPITAL EMPLOYED YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

PBDIT 6537.75 1316.22 321.10

RETURN ON EQUITY YEAR NET PROFIT Year Ended 06-07 5418.13 Year Ended 05-06 1139.20 Year Ended 04-05 145.79

CAPITAL EMPLOYED 9361.71 2675.89 1048.09

ROCE 69.83 49.19 30.64

NET WORTH 7255.24 1844.79 710.79

ROE 74.68 61.75 20.51

EQUITY 7255.24 1844.79 710.79

DEBT EQITY RATIO 0.13 1.06 5.29

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

TOTAL DEBT 913.85 1964.64 3756.85

EPS YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

EPS BASIC 30.1 22.78 14.58

P/E RATIO P/E Ratio cannot be calculated because the company got listed on 24 th July, 2007.

114

SHAREHOLDING PATTERN AS ON 31ST DECEMBER, 2007

Source: www.bseindia.com

115

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 116

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. 117

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.

118

FINANCIAL PERFORMANCE:

Source: www.bseindia.com

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.

119

UTILISATION OF THE FUNDS: The company came with an IPO worth Rs. 90785.30 million. This sum was utilized as: Particulars

Amount 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

Source: www.bseindia.com

120

(Rs.

RATIOS RETURN ON CAPITAL EMPLOYED YEAR PBDIT Year Ended 06-07 7083.00 Year Ended 05-06 4769.76 Year Ended 04-05 1244.51

CAPITAL EMPLOYED 70633.00 22615.45 8432.08

ROCE 10.03 21.09 14.76

RETURN ON EQUITY YEAR NET PROFIT Year Ended 06-07 4178.16 Year Ended 05-06 2274.38 Year Ended 04-05 677.06

NET WORTH 10633.00 6449.31 3839.26

ROE 39.29 35.27 17.64

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

TOTAL DEBT 67692.00 30138.97 6331.01

DEBT EQITY EQUITY RATIO 10633.00 6.37 6449.31 4.67 3839.26 1.65

EPS YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

PAT 4178.16 2274.38 677.06

No. of outstanding shares 1529.5 188.84 17.54

Source: www.myiris.com

121

EPS 2.73 12.04 38.60

SHAREHOLDING PATTERN:

Source: www.bseindia.com

122

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 builtup 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. 123

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

ii.

www.bseindia.com

iii.

Various newspapers

iv.

Various journals

124

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.

125

FINANCIAL PERFORMANCE:

Source: www.bseindia.com

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

114.00

issue 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.

Source: www.bseindia.com

126

RATIOS: RETURN ON CAPITAL EMPLOYED YEAR PBDIT CAPITAL EMPLOYED ROCE Year Ended 06-07 2461.00 22264.95 Year Ended 05-06 1857.43 20611.81 Year Ended 04-05 1652.63 7194.97

11.05 9.01 22.97

RETURN ON EQUITY YEAR NET PROFIT NET WORTH Year Ended 06-07 1218.00 Year Ended 05-06 1247.98 Year Ended 04-05 740.20

13.47 14.03 20.97

ROE 9040.75 8898.14 3529.84

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

DEBT EQITY RATIO 9040.75 1.72 8898.14 1.46 3529.84 1.21

TOTAL DEBT EQUITY 15510.60 12978.39 4256.82

EPS YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

No. of outstanding shares

PAT 1218 1247.98 740.2

EPS 256 256 229

Source: www.myiris.com

127

4.76 4.87 3.23

SHAREHOLDING PATTERN:

Source: www.bseindia.com

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

128

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

ii.

www.bseindia.com

iii.

Various newspapers and journals

129

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 31 st December, 2007 at Rs.390 on BSE and NSE.

