Sobha Developers: Eminence at discount

Initiating Coverage | 4 October 2013

Sector: Real Estate

Sobha Developers

BSE SENSEX

S&P CNX

19,902

5,910

CMP: INR292

TP: INR410

Buy

Eminence at discount

Stable core market-mix | throwing positive FCFE | fundamentals intact



Bloomberg

SOBHA IN

Equity Shares (m)

98.1

M.Cap. (INR b)/(USD b) 28.6/0.5

52-Week Range

472/214

1,6,12 Rel. Perf. (%)

16/-26/-25



Financial summary (INR b)

Y/E March

2013 2014E 2015E

Net Sales

18.6 21.1 24.0

EBITDA

5.5

6.1

7.0

Adj PAT

2.2

2.5

3.0

EPS (INR)

22.2 25.5 30.6

EPS Gr. (%)

5.5 15.3 19.8

BV/Sh. (INR) 217.9 234.1 255.3

RoE (%)

10.5 11.3 12.5

RoCE (%)

14.5 15.0 16.1

Payout (%)

31.6 31.3 26.2

Valuations

P/E (x)

13.2 11.4

9.5

P/BV (x)

1.3

1.2

1.1

EV/EBITDA (x)

7.6

6.8

6.1

Div. Yield (%)

2.4

2.7



Sobha Developers' (Sobha) stock price is down 30% from peak of YTD FY14, though the

recent upswing partially offset the steep discount. It offers a preferred play as strong

operations and liquidity aid resilience amid the macro uncertainty.

Our conviction on Sobha emerges from (1) performing market-mix and gain in market

share, (2) healthy core operations, consistent positive FCFE, and earnings visibility, (3)

solid fundamentals — land quality, superior execution, brand and clientele, independent

functioning of board etc and (4) liquidity comfort.

Correction in the stock price, which was led by concerns over future capital allocation in

capex business and land, was overdone. We expect recent recovery to continue further.

Consistent growth in cash flow (24% CAGR in core cash EBITDA over FY13-15E) and

healthy operations should render balance sheet comfort and drive re-rating.

We estimate Sobha's SOTP at INR47b (INR479/share) and initiate coverage with a Buy

rating and target price of INR410 (15% discount to SOTP, implied 8.8x EV/FY15E cash

EBITDA of INR6.1b), rendering 40% upside.

Core markets offer resilience, coupled with market consolidation

Southern markets' (Bangalore in particular) outperformance is likely to aid better

sustainability over the medium term, as the demand-supply dynamics for broader

segment (ticket size between INR5-12.5m) is still favorable. Skepticism over

supply pressure, IT hiring moderation and demand slowdown should be allayed

due to continued strengths in operations of major developers. Key drivers

bolstering operations are (1) steady market share gain by tier I developers and

(2) consistent addition in demand drivers over the past couple of years in the

form of robust commercial leasing. We believe Sobha's operations are a strong

proxy of these trends with (1) land banks situated in attractive and growing micro-

markets and (2) cheap acquisition cost driving MTM gain.

Shareholding pattern %

As on

Promoter

Dom. Inst

Foreign

Others

Mar-13 Dec-12 Mar-12

60.6

2.8

33.7

2.9

60.6

3.1

33.4

2.8

60.6

2.6

33.2

3.6

Ability to differentiate, quality and brand aid comfort in operations

SOBHA posted a healthy 22% CAGR in annual pre-sales volume and 25% CAGR in

realizations over FY10-13, propelled by strong core market and gradual

diversifications (Gurgaon and Chennai). Amid the skepticism, momentum

continues in 1HFY14, with 22.8% YoY growth in pre-sales value, with further

diversification into Calicut market. Pipeline launches of 6.8msf in FY14 (0.9msf

launched in 1HFY14), with no major approval risk (plus unoffered inventory of

5msf) render reasonable visibility on attaining INR26-27b of annual presales over

FY14E-15E (v/s INR22.3b in FY13). While uncertain macro-led slowdown remains

the biggest risk, SOBHA's strong execution bandwidth, wide client base and brand

recall should assist to maintain operational strength and consistency.

