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Company ReportIndustry : Real Estate
Akruti City
Scaling new highs
Neyha Srivastava (NeyhaSrivastava@PLIndia.com)
+971-509156585
Subramaniam Yadav (SubramaniamYadva@PLIndia.com)
+91-22-6632 2241
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Akruti City
2 December 19, 2007
Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors
should be aware that the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor
in making their investment decision.
Please refer to important disclosures and disclaimers at the end of the report.
Contents
Page No.
Investment Argument ...............................................................4
Leading Mumbai developer expanding into western India ................................... 4
Strong presence in SRS projects enable access to prime Mumbai property ............... 6
Prudent asset acquisition strategy: Open plot purchase, townships and SEZ ............ 6
Huge execution scale-up planned ............................................................... 7
Strong contender for Dharavi rehabilitation project ......................................... 8
Key assumptions and valuations ..................................................9
Akruti's share of rehabilitation projects valued at Rs32.5bn................................ 9
Non-SRS projects valued at Rs21bn ............................................................. 9
SEZ projects add Rs23bn to overall valuation ............................................... 10Panvel township valued at Rs31bn ............................................................ 11
Consolidated valuation at a steep premium to current market cap ..................... 12
Valuation cheaper vis--vis other Mumbai-based peers .................................... 14
Key valuation triggers ............................................................ 15
Pace of land acquisition......................................................................... 15
Private equity investment in township projects ............................................ 15
Dharavi redevelopment project ............................................................... 15
Key risks............................................................................. 16
Execution risk..................................................................................... 16
Long gestation period of SRS ................................................................... 16
Delay in absorption .............................................................................. 16
Geographical concentration .................................................................... 16
Input cost escalation ............................................................................ 16
Company Overview & Management Background ............................. 17
Experienced management team ............................................................... 17
Management background ......................................................................17
Annexure............................................................................ 19
Industry evaluation .............................................................................. 19
Mumbai ...........................................................................................19Navi Mumbai.....................................................................................19
Financials ........................................................................... 21
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Akruti City
Initiating coverage: We initiate coverage on Akruti City with BUY rating
and 12- month price target of Rs1,696/share, which is valued at 10% premium
to its NAV. We have assigned a premium due to substantial value enhancingopportunities that exist on account of township and Dharavi
development projects.
We have used DCF valuation to arrive at a fair value for Akruti, with cash
flows estimated from the development schedule of various projects. The
companys consolidated valuation works to Rs107.4bn rehabilitation
projects account for 30%, Panvel township for 29%.
Leading Mumbai based developer: The company has built its land bank
through slum rehabilitation, land acquisition through JVs and outright
purchase, and PPP projects. Having developed 5 million sq.ft. area since
1989, Akruti City is now targeting to develop 3.7 million sq.ft. saleable area
under SRS projects, 7.2 million sq.ft. under non-SRS projects, 21.7 million
sq.ft. SEZs and 43.5 million sq.ft. township.
Strong presence in SRS: Akrutis strong presence in slum rehabilitation gives
it access to prime properties in Mumbai at relatively lower prices. Prevailing
prices in these areas are around Rs25,00045,000 per sq.ft, which ensures
profitability of its ventures. However, land cost of these properties are limited
to the cost of rehabilitation, which ranges between Rs1,200-1,700 per sq.ft
Substantial value enhancing opportunities exist: We believe there exists
significant value enhancement potential on account of the Uran and Khalapur
township projects. Our base case valuation for these projects work out to
Rs16.5bn and Rs6.2bn respectively or Rs338/share.
Key financials (Rs m) FY07 FY08E FY09E FY10E
Revenue 1,889 5,723 11,178 31,421
Growth (%) (7.0) 202.9 95.3 181.
EBITDA 1,054 4,503 9,212 22,571
PAT 776 2,911 7,372 18,734
EPS (Rs) 11.6 43.6 110.5 280.9
Growth (%) (12.3) 275.5 153.3 154.