FINANCIAL PERFORMANCE 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 RETURN ON CAPITAL EMPLOYED YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

PBDIT 1198.62 503.43 249.61

RETURN ON EQUITY YEAR NET PROFIT Year Ended 06-07 729.04 Year Ended 05-06 419.86 Year Ended 04-05 196.03

CAPITAL EMPLOYED 3859.81 1812.79 1519.26

ROCE 31.05 27.77 16.43

NET WORTH 1471.89 804.24 430.41

ROE 49.53 52.21 45.54

EQUITY 1471.89 804.24 430.41

DEBT EQITY RATIO 1.63 1.27 2.54

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

TOTAL DEBT 2402.03 1025.24 1092.70

130

EARNING PER SHARE (EPS) YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

EPS BASIC 27.09 15.60 18.21

SHAREHOLDING PATTERN Data Not Available

PROJECTS COMPLETED Mainly they are into Residential and Commercial.

APARTMENTS IN BENGALURU Brigade Classic Brigade Coronet Brigade Elite2 Brigade Gardenia Brigade Hallmark Brigade Heritage Brigade HillView 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

MYSORE Brigade Elegance Brigade Parkway Brigade Regal Brigade Residency Brigade Retreat Brigade Royal Brigade Tranquil

131

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 newbuild 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.

132

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 13 th December, 2007 at Rs.145 on BSE and NSE.

FINANCIAL PERFORMANCE We have only information of 3 rd Quarter that is OND‘07. Net Sales of the company was Rs.127.35 crores. Profit after Tax was Rs.35.7 crores.

RATIOS RETURN ON CAPITAL EMPLOYED YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

PBDIT 929.88 61.11 45.23

RETURN ON EQUITY YEAR NET PROFIT Year Ended 06-07 835.10 Year Ended 05-06 28.02 Year Ended 04-05 24.25

CAPITAL EMPLOYED 776.07 574.48 362.61

ROCE 119.82 10.64 12.47

NET WORTH 1802.49 185.3 160.4

ROE 46.33 15.12 15.12

EQUITY 1802.49 185.30 160.40

DEBT EQITY RATIO 0.48 3.88 1.43

DEBT EQUITY RATIO

YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

TOTAL DEBT 859.98 718.55 228.70

133

EARNING PER SHARE (EPS) YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

EPS BASIC 14.85 5.12 4.43

SHAREHOLDING PATTERN

Source: www.bseindia.com

134

COMPLETED PROJECTS Residential Projects in PUNE Greenfields Patil Regency Patil Heritage Orchids Precious Gem Ragdari – Conifer Misty Moors Hills & Dales

Maestros Rose Parade Sovereign Pink City Lapis Lazuli Mayur Pankh (residential and commercial) Floriana Estate( residential and commercial) Green Acres (residential and commercial)

Residential Projects in BENGALURU Projects Floriana Estate Surabhi Whispering Meadows Shubha

Locations Koramangala Bannerghatta Road RMV Extn. Bannerghatta Road

IT Park in PUNE Giga Space IT Park E-Space

PROJECTS IN PIPELINE Residential Projects in PUNE Projects Golden Towers Kharadi Residential

Locations PimpleNilakh Kharadi

Residential Projects in BENGALURU Projects Hosur Road Richmond Road Koramangala

135

IT Spaces in PUNE

Hinjewadi Bavdhan

Source: www.koltepatil.com

136

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 7 th February, 2007 at Rs.540 on BSE and NSE.

137

FINANCIAL PERFORMANCE

Source: www.bseindia.com

UTILISATION OF THE FUNDS Details of utilisation of fund received from IPO of equity shares:(Rs in millions) Particulars -

Acquisition of Land/rights in land Repayment of Loan Development and construction cost Expenses relating to IPO General corporate purposes

Estimated Utilisation Amount 1800

Actual Utilisation upto December,2007 1800

570 550

570 550

310 390

310 390

3620

3620

138

RATIOS RETURN ON CAPITAL EMPLOYED YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

CAPITAL PBDIT EMPLOYED ROCE 1027.76 7132.84 757.52 1714.71 315.49 1888.83

RETURN ON EQUITY YEAR NET PROFIT NET WORTH ROE Year Ended 06-07 758.67 5018.3 Year Ended 05-06 630.68 1067.53 Year Ended 04-05 129.19 509.61