Stock performance (1 year)

Liquidity strong enough to drive growth and expansion

Strong pre-sales and execution resulted in customer collections growing in

tandem. We estimate the company to generate post tax core operating cash flow

4 October 2013

Sobha Developers

of ~INR13b over FY14E-16E (18% CAGR) and cash EBITDA of INR18.5b (24% CAGR).

Hence, visible liquidity is strong enough to facilitate its entry into select capex cycle,

which has been an untapped asset class for Sobha, and has the ability to unleash

meaningful long term value. On the back of improving liquidity comfort, ICRA

upgraded the long term rating of the company from BBB+ to A- in 2QFY14.

Valuation room still ample; operating consistency renders comfort

Sobha's stock price is down 30% from the peak of YTD FY14, though the recent upswing

partially offset the steep discount. Correction in stock price, which was led by

concerns over (a) slowdown in Bangalore and (2) future capital allocation in capex

business and land diversification, was overdone. We expect the recent recovery to

continue further. The planned expansion would be largely capital light in nature and

should be addressed comfortably without hurting the balance sheet, unlike FY07-08.

Hence, with ample valuation room still left, the company is a preferred play as its

strong operations and liquidity aid the most resilience amid current macro uncertainty.

It trades at 9.5x FY15E EPS and 1.1x FY15E BV (v/s RoE of 12.5%). We value Sobha's

SOTP at INR47b or INR479/share and initiate coverage with a Buy rating and target

price of INR410 (15% discount to SOTP, implied 8.8x EV/FY15E cash EBITDA of INR6.1b),

rendering 40% upside. Weak macro, economic slowdown and broad-based worsening

of liquidity remain the biggest risks.

We value Sobha using the SOTP method at INR479/share

SOTP calculation

Real Estate

Ongoing projects

Upcoming projects (next 12 months)

Land bank

(INR m)

54,995

16,218

7,767

31,010

NAV/Share

561

165

316

Method of valuation

~16msf of ongoing projects offer ~INR38b of net cash flow

visibility over next 3-4 years

~9msf of planned launches over next 3-4 quarters

~218msf of balance land bank, with average FSI cost of INR86/sf.

Value Bangalore land at the lowest range of MTM value

(INR300/sf) and rest at the cost of acquisition

Valued at 5x FY15E EV/EBITDA

GAV-based on NPV of development potential

Contractual Business

Gross Asset Value (GAV)

Less: Net debt

Net Asset Value (NAV)

Target price

Implied EV @ Target price (INR b)

Cash EBITDA FY15E (INR b)

Implied multiple at target price (x)

4,890

59,885

12,900

46,985

53.1

6.1

8.8

611

132

479

410

15% discount to SOTP

Source: Company, MOSL

Valuations at a steep discount to historical average and attractive compared to peers in the context of operational quality

RoE (%)

4 October 2013

Sobha Developers

Core market offers resilience...

...and benefits of consolidation; Sobha scores on land quality and cost



Sobha's core market aids better sustainability over medium-term, as the demand-supply

equation for biggest customer segment is still favorable.

Even if market stagnates on macro-led slowdown, the rising trend of market consolidation

should propel growth for tier I developers.

Continuing operational strengths of major developers should alley skepticism on over-

supply, IT hiring moderation and slowdown in absorption.

Sobha's operations to be a strong proxy of these trends, with (1) land banks situated in

attractive growth micro-markets, and (2) cheap acquisition cost driving MTM gain.

Market-mix to uphold strengths, led by...

Over the past 2-3 years, it

has been absorbing

8-10msf of commercial

spaces, thereby

necessitating

at least 25,000-30,000

units of housing

demand every year

The recent outperformance of Southern markets in general and Bangalore in particular

(~80% of Sobha's presales mix) is likely to aid better sustainability over medium-

term, as the demand-supply dynamics for broader segment (ticket size between

INR5m-INR12.5m) is still favorable. Channel checks suggest a favorable demand-supply

gap in the INR5-8m bracket, at par dynamics in INR8m-12.5m and some concerns over

>INR12.5m category. While there has been a visible slowdown in momentum in its

Gurgaon premium project, we expect higher mix of southern diversifications (Kerala

and Tamil Nadu) with additional support from NRI-demand (due to favorable currency

trend) to uphold market-mix strength.