Net DPS (Rs) 1.5 4.4 4.4 4.4
Profitability & valuation FY07 FY08E FY09E FY10E
EBITDA Margin (%) 55.8 78.7 82.4 71.8
RoE (%) 20.9 12.3 26.2 30.9
RoCE (%) 7.9 6.1 17.9 20.4
EV / Sales (x) 40.7 13.4 6.9 1.8
EV / EBITDA (x) 72.9 17.0 8.3 2.5
PE (x) 94.6 25.2 9.9 3.9
P / BV (x) 14.5 9.6 5.0 2.2
Net divided yield (%) 0.1 0.4 0.4 0.4
Source: Company Data; PL Research
Price Performance (RIC: AKRU.BO, BB: AKCL IN)
Source: Bloomberg, PL Research
Rating BUY
Price Rs1,099
Target Price Rs1,696
Implied Upside 54.3%
Sensex 19,080
(Prices as on December 18, 2007)
Trading Data
Market Cap. (Rs bn) 73.3
Shares o/s (m) 66.7
Free Float 10.0%
Avg. Daily Vol (000) 232
Avg. Daily Value (Rs m) 201
Major Shareholders
Promoters 90.0%
Foreign 1.6%
Domestic Inst. 5.3%
Public & Others 3.1%
Stock Performance
1M 6M 12M
Absolute (5.8) 213.8 NA
Relative (3.5) 179.6 NA
Source: Company Data; PL Research
Company ReportDecember 19, 2007
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Investment Argument
Leading Mumbai developer expanding into western India
Akruti is one of the leading Mumbai-based real estate developers with a high
quality land bank, with large contribution in the Mumbai metropolitan region
The company has acquired its land reserve through slum rehabilitation
development, open plot purchases both through joint ventures and outright
purchases, and public private partnership (PPP) projects.
Having established significant presence in Mumbai, Akruti has strategically
forayed into Pune and is currently developing IT park/SEZs in association with
DLF Ltd. Also, Akruti was recently awarded the mandate to develop a
biotechnology park by the government of Gujarat, enabling it to further expand
into western India. The company also has limited presence in Bangalore and
Surat.
Having developed 5 million sq.ft. area since 1989, Akruti is now targeting to
develop 3.7 million sq.ft. saleable area under SRS projects, 7.2 million sq.ft.
under non-SRS projects, 21.7 million sq.ft. SEZs and 43.5 million sq.ft. township.
Table 1: Planned projects
Segments Saleable area (m sq.ft.) No. projects
SRS 3.7 17
Residential 2.7 12
Commercial 0.6 3
Retail 0.5 2
Non SRS 7.2 20
Residential 2.8 7
Commercial 3.6 10
Retail 0.8 3
SEZ 21.7 5
Panvel Township 43.6 1
Source: Company Data, PL Research
Its largely Mumbai-based operation is
being expanded to other areas in the
western region
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Chart 1: Geographical distribution of land reserve
Source: Company Data, PL Research
Mumbai
18%
Pune
4%
Panvel
52%
Others
1%
Baroda
25%
Chart 2: KEY completed and ongoing projects
Source: Company Data
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Strong presence in SRS projects enable access to prime
Mumbai property
Akruti is a leading slum rehabilitation developer with over two decades of
experience in execution of SRS projects in Mumbai. Having rehabilitated closeto 10,000 slums in Mumbai in exchange for land development rights, the company
has gained significant expertise in clearing encroachment and building consensus
among slum dwellers. Given the high level of expertise and knowledge required
in implementing SRS projects, there exists significant entry barriers and thus
limited competition.
This in turn gives Akruti access to prime properties at low cost within Mumbai,
ensuring profitability of its ventures. On account of rehabilitation of projects
undertaken/being undertaken, Akruti has acquired land at some of the best
locations in Mumbai like Tulsiwadi, Mount Mary in Bandra, Mayanagar in Worli,
Jogeshwari, Andheri, etc. where prevailing property prices are in the region ofRs20,000-45,000 per sq.ft. However, the land cost for these properties are
limited to the cost of rehabilitation, which ranges between Rs1,200-1,700 per
sq.ft.
Table 2: Snapshot of Indicative Realisation and Rehabilitation Cost
Project Expected Realisations (Rs/sq.ft.) Cost of Rehabilitation (Rs/sq.ft.
