Akruti Pl Dec 07

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Company ReportIndustry : Real Estate

Akruti City

Scaling new highs

Neyha Srivastava ([email protected])

+971-509156585

Subramaniam Yadav ([email protected])

+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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Akruti City

4 December 19, 2007

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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Akruti City

December 19, 2007 5

Chart 1: Geographical distribution of land reserve


Mumbai

18%

Pune

4%

Panvel

52%

Others

1%

Baroda

25%

Chart 2: KEY completed and ongoing projects

Source: Company Data


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Akruti City

6 December 19, 2007

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


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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Akruti City

December 19, 2007 7

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


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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Akruti City

December 19, 2007 9

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


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


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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Akruti City

10 December 19, 2007

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


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


Plans to develop 5 SEZs spread across

an area of 45 m sq.ft.


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Akruti City

December 19, 2007 11

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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Akruti City


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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Akruti City


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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Akruti City


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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Akruti City


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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Akruti City


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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Akruti City


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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Akruti City


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


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



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Akruti City


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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Akruti City


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


Balance Sheet (Rs m)


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



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Cash Flow (Rs m)


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


Key ratios


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



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Akruti City


Notes


24/24

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