Bangalore market posted healthy pre sales over the past couple Despite slew of launches, Inventory (months) still better placed

of years, across income segments

compared to other regions

Source: Liases Foras, MOSL

...Existence of demand drivers and market consolidation

Skepticism over (a) supply pressure, (b) IT hiring moderation and (c) demand

slowdown should be partially allayed on the back of continued strengths in operations

delivered by major developers. Key drivers which have bolstering core operations

for tier I developers are:

1) Consistent addition in demand drivers:

The Bangalore city rides on end-users

demand, with IT/ITES segment accounting for 40-60% of absorption. Over the

past 2-3 years, it has been consistently absorbing 8-10msf of commercial spaces,

and thereby necessitating at least 25,000-30,000 units of housing demand potential

every year (as typically 50-60% of IT employees are still staying on rent). Despite

4 October 2013

Sobha Developers

a 10-15% annual increase, average prices for mid income projects are still within

affordable range (rental yield at ~4%), and thus we expect a meaningful portion

of this potential demand to convert into absorption.

2) Market consolidation:

There has been visible trend of rising market consolidation

in southern cities. Entry into reputed brands in under penetrated markets like

Chennai, Kochi etc have led strong growth, while a steady rise in market share in

Bangalore by tier I developers offers healthy cushion to their growth aspiration

even if overall demand growth stagnates.

Price movement has been controlled and cost driven, barring

some recent spurt due to rise in mix of premium launches

Superior commercial absorption is a lead indicator for near

to medium term housing demand (msf)

Source: Liases Foras, DTZ, MOSL

Can supply pressure, moderation in IT hiring camouflage demand drivers?

While we are not

excessively worried

about the immediate

absorption pace, a

bloated supply pressure

can thwart the price

uptrend

Major developers in Bangalore have witnessed own share of operational success in

recent past. Therefore, the key risks which can disturb the market dynamics are:

a) Aggressive launches, if sustaining longer, could create supply overhang in some

micro locations. Most developers have strategic inventories of 3-4x annual average

pre-sales, which are likely to get released over projects' lifecycle over the next

two to four years, along with ambitious launch plans in FY14. Still we are not

excessively worried on immediate absorption pace, as current supply-demand

equation (especially in INR5-12.5m) is still far from being unfavorable.

Launch pipeline and inventory seem to be large against current sales run-rate

Avg annual sales

FY12/FY13 (msf)

3.3/3.8

4.9/6

2.4/4

1.6/1.9

Total launch

FY12-13 (msf)

12.8

16.3

O/S Inventory

Next 12 months

(msf)

launch plan (msf)

6.0

6.8

8.5

12.0

8.6

10-11

6-7

Source: Company, MOSL

Sobha

Prestige

Puravankara

Brigade

b) Lower speculative buying had been one of the key reasons behind controlled

pricing in Bangalore. But a rising participation among private equity players

(contrary to history) could infuse some market inefficiency, going forward.

c) IT/ITES hiring may witness moderation over FY14. Our house view is that past

hiring is sufficient to drive near term growth due to spillover effect of low growth

4 October 2013

Sobha Developers

in FY13. However past few years' strong commercial leasing performance render

strong enough shield to drive housing demand over medium term.

Despite some early signs of these concerns, the absorption momentum of southern

cities, especially for the tier I developers, are unlikely to be interrupted over next 2-

3 years. Various infrastructure initiatives (metro rail, peripheral ring road, elevated

expressway etc) and upcoming deliveries of some FY10-12 launches are expected to

bolster capital values in select micro markets.

Sobha's Bangalore market mix offers resilience and growth opportunity

Company owns the largest land bank in south (243msf v/s 81msf of Prestige and 113msf

of Puravankara), with ~38% (85msf) in Bangalore. Sobha's Bangalaore land parcels are

more concentrated on south-east, south and north-east quadrants and offer a strong

proxy to the growth corridors and IT/ITES catchments of Bangalore city.

Sobha's Bangalore land patches are situated in micro-markets with healthy medium term outlook

Our channel checks on

Bangalore market

indicate:



Demand to grow in

north Bangalore

stretch, which comes

along with

infrastructure-backed

capital appreciation

potential such as the

proposed high-speed

rail link, Hebbal-

Yelahanka

expressway, elevated

expressway to BIAL

and the advent of

monorail etc.