Worli-Tardeo 30000-45000 1200-1700
Bandra & BKC 20000-30000 1200-1300
Andheri 12000-20000 1200-1300
Jogeshwari 8000-14000 1200-1300
Sion-Matunga 12000-18000 1200-1300
Source: Company Data, PL Research
Note: Realisations in specific locations could vary depending on residential/commer
cial property
Prudent asset acquisition strategy: Open plot purchase,townships and SEZ
While historically, SRS has been the key mode of land acquisition by Akruti, in
order to derisk and maintain low land acquisition cost, the company has been
proactive in acquiring large tracts of land in the outskirts of Mumbai, namely
Panvel, Uran and Khalapur.
Navi Mumbai, logical extension to urban Mumbai: Panvel and its adjoining
areas with their low population density, close proximity to the main city and
planned infrastructure emerge as a rapidly growing corridor. New initiatives
like the proposed Navi Mumbai airport, Mumbai Trans-Harbour Link, Rewas Port
etc. are likely to sustain growth in the region.
One of the oldest and largest
rehabilitator of slums - has so farcleared 10,000 in Mumbai
Building a number of projects to
enhance development portfolio
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In light of which, Akruti plans to acquire large tracts of land and targets to
develop three township projects of 1,000 acres each at Panvel, Uran and Khalapur
Each of these township projects are estimated to have a saleable area of 43.5
million sq.ft. to be developed over the next 7-8 years.
Joint ventures mitigate risk and cost of acquisition: Additionally, for large
projects like the Baroda biotechnology-IT park, Akruti has entered into an
agreement with the government of Gujarat to develop the same. This agreement
gives Akruti access to large parcels of land in return for revenue sharing with
the government; however, 67% of the revenue would accrue to the company
itself.
Strategic partnerships enhance development scope: In addition to these, to
further enhance the scope of its development portfolio, Akruti has tied-up with
leading developers like DLF to undertake some key SEZ, residential and
commercial projects.
Chart 4: Segmental break-up of saleable area
Source: Company Data, PL Research
Note: This does not include the planned township projects in Uran and Khalapur
Huge execution scale-up planned
Akrutis land reserves span across premium properties within Mumbai, namely
Worli, Bandra, Andheri, Sion, Ghatkopar, etc. Given the limited supply of land
within the city, these properties would be developed largely within the next 3-4 years.
Additionally, Akruti has been in the process of acquiring huge tracts of land
targeting a total of 3,000 acres in Panvel, Uran and Khalapur areas. The company
is planning to develop large format townships in these areas, each of which
would have a saleable area of 43.5 million sq.ft. These are likely to be developed
over the next 7-8 years.
Residential
7%
Commercial
9%
Retail
12%
Township
37%
SEZ
35%
Plans to develop large format townships
in areas like Panvel, Uran and Khalapur
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Key assumptions and valuations
Akruti's share of rehabilitation projects valued at Rs32.5bn
Akruti has a portfolio of 17 rehabilitation projects, which are likely to generate
a saleable area of 7.1 million sq.ft. and rehabilitation construction of 5.0 million
sq.ft. Akruti's share of saleable area works out to 3.7 million sq.ft. These projects
are concentrated in the Mumbai region and are largely spread across some of
the best locations in Mumbai like Tardeo, Mount Mary in Bandra, Mayanagar in
Worli, etc. where prevailing property prices are in the region of Rs30,000-45,000
per sq.ft. However, land cost for these properties are limited to the cost of
rehabilitation, which ranges between Rs1,200-1,700 per sq.ft.
Since these projects are in prime locations, we have assumed construction and
sales rollout during FY08-13, with construction for sale commencing largely
towards the completion of rehabilitation construction. Discounting cash flows
over this period at WACC of 15%, we have arrived at a NPV of Rs67.4bn for the
17 projects, and Akrutis financial interest in these projects at Rs32.5bn.
Table 4: Project rollout assumptions (rehabilitation projects) (m sq.ft.)