14.41 44.18 16.70

15.12 59.08 25.35

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

DEBT EQITY RATIO

TOTAL DEBT EQUITY 2817.55 844.96 1454.14

667.00 480.00 20.00

4.22 1.76 72.71

EARNING PER SHARE (EPS) YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

EPS BASIC 11.37 13.14 64.60

PRICE EARNING RATIO (P/E) YEAR FY 07

C .M. P 405.85

EPS 11.37

139

P/ E 35.68

SHAREHOLDING PATTERN

Source: www.bseindia.com

140

COMPLETED PROJECTS Residential

Name of the Project Akruti Aditi Akruti Aditya Akruti Niharika Sai Akruti Akruti Aneri Akruti Astha Akruti Classic Akruti Laxmi Akruti Erica Akruti Elegance Akruti Orchid Park Akruti Lake Woods Commercial & IT

Location Jogeshwari (E),Mumbai Grant Road (W),Mumbai Andheri (W),Mumbai Bandra (E),Mumbai Andheri (E),Mumbai Walkeshwar,Mumbai Mulund (E),Mumbai Dadar T.T,Mumbai Vile Parle (E),Mumbai Mulund (E),Mumbai Andheri (E),Mumbai Thane (E),Mumbai

Name of the Project Akruti Softech Park Akruti Centre Point Akruti Orion Akruti Arcade Akruti Business Port Akruti Trade Centre

Location Andheri (E),Mumbai MIDC,Andheri (E) Vile Parle (E),Mumbai Andheri (W),Mumbai Andheri (E),Mumbai Mumbai

PROJECTS IN PIPELINE Commercial & IT

Name of the Project Akruti Topaz Akruti Corporate Park Akruti Trade Point DLF Akruti Infotech Park IRIS Akruti Star Akruti Sapphire Retail

Location Bandra (E),Mumbai Kanjurmarg (W),Mumbai Jogeshwari (E),Mumbai Pune Andheri (E),Mumbai Andheri (E),Mumbai Andheri (E),Mumbai

Name of the Project Akruti SMC Akruti City World Akruti Elite Plaza

Location MSRTC,Thane (W) Thane (W) Mahalakshmi

Source: www.akruticity.com

141

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.

FINANCIAL PERFORMANCE:

Source: www.bseindia.com

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.

142

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

Source: www.bseindia.com

143

RATIOS: RETURN ON CAPITAL EMPLOYED YEAR PBDIT CAPITAL EMPLOYED ROCE Year Ended 06-07 375.43 3953.83 Year Ended 05-06 135.41 1158.58 Year Ended 04-05 12.18 1376.93

9.50 11.69 0.88

RETURN ON EQUITY YEAR NET PROFIT NET WORTH Year Ended 06-07 230.16 Year Ended 05-06 102.78 Year Ended 04-05 -1.48

28.81 21.24 LOSS

ROE 798.91 483.94 281.03

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

DEBT EQITY RATIO 798.91 3.95 483.94 1.40 281.03 3.90

TOTAL DEBT EQUITY 3155.91 675.14 1095.90

EPS YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

No. of outstanding shares

PAT 230.16 102.78 -1.48

EPS 50 40 30

Source: www.myiris.com

144

4.60 2.57 LOSS

SHAREHOLDING PATTERN:

Source: www.bseindia.com

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

ii.

www.bseindia.com

iii.

Various newspapers

iv.

Various journals

145

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.

146

FINANCIAL PERFORMANCE:

Source: www.bseindia.com

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 Utilized (Rs. Millions)

amount(Rs. Millions)

Advances towards Acquisition of New Project Project projects

Development and

Cost

investment

for in

the

wholly

500.00

500.00

current 422.81

205.00

owned

subsidiaries for projects developed by subsidiaries IPO Issue Expenses

78.19

42.40

Total

1001.00

747.40

Source: www.bseindia.com

147

RATIOS: RETURN ON CAPITAL EMPLOYED YEAR PBDIT CAPITAL EMPLOYED ROCE Year Ended 06-07 88.68 1452.79 Year Ended 05-06 2.35 715.47 Year Ended 04-05 44.62 132.73

