batlivala & karani - ansalapi.com · ansal properties projects 2 b&k r esearch june 2011...

Ansal Properties ProjectsPrice: Rs 40 BSE Index: 17,507 20 June 2011

Maintain OutperformerVISIT UPDATE

Share Data

Reuters code APIL.BO

Bloomberg code APIL IN

Market cap. (US$ mn) 139

6M avg. daily turnover (US$ mn) 0.4

Issued shares (mn) 157

Target price (Rs) 73

Performance (%) 1M 3M 12M

Absolute (3) 14 (48)

Relative (2) 16 (49)

Valuation ratios

Yr to 31 Mar FY12E FY13E

EPS (Rs) 8.3 11.0

+/- (%) 29.4 31.8

PER (x) 4.8 3.6

Dividend/Yield (%) 2.7 2.7

EV/Sales (x) 1.5 1.2

EV/EBITDA 7.5 5.8

Major shareholders (%)

Promoters 46

MFs/FIs 3

FIIs 22

Public & Others 29

Renewed focus on execution to improve cash flows and earnings

We met the management of Ansal Properties (APIL) and visited their five

prominent projects across Noida, Greater Noida, Gurgaon and Lucknow. Most

of the projects we visited were more than 50% sold out (of the launched area)

while level of construction were varying for different projects.

Construction work picking up pace

The developers have learnt a hard lesson from the last recession. Accordingly, apart from

launch of new projects, APIL is equally focusing on construction and execution. In FY11,

the company launched 19.3 mn sq ft of new projects and delivered 10.8 mn sq ft. With Rs 5.1

bn expensed towards construction in FY11, management has strongly indicated its focus on

increased execution and delivery of delayed projects.

Considerable portion sold

The company presently has 125.1 mn sq ft (co’s share) of ongoing projects in hand, of which

70.4 mn sq ft (56%) is already sold out. In the projects we visited, Esencia and Megapolis

projects, which were launched in 2010 have already been sold out 51%, because of their

good location and pricing along with the management’s increased focus on these projects.

Slowdown in fresh sales, halt in price increase

As the latent demand has almost dried up and prices have reached back to peak levels, the

fresh sales have come down significantly. APIL’s average realisations have increased from Rs

778 per sq ft in FY10 to Rs 1,067 per sq ft presently. However, majority of the developers

have done considerable sales in the last 12 months and are having good pre-sales inventory

(APIL has 70.4 mn sq ft of pre sales out of 125.1 mn sq ft of ongoing projects). Thus, they do

not intend to decrease the prices in the short run and instead are focusing on execution. Due

to oversupply of projects in the recent months and fall in fresh sales, the developers are

unable to increase prices further.

Esencia project in Gurgaon saw good pre-sales

In FY11, sales momentum was good in Gurgaon with key real estate players like Unitech and

DLF drawing a nice response to their attractively priced residential and plotted development

projects. Ansal also has witnessed an encouraging response to its Gurgaon Esencia project

(~3.1 mn sq ft) launched in FY11, which is 70% sold out.

Outlook and valuation

This last recession has forced the developers to reconsider and restructure their policies.

Now their increased focus is on construction and execution unlike before, when they used

most of the internal accruals from the projects to purchase land. Accordingly, APIL is also

focusing on construction and execution. Though fresh sales have slowed down because the

latent demand has almost dried up and prices have reached to peak levels, significant sales

bookings in few of its major projects during the last financial year along with renewed focus

on execution augurs well. Though the interest rate hikes (impacting demand and cost of the

Batlivala & KaraniSMALL CAP

Relative performance

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Ansal Properties andInfras trucrure (Actual)Sensex

2ANSAL PROPERTIES PROJECTS

B&K RESEARCH JUNE 2011

companies) and limited availability of additional debt to the real estate developers is concerning,

APIL is trying to match its cash flows by customer advances and exit from its smaller projects.

We have arrived at an FVPS of Rs 73 and maintain our Outperformer rating on the stock.

We visited five prominent projects of APIL, since these contribute 51% to its

total GPV and delta on FVPS is high in terms of execution, sales and pricing of

these projects.