2007 2008 2009 2010 2011-2013
Rehabilitation construction 0.41 1.11 2.22 1.82 0.55
Construction rollout 0.05 0.32 1.42 2.23 3.07
Sales rollout 0.05 0.27 0.88 1.64 4.25
Source: Company Data, PL Research
Non-SRS projects valued at Rs21bn
Akruti, along with its joint venture partners, has a portfolio of 20 non-SRS projects
with saleable area of 11.45 million sq.ft. Of this, Akrutis share is around 7.2
million sq.ft. These projects are largely in Mumbai and are spread across Worli,
Prabhadevi, Bandra, Thane, Andheri, etc. However, area totalling approximately
15% of the total saleable area, is spread across, Pune, Surat and Bangalore.
We have assumed construction and sales rollout during FY08-13, based on which
we have discounted cash flows at WACC of 15%. We have arrived at a NPV of
Rs35.2bn for the 20 projects and Akrutis financial interest in these projects at
Rs20.9bn.
Table 5: Non-SRS projects - rollout assumptions (m sq.ft.)
2007 2008 2009 2010 2011-2013
Construction rollout 0.34 0.83 3.31 3.39 3.58
Sales rollout - 0.68 1.55 2.09 7.14
Source: Company Data, PL Research
Has the mandate to work on 17 slum
rehabilitation projects on prime
locations in Mumbai
Has in its portfolio 20 non-SRS projects
in Mumbai, Pune, Surat and Bangalore
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SEZ projects add Rs23bn to overall valuation
Akruti plans to develop five SEZ projects - three in JV with DLF and private
landowners in Pune, one in Mulund along with DLF, and a biotech SEZ in Baroda
in association with TCG and the government of Gujarat. All five SEZs put togetheare spread across an area of 45 million sq.ft. of which Akruti's share is 21.7
million sq.ft.
For the SEZ in Hinjewadi, final notification has been received and work on it is
underway. In-principal approvals are in place for the SEZs at Mulund, Lohegaon
and Tathewadi, and rest of the formalities are expected to be completed by
Q4FY08.
The Baroda Biotech SEZ, spread across 708 acres, has a saleable potential of
20.5 million sq.ft. Phase I of the SEZ is already complete, where plots have
been leased at Rs165/square metre (Rs16/sq.ft). Some of the key clients allottedspace in the SEZ include pharma companies like Zydus Cadila, MJ Biopharma
MD Bio, BDR Pharma, etc. Akruti plans to launch Phase II in 2-3 months.
We have discounted the future value of these projects at 15% over the expected
development phase, assuming a vacancy rate of 5% for each of the projects. We
have arrived at a NPV value of Rs67bn based on Akruti's financial interest in the
various projects. Overall value for Akruti works out to Rs23bn.
Table 6: Snapshot of SEZ projects
Project Area ANL's Net NPV Akrutis
(m sq.ft.) share rent (Rs m) shareRs / sq.ft. / (Rs m)
p.m.
Pune 1 2.2 33.0% 26 1,906 629
Pune 2 2.2 33.0% 38 3,643 1,202
Mumbai SEZ 15.4 33.0% 72 48,646 16,053
Hinjewadi 5.0 33.0% 38 10,063 3,321
Saivoli - Baroda Biotech 20.5 66.0% 14 2,578 1,702
Total 45.2 38 66,837 22,907
Source: Company Data, PL Research
Table 7: Development schedule for SEZ projects (m sq.ft.)
Development schedule (m sq.ft.) 2008 2009 2010 2011 2012 2013 Beyond 2013
Pune 1 - 1.08 1.08 - - - -
Pune 2 - 0.75 0.75 0.65 - - -
Mumbai SEZ - 3.08 3.08 3.08 3.08 3.08
Hinjewadi 0.50 1.50 1.50 1.50 - - -
Saivoli - Baroda Biotech 0.41 2.05 2.67 3.08 3.08 3.08 6.16
Source: Company Data, PL Research
Plans to develop 5 SEZs spread across
an area of 45 m sq.ft.
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Panvel township valued at Rs31bn
Akruti plans to develop three townships in Panvel, Uran and Khalapur, each
spread over 1,000 acres with total saleable potential of 43.5 million sq.ft. each
Currently, Akruti has aggregated land reserves of 700 acres in Panvel in itstownship development subsidiary, Akruti City Knowledge Private Ltd. As per
details provided by the company, the balance land has been identified and
requisite title due diligence in underway, while land acquisition is likely to be
completed in the next 6-7 months. Akruti expects to commence construction of
basic infrastructure in the next 10-12 months.