ORR, Whitefield,

Sarjapur will remain

an active market.

There are several

under-construction

projects reaching the

completion stage by

CY15-16. While that

increases the

possibility of a supply

glut 2-3 years down

the line, it should

also improve

absorption, given

customers'

preference for ready-

to-occupy properties.

It is also emerging as

the IT growth corridor

and offers better

social infrastructure.

4 October 2013



67 acre /

7.2msf

Launched

Indraprastha in

4QFY13



376 acre /

46msf



9 acre /

1.1msf



32 acre /

3msf



56 acre /

5.2msf

Launched

Palladian in

2QFY14



263 acre /

19msf

Source: Company, MOSL

Sobha Developers



Bannerghatta and Kanakapura Road have begun to witness the benefits of

metro connectivity, proximity to established IT corridor, establishment of NICE

Road (Bangalore-Mysore infrastructure corridor) and its affordable price points.



Improving connectivity with the developing metro line in West Bangalore

(Tumkur Road, Rajaji Nagar etc) is positioning it as the preferred destination for

non-IT/business people, which is also witnessing higher capital appreciation

due to restrained supply.

Sobha scores high on land quality, cost…

Sobha has a land bank of 2,558 acres (Sobha's share), with saleable potential of 227msf

(including 9msf of FY14 launches) and acquisition cost of ~INR20b (implying blended

FSI cost of INR86/sf). Almost 90% of its land bank is already paid for. Bangalore projects

account for ~38% of saleable potential (85msf) and ~51% cost of acquisition (FSI cost

of INR120/sf). ~93% of its current land bank is owned, while the balance and the most

recent acquisitions have been done through JDA route, which also has reduced upfront

capital commitment for land purchase.

As per accounting practices, Sobha recognizes advances paid to seller/ intermediary

toward outright purchase of land as (a) "land advances" under loans and advances

during the course of obtaining clear and marketable title, free from all encumbrances

and transfer of legal title to the company, and (b) "inventories" when the title is

transferred. As on Mar-13, it has INR13.8b outstanding as land advances (in loans and

advances) and INR6.7b in inventories. Nonetheless we understand that many of such

loans and advances are due to title being with land holding company on account of

ownerships limitation on land in states like Kerala and Tamil Nadu, and title risk is

negligible in such cases. Land with near term monetization plan (three to four years)

is largely free from any hassle with clear title and no major payment is pending.

…and enjoys meaningful MTM gain...

Sobha's low cost land

enjoys significant benefit

from marked to market

(MTM) value gain over its

book value, as

realizations for land

transaction or

development properties

have increased manifold

Sobha's low cost land enjoys significant benefit from marked to market (MTM) value

gain over its book value, as realizations for land transaction or development properties

have increased manifold post the acquisition time. Recent land transactions in SBDs

or city outskirts have been commanding a valuation of INR40-300m/acre (INR400-

4,000/sf assuming 1.8x FSI).

Recent trends in land transactions indicate per acre acquisition cost of >INR50m (>4x) of Sobha's

acquisition cost, implying significant benefit of MTM gain. This also bolsters its strategy of rising

proportion of JDA model to keep incremental acqusitions asset-light

Buyers

Peninsula Land

Net app

Matri

TCS

RMZ Group

Brigade and GIC

Sobha land

Location

JP Nagar

Whitefield

Kanakapura

Whitefield

ORR

Whitefield

Time

2011

2010

2011

2012

Size (acre)

9.5

884

Value

(INR b)

1.23

1.2

2.52

3.0

1.3

10.25

Value /

Est. FSI cost

acre (INR m)

(INR/sf)

308

3,918

1,019

1,147

1,092

605

132

1,677

120

Source: Industry, MOSL

4 October 2013

Sobha Developers

...and rising diversification

Diversification aid

comforts against the risk

of saturation in

Bangalore market

Sobha has expanded its presence outside the core market of Bangalore to southern

cities like Chennai, Cochin, Mysore and Coimbatore followed by the entry into Gurgaon

and Pune (and recently into Calicut). Liquidity stress during the global financial crisis

resulted in halting land acquisitions for three to four years. However, with a strong

operational revival coupled with de-leaving, it resumed to replenish land in existing

markets and plans to enter cities like Hyderabad, Noida and Ghaziabad.