Project statistics

Esencia, Esencia Sushant Sushant Megapolis,

Gurgaon Extension, City I, City II, Dadri*

Gurgaon Lucknow Lucknow*

Land area ( acres) 112 108 1,765 800 1,371

Land purchased ( acres) 112 75 1,723 400 580

Pending land payments (Rs mn) – 600 325 1,200 4,746

Type JV JV Fully owned Fully owned Subsidiary

Saleable area ( mn sq ft) 3.1 5.9 59.3 22.6 42.8

Co’s share (%) 48 74 100 100 55

Co’s share (mn sq ft) 2.1 4.3 59.3 22.6 23.5

Area launched ( mn sq ft) 3.1 1.3 39.1 10.1 16.9

Area sold ( mn sq ft) 2.2 – 23.6 4.3 5.1

Cash received (Rs mn) 2,122 – 9,114 1,110 2,171

Sale value (Rs mn) 5,112 – 19,094 2,932 5,341

Per sq ft realisation 2,345 – 808 688 1,062

Construction cost incurred (Rs mn) 39 – 2,312 9 481

Note: All figures as on 31 March 2011. *Since development agreement has been signed for – 800 aces inthe Lucknow Phase II (out of 1,765 acres) and 1,371 acres in Megapolis (out of 2,504 acres), we have takennote of all statistics pertaining to only 800 and 1,371 acres, respectively.

Source: Company, B&K Research



Project details

Esencia Esencia Extension

Saleable Co’s Area Co’s Avg. Current Saleable Co’s Area Co’s Avg. Current

area share sold share selling price area share sold share selling price

price price

Mn sq ft Rs per sq ft Mn sq ft Rs per sq ft

Plots 2.1 1.5 1.4 1.4 1,615 6,000 0.4 0.3 – – – 6,000

Floors 0.7 0.4 0.6 0.3 3,842 5,000 4.2 3.1 – – – 5,100

Group Housing – – – – – – 1.3 1.0 – – – 4,500

Group Housing FSI – – – – – – – – – – – –

Commercial – – – – – – – – – – – –

Commercial FSI 0.2 0.2 0.1 0.1 2,817 3,000 – – – – – –

Others 0.1 0.1 – – – 1,300 – – – – – –

Total 3.1 2.1 2.2 1.8 – – 5.9 4.3 – – – –


Site visit of "Esencia" at Gurgaon

Source: B&K Research

Esencia

Badshahpur, SohnaRoad (7 kms)

Distance betweenGurgaon Toll Plaza and

Esencia is ~19 kms

Rajiv Chowk(12 kms)

Gurgaon Toll Plaza

Esencia – Gurgaon

The project is a luxury JV project spread across 220 acres (including 108 acres of its extension)

Plots were launched at Rs 1,615 per sq ft and villas at Rs 3,842 per sq ft with prices having

gone up to currently selling at Rs 6,000 per sq ft and Rs 5,000 per sq ft, respectively.

The Esencia project is in Gurgaon with total saleable area (including Esencia extension) of

more than 6.5 mn sq ft (co’s share), and accounts for ~13% of the GPV for APIL. The project

was launched in April 2010 and currently work has started on construction of roads, leveling

of land and laying of sever lines. Its good location at Sohna road extension, along with

projects of many other prominent developers like Unitech, DLF, Parsvnath, etc. in this region,

augurs well.



Entry gate Construction work on the entry gate

Roads inside



Sushant City – Lucknow

This is one of the largest integrated township in APIL’s pack (~3,530 acres) of which

development agreement has been signed for 2,565 acres cumulating to saleable area of 81.9

mn sq ft, and accounts for ~24% of the GPV for APIL. It is a Hi-tech township under the Hi-

tech policy of Government of UP. It has a combination of residential plots, group housing,

villas, retail mall, hotel, commercial complex, golf course, etc. A, 18 hole Golf course is being

developed in the township by Martin Hardy. The area of the entire golf course area is 441

acres, of which 180 acres is devoted to the golf course and the rest is planned to be developed

as golf villas and golf group housing around the golf course.