According to Akruti, the noteworthy aspect with regards to land acquisition is
that the company has approval from the Ministry of Revenue & Forest
Government of Maharashta, to acquire the entire land for the township in the
name of a single company, Akruti City Knowledge Private Ltd.
In our valuation, we have only considered the township project at Panvel and
would ideally like to include Uran and Khalapur only once the requisite land has
been acquired.
For the 1,000 acres to be developed in Panvel, we have assumed an
open space of 15% and of the total land area and an FSI of one which
translates to a total saleable potential of 43.5 million sq.ft.
We have assumed Akruti to undertake a mix of residential and commer-
cial development, and thus estimate about 70% of the development to
be in the residential segment, about 30% in the commercial segment
(office, IT parks, retail, etc) and different price realisations for each of
the segments.
We have assumed an average land acquisition cost of Rs5m/acre and
different base realisations for various segments, hence the total project
cost of Rs74bn will be funded at a debt:equity ratio of 2.33:1.
Escalation in sales realisation and cost of construction is assumed at 5%
per annum.
Plans to develop 3 townships in Panvel,
Uran and Khalapur
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Table 8: Key assumptions: Panvel township
% share Realisation Total area CoC(Rs/sq.ft.) (m sq.ft.) (Rs/sq.ft.)
Mid-segment apartments 40.0 3,000 17.42 1,100
Row houses 20.0 3,450 8.71 1,100Premium 10.0 4,200 4.36 1,500
Retail 10.0 4,200 4.36 1,760
Commercial 20.0 4,200 8.71 1,760
Total 100.0 3,570* 43.56 1,338*
* weighted average rate, all are base realisations
Source: PL Research
Since the township project would require an initial investment to facili-
tate basic infrastructure, we have assumed that Akruti will launch sales
of all properties from 2011 onwards. We have assumed a total develop-
ment period starting FY09 till FY17, with the initial couple of years
being devoted to site development.
Based on the above assumptions we have a total present value of Rs31bn for the
Panvel township. Base case assumptions for Uran and Khalapur, assuming similar
development timelines and base realisations of Rs3,000/sq.ft. and Rs2,000/
sq.ft. respectively and higher costs of land acquisition, translate to a base value
of Rs23bn, which could scale up as visibility on the same increases. However,
since the requisite land is yet to be acquired, even though the acquisition process
in underway, we are being conservative and not including this in the overal
valuation.
Consolidated valuation at a steep premium to current marketcap
Consolidated valuation work out to Rs107.4bn, with significant value
enhancement potential on account of the Uran and Khalapur township projects
Our base case valuation for these two projects works to Rs16.5bn and Rs6.2bn
respectively or Rs338/share. Further, development potential arising from Dharav
redevelopment and other rehabilitation projects could prove to be significant
growth opportunities for Akruti. Therefore, we believe it merits a 10% premium
to NAV. Based on this we have a per share value of Rs1,696. We rate Akruti a
BUY.
Potential arising from Dharavi and
other rehabilitation projects could
prove to be significant growth
opportunities
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Table 9: Valuation snapshot
Non-SRS 20,939
SRS projects 32,512
Panvel township 31,052
SEZ 22,907Total NPV 107,410
Net debt 4,105
NAV 103,306
Premium to NAV 10.0%
No shares 67
Value/share 1,696
Source: PL Research
Chart 5: NAV composition
Source: PL Research
Chart 6: Geographical composition of NAV
Source: PL Research
Non SRS
19%
SRS Projects
31%Panvel Township
29%
SEZ
21%
Mumbai
62%
Pune
6%
Baroda
2%
Panvel
29%
Others
1%
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Valuation cheaper vis--vis other Mumbai-based peers
Table 10: Comparative valuations
EPS P/EM/cap NPV Land bank Discount FY08E FY09E FY10E FY08E FY09E FY10E(Rs bn) (Rs bn) (m sq.ft.) to M/cap
Akruti City 73 107 76.15 -46.5% 43.6 110.5 281.0 25.2 9.9 3.9
HDIL 204 208 126* 1.9% 53.0 90.3 112.9 18.0 10.6 8.4
Peninsula Land 31 30 26.4 3.5% 8.4 16.0 28.9 15.8 8.3 4.6
Source: PL Research
*does not include Airport SRS
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Key valuation triggers
Pace of land acquisition
Akruti is in the process of acquiring land for three township projects. Currently
the company has acquired 700 acres in Panvel and has identified areas to be
acquired for which title due diligence and MoUs are underway. The management
has indicated a 7-8 month timeframe for land acquisition and a 10-12 month
timeframe for commencement of construction. Speedy acquisition of this balance
land, particularly in Uran and Khalapur, would act as significant value enhancers
to the overall valuation of Akruti.