6.10 0.33 33.62

RETURN ON EQUITY YEAR NET PROFIT NET WORTH Year Ended 06-07 77.71 Year Ended 05-06 0.92 Year Ended 04-05 28.55

5.10 0.09 18.99

ROE 1524.16 984.88 150.35

DEBT EQUITY RATIO YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

DEBT EQITY RATIO 1524.16 0.14 984.88 0.02 150.35 0.23

TOTAL DEBT EQUITY 213.68 15.65 34.40

EPS YEAR Year Ended 06-07 Year Ended 05-06 Year Ended 04-05

PAT

No. of outstanding shares EPS 77.71 27.17 0.92 21.60 28.55 11.00

148

2.86 0.04 2.60

SHAREHOLDING PATTERN:

Source: www.bseindia.com

149

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

150

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

ii.

www.bseindia.com

iii.

Various newspapers

iv.

Various journals

151

XII.

INDIA BULLS REAL ESTATE

FINANCIAL PERFORMANCE

Source: www.bseindia.com

152

RATIOS RETURN ON CAPITAL EMPLOYED YEAR Year Ended 06-07

PBDIT 57.45

CAPITAL EMPLOYED 3733.41

ROCE 1.54

NET PROFIT 131.14

NET WORTH 5432.05

ROE 2.41

TOTAL DEBT 2971.65

EQUITY 5432.05

DEBT EQITY RATIO 0.55

EPS 0.729873382

P/ E 408.43

RETURN ON EQUITY YEAR Year Ended 06-07 DEBT EQUITY RATIO

YEAR Year Ended 06-07

EARNING PER SHARE (EPS) YEAR Year Ended 06-07

EPS BASIC 0.73

PRICE EARNING RATIO (P/E RATIO) YEAR FY 07

C .M. P 298.1

153

SHAREHOLDING PATTERN

Source: www.bseindia.com

154

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.

155

PROJECTS IN PIPELINE  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

156

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.

157

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 UNITECH HCC PDL HDIL DLF OMAXE BRIGADE ENT. KOLTE PATIL DEVELOPERS AKRUTI NIRMAN CITY IVR PRIME ORBIT CORPORATION INDIA BULLS REAL ESTATE

SALES* 24417.35 23576.2 12361.36 12034.48 11335 9408.84 3781.7 2293.68 1778.88 1477.62 308.89 133.25 102907.25

MARKET SHARE 24 23 12 12 11 9.14 4 2 2 1 0.30 0.13

* Sales as on 31st March, 2007 in million.

158

HI 563 525 144 137 121 84 14 5 3 2 0.09 0.02 1597

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.

159

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.

160

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

161

PEST ANALYSIS

POLITICAL FACTORS In Political factors we have to look at following factors 1. 2. 3. 4. 5.

How stable is the political environment? Will government policy influence laws that regulate? What is government’s policy on the economy? Does the government have view on culture and religion? 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. 2. 3. 4. 5. 6.

What is dominant religion? What are attitudes of foreign products and services? Does language impact upon the diffusion of products onto markets? What are the roles of men and women within society? How long are the population living? Are the older generations wealthy? Do the population have a strong/weak opinion on green issues? 162

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

163

PEER COMPARISON: Last Price*

Market Cap*

COMPANY

(Rs.)

Parsvnath Developer s

HDIL

(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)

224.85

421,400

12361.36

3614.53

4874.46

18.58

8.32

17.6

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 25/04/08 164

8. MARKET PERFORMANCE: RELATIVE PERFORMANCE In this relative performance we have shown the comparison of Sensex with Realty Sector.

Source: www.bseindia.com 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.

165

IPO RATES: F.V

Issue

Listed on BSE

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%

KOLTEPATIL 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 -23.95%

-56.65%

Company Name

52 Week

598

Source: - www.sptulsian.com

166

170.2

228.15

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. 167

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.

168

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.

169

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

170

 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.moneycontrol.com  www.myiris.com  Various company sites

171

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.1,00,000 172

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

173