It is located on the Lucknow-Sultanpur National Highway on Amar Shaheed Path, Ring Road

in Lucknow, which at present is on the outskirts of the city but is strategically located between

the airport and upscale Gomti Nagar. There is a bridge being built on the Gomti river

connecting Sushant Golf city to Gomti Nagar which will reduce the distance to around 6 kms

( from presently 12 kms). Out of 81.9 mn sq ft of saleable area 49.2 mn sq ft has been

launched of which 57% is sold out. Construction work is in full swing with 80-85% of

infrastructure work almost complete (in phase-I of 1,765 acres). First phase of villas have

been handed over to customers in FY11 and construction work on the group housing and

commercial complex, has started. Till date ~Rs 2.3 bn has been expensed towards construction

expenses.

Project details

Sushant City I, Lucknow Sushant City II, Lucknow

Saleable Co’s Area Co’s Avg. Current Saleable Co’s Area Co’s Avg. Current

area share sold share selling price area share sold share selling price

price price

Mn sq ft Rs per sq ft Mn sq ft Rs per sq ft

Plots 10.8 10.8 7.9 7.9 702 1,556 8.5 8.5 3.7 3.7 435 1,000

Villas 4.4 4.4 2.2 2.2 2,029 2,816 1.6 1.6 0.6 0.6 2,375 2,800

Group Housing 8.4 8.4 3.7 3.7 1,354 1,959 7.1 7.1 – – – –

Group Housing FSI 3.2 3.2 2.3 2.3 570 650 – – – – – 400

Commercial 0.2 0.2 0.1 0.1 2,429 2,532 4.5 4.5 – – – 3,300

Commercial FSI 16.5 16.5 2.3 2.3 493 686 1.0 1.0 – – – 500

Others 15.8 15.8 5.0 5.0 242 350 – – – – – –

Total 59.3 59.3 23.6 23.6 22.6 22.6 4.3 4.3




Site visit of "Sushant City" at Lucknow


Charbagh RailwayStation (8 kms)

Gomti Nagar(10-12 kms)

Lucknow Airport

Sushant Golf City(6 kms)

Amar Shaheed Path(2 kms)

Entrance of the township Water body within the township

Roads within the sectors EWS LIG



Shopping square Commercial complex - Felix Square

Golf course Golf villas

G.D Goenka School within the campus



Megapolis – Dadri (Greater Noida)

This is a Hi-tech township being developed in adherence to the Hi-Tech Policy of Government

of Uttar Pradesh. The licence to build 2,504 acre township has been awarded to a consortium

including APIL and is being developed in a SPV. Out of this, the company has entered into

development agreement for only 1,371 acres cumulating to saleable area of 23.5 mn sq ft

(co’s share) and till date has acquired 580 acres of land parcel. We have valued only 580 acres

and it accounts for ~14% of the GPV for APIL.

Structure of the SPV

This township is being developed in a SPV with APIL having 63% stake and the remaining in

the hands of three consortium members. APIL cannot dilute its stake below 63% in this

consortium, it can, however increase it. Further to this initial consortium, HDFC real estate

fund invested in first phase Rs 2.3 bn (Rs 1.5 bn by way of subscribing to 15 mn Secured

Redeemable Optionally Convertible Debentures (SROCD) and Rs 7.5 mn by way of equity

shares for 8.5% stake. Post HDFC, effective stakes are APIL (55%), HDFC (14%) and remaining

in the hands of the other consortium members.

Saleable area statistics

Saleable area Co’s share Area sold Co’s share Avg. selling price Current price

Mn sq ft Rs per sq ft

Plots 9.1 5.0 4.0 2.2 1,264 1,684

Villas 1.8 1.0 0.1 0.1 2,447 2,631

Group Housing 9.2 5.0 0.9 0.5 1,869 1,953

Group Housing FSI 1.8 1.0 – – – 800

Commercial 12.8 7.1 0.0 0.0 2,847 4,355

Commercial FSI 2.3 1.3 – – – 1,200

Others 5.8 3.2 – – – 867

Total 42.8 23.5 5.0 2.8 – –


Site visit of "Megapolis" at Greater Noida


Megapolis

Noida Expressway,Amity Chock

Distance from NoidaExpressway to

Megapolis is (~34 kms)

Boraki RailwayLine (6 kms)

Pari Chowk(24 kms)

Wipro Campus(3 kms)



Entry point to township Landscapping

Roads inside the township Parks

Sever lines being laid Construction work going on



Fairway apartments Sample villas

Valuation

We have valued the company on a mix of DCF (118 mn sq ft – co’s share) and land valuation

(100.4 mn sq ft – co’s share). For our valuation, in Dadri township we have considered, of the

total licenced 2,504 acres, 580 acres (has purchased only 580 acres as yet) and in Lucknow

township of the total approved 3,530 acres only 2,565 acres (development agreement has

been signed for 2,565 acres).