Private equity investment in township projects
Akruti is also exploring alliances with private equity investors/developers for
its township projects and is currently in talks with various interested parties.
Dharavi redevelopment project
Given the high level of expertise and knowledge required in implementing SRS
projects, there exists significant entry barriers and thus limited competition.
Akruti being one of the leading slum rehabilitation developers, we think the
company is a prime contender for the redevelopment of the Dharavi, which
would add high visibility to an upgradation in NAV.
Speedy acquisition of land, particularly
in Uran and Kahalpur, could be a
positive trigger
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16 December 19, 2007
Key risks
Execution risk
A significant scale up in development plans over the next couple of years does
pose a risk to execution and adherence to time and cost.
Long gestation period of SRS
While SRS projects command high returns, the process of building consensus
among slum dwellers, clearing and rehabilitating hutments, etc. are a time
consuming process. Any significant delay in the whole process would delay
execution and lock working capital in the project.
Delay in absorption
This is particularly with regards to the township projects, as it entails significant
rollout plans. Any slowdown in absorption would have a likely impact on returns
Geographical concentration
Akruti is largely a Mumbai-based developer with new expansion plans largely
concentrated in the western region. Any slowdown in property prices in the
region could impact valuation negatively.
Input cost escalation
Any larger than anticipated increase in input costs, like steel and cement, could
impact margins and in turn overall profitability of its projects.
Building consensus among slum dwellers,
clearing and rehabilitating hutments is
a long drawn process
Slowdown in property prices in the
region could negatively impact
valuation
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Company Overview & Management Background
Akruti City, a predominantly Mumbai-based company, is involved in the
development, sale and lease of commercial, residential and retail properties
The company commenced real estate development in 1989; and since 1992 ithas been participating in slum rehabilitation projects initiated by the Slum
Rehabilitation Authority (SRA). The company bagged its first assignment from
the SRA in September 1996.
Of the 5 million sq.ft. that the company has developed since inception, 97% or
more than 4.8 million sq.ft. is on account of slum rehabilitation, which constitutes
157 apartment buildings and over 9,400 apartments. Akruti has so far constructed
3.6 million sq.ft. residential space and handed them over to slum dwellers free
of cost. The remaining land has been used to develop 1.4 million sq.ft. saleable
or leasable building area in commercial and residential projects.
Of the total land that has been developed, the company and its subsidiaries
have developed approximately 2.8 million sq.ft. or 56% of the land, and
approximately 2.2 million sq.ft. or 44% has been developed either in partnership
with other real estate developers, as part of a joint venture arrangement, or as
part of a consortium.
In addition to land development, the company also trades in transferable
development rights, which are continuously generated from its slum rehabilitation
business.
Experienced management team
Akruti has an experienced management team with relationships built over years
with architects, contractors, property consultants and suppliers.
Management background
Mr. Hemant Shah (Chariman): Civil Engineer from Mumbai University with 26
years of experience in executing various large projects (involving military
contracts, government projects, private contracts and real estate developments)
Mr. Vyomesh Shah (Managing Director): A commerce graduate and Chartered
Accountant with over 21 years of industry experience. Mr. Shah is currently the
President of the Slum Redevelopers Association (SRA) and the Secretary of the
Maharashtra Chamber of Housing Industry (MCHI).
Experienced and qualified executives
running the company
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Table 11: Some key commercial projects completed (m sq.ft.)