SOTP valuation

APIL Esencia (incl. Sushant Megapolis,

Rs per share Extension), City, Dadri

Gurgaon Lucknow

Plots 40 9 4 15

Residential 7 2 3 –

Group housing 27 – 6 7

Commercial 27 1 11 8

Retail 23 – 5 –

Miscellaneous 1 – – –

Land value 92 17 22 –

Total GPV 217 28 52 30

Less: Outstanding land cost per share 51 – – –

Less: Net debt per share 93 – – –

No. of shares (mn) 157 – – –

FVPS (Rs) 73 – – –




Balance Sheet

Yr end 31 Mar (Rs mn) FY10 FY11P FY12E FY13E

Cash & Marketable secuties 1,081 1,284 793 1,160

Other current Assets 47,843 51,342 53,382 55,817

Investments 122 13 13 13

Net fixed assets 1,243 1,164 1,152 1,149

Other non-current assets (41) (21) 23 24

Total assets 50,247 53,782 55,362 58,162

Current liabilities 18,739 20,521 21,594 22,604

Total Debt 17,183 15,878 15,743 15,972

Total liabilities 35,921 36,399 37,337 38,576

Share capital 616 787 787 787

Reserves & surplus 12,380 15,782 16,424 17,985

Less: Misc. expenditure (0) – – –

Shareholders’ funds 12,995 16,569 17,211 18,772

Minorities interests 1,330 814 814 814

Total equity & liabilities 50,247 53,782 55,362 58,162

Capital employed 30,178 32,447 32,954 34,744

Income Statement

Yr end 31 Mar (Rs mn) FY10 FY11 FY12E FY13E

Net sales 8,621 12,571 14,369 17,745

Growth (%) 15.4 45.8 14.3 23.5

Operating expenses (6,758) (10,150) (11,555) (14,098)

Operating profit 1,863 2,421 2,814 3,647

EBITDA 1,863 2,421 2,814 3,647

Growth (%) 55.2 30.0 16.2 29.6

Depreciation (97) (96) (109) (104)

Other income 320 307 285 286

EBIT 2,085 2,632 2,989 3,828

Interest paid (1,061) (923) (1,000) (1,192)

Pre-tax profit 1,024 1,709 1,990 2,636

(before non-recurring items)

Non-recurring items 156 – – –

Pre-tax profit 1,180 1,709 1,990 2,636

(after non-recurring items)

Tax (current + deferred) (380) (629) (657) (870)

Net profit (before Minority 800 1,080 1,333 1,766

Interest, Pref. Dividend, etc.)

Prior period adjustments 66 – – –

Minority interests (63) (66) (20) (35)

Reported PAT 803 1,015 1,313 1,731

Adjusted net profit 581 1,015 1,313 1,731

Growth (%) 95.2 74.8 29.4 31.8

Cash Flow Statement

Yr end 31 Mar (Rs mn) FY10 FY11P FY12E FY13E

Pre-tax profit 1,180 1,709 1,990 2,636

Depreciation 46 108 94 84

Chg in working capital (4,010) (1,727) (967) (1,425)

Total tax paid (290) (659) (700) (871)

Cash flow from oper. (a) (3,075) (570) 417 425

Capital expenditure 248 (29) (82) (82)

Chg in investments 159 109 – –

Cash flow from inv. (b) 407 80 (82) (82)

Free cash flow (a+b) (2,668) (490) 335 343

Equity raised/(repaid) 638 3,020 – –

Debt raised/(repaid) 3,143 (1,305) (135) 229

Dividend (incl. tax) (66) (72) (171) (171)

Other financing activities (332) (368) (501) 0

Cash flow from fin. (c) 2,736 693 (827) 24

Net chg in cash (a+b+c) 68 203 (491) 367

Key Ratios

Yr end 31 Mar (%) FY10 FY11P FY12E FY13E

Adjusted EPS (Rs) 4.7 6.4 8.3 11.0

Growth 80.0 36.7 29.4 31.8

Book NAV/share (Rs) 116.1 110.2 114.3 124.2

Dividend/share (Rs) 0.6 0.6 1.1 1.1

Dividend Payout Ratio 12.4 9.1 13.0 9.9

Tax 32.2 36.8 33.0 33.0

EBITDA margin 21.6 19.3 19.6 20.6

EBIT margin 24.2 20.9 20.8 21.6

RoCE 7.0 8.1 8.9 11.0

Net debt/Equity 112.4 84.0 82.9 75.6

Valuations

Yr end 31 Mar (x) FY10 FY11P FY12E FY13E

PER 8.4 6.2 4.8 3.6

PCE 7.2 5.6 4.4 3.4

Price/Book 0.3 0.4 0.3 0.3

Yield (%) 1.5 1.5 2.7 2.7

EV/Net sales 2.6 1.7 1.5 1.2

EV/EBITDA 12.0 8.6 7.5 5.8

Du Pont Analysis – ROE

Yr end 31 Mar (x) FY10 FY11P FY12E FY13E

Net margin (%) 6.7 8.1 9.1 9.8

Asset turnover 0.2 0.2 0.3 0.3

Leverage factor 3.3 3.3 3.1 3.0

Return on equity (%) 4.1 6.4 7.4 9.2



Analyst Declaration: We, Neetika Singhal & Rahul Khursija, hereby certify that the views expressed in this report accurately reflect our personal views aboutthe subject securities and issuers. We also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specificrecommendation or view expressed in this report.

Neetika Singhal Rahul [email protected] [email protected]+91-120-460 5611 +91-120-460 5608

B & K SECURITIES INDIA PRIVATE LTD.Equity Research Division: City Ice Bldg., 298, Ground/1st Floor, Perin Nariman Street, Behind RBI, Fort, Mumbai - 400 001, India. Tel.: 91-22-4031 7000, Fax: 91-22-2263 5020/30.

Registered Office: Room No. 3/4, 7 Lyons Range, Kolkata - 700 001. Tel.: 91-33-2243 7902.

B&K Research is also available on Bloomberg <BNKI>, Thomson First Call & Investext.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,mechanical, print, publishing, photocopying, recording or otherwise without the permission of Batlivala & Karani Securities India Pvt. Ltd. Any unauthorizedact in relation to all or any part of the material in this publication may call for appropriate statutory proceedings.

The information contained herein is confidential and is intended solely for the addressee(s). Any unauthorized access, use, reproduction, disclosure ordissemination is prohibited. This information does not constitute or form part of and should not be construed as, any offer for sale or subscription of or anyinvitation to offer to buy or subscribe for any securities. The information and opinions on which this communication is based have been complied or arrivedat from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to their accuracy, correctness andare subject to change without notice. Batlivala & Karani Securities India P Ltd and/ or its clients may have positions in or options on the securities mentionedin this report or any related investments, may effect transactions or may buy, sell or offer to buy or sell such securities or any related investments. Recipient/sshould consider this report only for secondary market investments and as only a single factor in making their investment decision. The information enclosedin the report has not been vetted by the compliance department due to the time sensitivity of the information/document. Some investments discussed in thisreport have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when the investment isrealized. Those losses may equal your original investment. Some investments may not be readily realizable and it may be difficult to sell or realize thoseinvestments, similarly it may prove difficult for you to obtain reliable information about the value, risks to which such an investment is exposed. Neither B&KSecurities nor any of its affiliates shall assume any legal liability or responsibility for any incorrect, misleading or altered information contained herein.

B&K Securities is the trading name of Batlivala & Karani Securities India Pvt. Ltd.

B&K Investment Ratings:

1. BUY: Potential upside of > +25% (absolute returns)

2. OUTPERFORMER: 0 to +25%

3. UNDERPERFORMER: 0 to -25%

4. SELL: Potential downside of < -25% (absolute returns)


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