Project name Saleable area
Akruti Trade Centre, Mumbai 0.216
Akruti Centre Point, MIDC Andheri (E) 0.214
Akruti Business Port , Andheri (E) 0.139Akruti Softech Park, Andheri (E) 0.118
Akruti Arcade, Andheri (W) 0.041
Akruti Orion, Vile Parle (E) 0.013
Total 0.741
Source: Company Data, PL Research
Table 12: Some key residential projects completed (m sq.ft.)
Project name Saleable area
Akruti Niharika, Andheri (E) 0.326
Akruti Elegance (A-Wing) 0.063
Our joint venture projects
Akruti Aneri, Andheri (E) 0.080
Akruit Orchid Park (A&B) 0.073
Akruti Aditi, Jogeshwari (E) 0.014
Akruti Classic, Mulund (E) 0.012
Our Subsidiary Company Projects
Akruti Aditya, Grant Road (W) 0.029
Akruti Aastha, Walkeshwar 0.025
Akruti Laxmi, Dadar T.T. 0.016
Akruti Aditya (ext) 0.015
Total 0.653
Source: Company Data, PL Research
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Annexure
Industry evaluation
Mumbai
Mumbai, the capital of Maharashtra is the financial and economic centre of the
country. The city contributes to 40% of the income tax, 60% of custom duty and
20% of the central excise duty. According to United Nations Development
Programme (UNDP), Mumbai is one of the most populated cities in the world,
having a population of 20 million people. Mumbai has a per capital income of
Rs49,000.
Heightened economic activity driven by financial services, IT/ITES and
entertainment sectors, high population density and high per capita income has
been driving demand for real estate in Mumbai. This in turn has triggered
widespread real estate development activity both in residential and commercia
real estate. According to Knight Frank, almost 80% real estate development
currently underway in Mumbai is in the residential sector with an estimated 24
mn sft of residential supply is expected in 2008 and 18.5 mn sft in 2009-10.
While new supply is in the offing, restricted land supply has resulted in heightened
demand for property in Mumbai, resulting in continued pressure on pricing. The
mismatch in demand -supply in the region is likely to result in sustained pressure
on property prices in the region.
Navi Mumbai
Given the surging population and limited land supply in Mumbai, apart from the
increased prominence within the central and western suburbs and Thane, there
has been increased interest in Navi Mumbai. According to industry professionals
Navi Mumbai has fast emerged as an attractive option for residential buyers
with property prices ranging between Rs2,200-4,500. Improved infrastructure
and announcements of infrastructure projects like the Mumbai Trans Harbour
Link, new airport at Panvel, Rewas Port, etc. are likely to further support growth
in the region.
Another fillip to developmental activity in the region has been on account of
the amended Special Township Scheme (STS) under the Maharashtra Regional
and Town Planning Act, which has removed most of the regulatory bottlenecks
in developing land. According to the new scheme, developers can convert
agricultural land into non-agricultural tract automatically.
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Chart 7: Residential property prices
Source: Knight Frank
0
10,000
20,000
30,000
40,000
50,000
60,000
Napeansea
Road
Worli-
Prabhadevi
Bandra-
Santacruz
Powai-
Chandivili
Malad-
Goregaon
Borivali-
Kandivali
Ghatkopar-
Mulund
Thane
Vashi
(Rs/
sq.
ft.)
Minimum Maximum
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Financials
Income Statement (Rs m)
Y/e March FY06 FY07 FY08E FY09E FY10E
Total income 2,033 1,889 5,723 11,178 31,421
Total expenditure 1,268 836 1,221 1,967 8,851
Change in inventory 149 (460) (2,995) (6,729) 2,082
Construction cost 1,066 1,066 3,614 7,550 3,626
% sales 52.5 56.4 63.1 67.5 11.5
SG&A 39 163 401 782 2,200
% sales 1.9 8.6 7.0 7.0 7.0
Staff cost 13 67 200 363 943
% sales 0.6 3.6 3.5 3.3 3.0
EBIDTA 765 1,054 4,503 9,212 22,571
% sales 37.6 55.8 78.7 82.4 71.8
Depreciation 48 62 64 67 70
EBIT 717 991 4,439 9,145 22,501
Finance expenses 67 200 386 593 599
Other income 20 91 105 120 139
PBT 670 883 4,158 8,673 22,040
Tax 32 107 1,247 1,301 3,306
% of PBT 4.7 12.1 30.0 15.0 15.0
PAT 638 776 2,911 7,372 18,734
Source: Company Data, PL Research
Balance Sheet (Rs m)
Y/e March FY06 FY07 FY08E FY09E FY10E
Sources of funds
Share capital 480 667 667 667 667
Reserves & surplus 593 4,379 6,947 13,975 32,366
Networth 1,073 5,046 7,614 14,642 33,033
Minority interest 5 1 1 1 1
Total debt 957 4,879 4,026 6,451 5,094
Total 2,041 9,928 11,642 21,095 38,129
Application of funds
Net block 863 891 877 865 856
Capital work-in-progress - 3 3 3 3Investments 213 2,749 2,749 2,749 2,749
Current assets, loans & adv. 1,592 7,207 9,778 20,057 41,415
Current liabl. 473 660 1,451 2,201 6,441
Provisions 115 262 314 377 453
Liabilities and provisions 627 922 1,765 2,578 6,893
Net current assets 965 6,285 8,013 17,478 34,522
Total 2,041 9,928 11,642 21,095 38,129
Source: Company Data, PL Research
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Cash Flow (Rs m)
Y/e March FY06 FY07 FY08E FY09E FY10E
Cash flow from operations 256 (3,410) 687 164 20,014
Cash flow from financing (137) 7,234 (1,197) 2,082 (1,700)
Cash flow from investing (268) (2,547) (50) (55) (61)
Increase / decrease in cash (146) 1,277 (559) 2,190 18,253
Opening cash balance 203 57 1,333 774 2,965
Closing cash balance 57 1,333 774 2,965 21,218
Source: Company Data, PL Research
Key ratios
Y/e March FY06 FY07 FY08E FY09E FY10E
Asset based ratios (%)
RoCE 7.8 7.9 6.1 17.9 20.4
RoE 16.7 20.9 12.3 26.2 30.9
Growth ratios (%)Sales 201.3 (7.0) 202.9 95.3 181.1
EBIT 198.3 38.3 347.8 106.0 146.0
EBITDA 146.0 37.8 327.4 104.6 145.0
PAT 383.1 21.6 275.1 153.3 154.1
EPS (79.9) (12.3) 275.5 153.3 154.1
Balance sheet ratios
Gross debt : equity (x) 0.9 1.0 0.5 0.4 0.2
Net debt : equity (x) 0.8 0.7 0.4 0.2 (0.5)
Debtor days 6.6 72.3 50.0 50.0 50.0
Inventory days 219 265 197 259 119
Creditor days 33 49 37 37 37
Net working capital days 193 700 456 416 302
Per share (Rs)
EPS - fully diluted 13.2 11.6 43.6 110.5 280.9
BV 22.4 75.7 114.1 219.5 495.2
CEPS 14.3 12.6 44.6 111.5 281.9
DPS 1.5 1.5 4.4 4.4 4.4
Margins (%)
EBITDA 37.6 55.8 78.7 82.4 71.8
EBIT 35.3 52.5 77.6 81.8 71.6
PAT 31.4 41.1 50.9 65.9 59.6
Tax rate 4.7 12.1 30.0 15.0 15.0
Valuations (x)
P/E 82.9 94.6 25.2 9.9 3.9
P/CEPS 76.9 87.5 24.6 9.9 3.9
P/BV 49.2 14.5 9.6 5.0 2.2
EV/EBITDA 70.2 72.9 17.0 8.3 2.5
EV/sales 26.4 40.7 13.4 6.9 1.8
Market cap/sales 26.0 38.8 12.8 6.6 2.3
Source: Company Data, PL Research
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Notes
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This document has been prepared by the Research Division of Prabhudas Lilladher Pvt. Ltd. Mumbai, India (PL) and is meant for use by the recipient only as
information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not beconsidered or taken as an offer to sell or a solicitation to buy or sell any security.
The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the
accuracy or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accept any responsibility of whatsoever nature for the
information, statements and opinion given, made available or expressed herein or for any omission therein.
Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well
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or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication.
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