Sobha's incremental land acquisition especially plans to foray into rather speculative

NCR markets and recent slowdown in Gurgaon project has been perceived negatively.

The management has clarified that going ahead, the acquisition would largely be

though joint development model and it would buy land outright only if it has high

conviction on churning the land within 12-18 months. On the other hand, lack of

execution ability among local developers has been the driving force behind Sobha's

plan to foray into the NCR (Noida, Ghaziabad) market. However, land acquisition

would be through JDA in such regions to mitigate approval risk.

Diversification would partially aid comforts against the risk of saturation in Bangalore

market and maintain the sales growth, given ample potential in these emerging cities.

However it may also lead to contraction in operating margins as any new market entry

would necessitate higher other expenses towards brand building, advertisement and

mobilization expenditures during initial days.

... however Bangalore still accounts for higher share of GAV

in FY14 launches due to premium offerings

Plans to foray into

speculative northern

market drew a lot of

concerns, but

management targets JDA

route and leverage on

lack of execution

prowess among local

developers

Diversification led to waning volume reliance on Bangalore.

Trend in presales volume mix (%)...

Source: Company, MOSL

4 October 2013

Sobha Developers

Ability to differentiate

Robust operations, superior execution quality and premium brand



Sobha posted a 22% CAGR in annual pre-sales volume and 25% CAGR in realizations over

FY10-13, propelled by strong core market and gradual diversifications.

Amidst sluggish macro, Sobha's strong execution bandwidth, wide client base and brand

should assist maintaining operational strength and consistency.

With required strength in launch pipeline, it renders reasonable visibility on attaining

INR26-27b of annual pre-sales over FY14E-15E (v/s INR22.3b in FY13).

Pre-sales on a solid uptrend

Pre-sales momentum

continues in 1HFY14,with

22.8%YoY growth

in value

Sobha posted a healthy uptrend in pre-sales over FY10-13, led by strong launches in

buoyant markets. It launched ~18msf of projects in the past three years, taking its

ongoing projects under development from 6msf in FY11 to 16msf in FY13 (adjusted for

completion). While the robust southern market played a key role for such strong

operations, company has also been proactive to take advantage of this market

dynamics and maintained sales volume market share of 5-7%. It posted ~53% CAGR in

pre-sales value over FY10-13, driven by 22% CAGR in pre-sales volume and 25% CAGR

in realizations (up from INR3,000/sf in FY10 to INR5,900/sf in FY13). While growth in

realization is attributable to the entry into Gurgaon market with super luxury projects,

in its core market (Bangalore), Sobha's projects enjoys 15-20% pricing premium over

blended average.

... consistent market share even in buoyant market (%)

Steady project launches (msf) resulted into...

Quality brand aids 15-20% pricing premium Sobha's Bangalore

projects (INR/sf)

Pre-sales posted a strong growth trend (INR b) of 53% CAGR

over FY10-13, backed by 22% volume and 25% pricing CAGR

Source: Company, Liases Foras, MOSL

4 October 2013

Sobha Developers

Operational comforts from execution prowess, quality preference…

Sobha's backward

integration model with

contract and

manufacturing business

renders execution

prowess to its

in-house construction

capability

Sobha enjoys a superior brand recall due to its quality of execution, which is a top-

most priority for Bangalore customers. Its execution prowess is evident from delivery

of almost 50msf+ real estate and contractual projects since inception in 1995. Backward

integration model with contract and manufacturing business has induced much needed

certainty over execution time-frame, better sourcing ability and consistency in

delivering superior quality. Company has been the preferred developer/contractor

for Infosys and credited for various marquee office space developments. Pertinently,

it scaled up execution commensurate with monetization as is evident from the 18.7msf

delivery over the initial 12 years till FY07, followed by 35.7msf over FY07-13 (~6msf of

annual average).

Projects under execution scaled-up meaningfully since FY11

Posted strong execution track, further scaled up from FY07

Delivery trend (msf)

Source: Company, MOSL

…and wide clientele

Sobha enjoys a strong core customer network in both real estate and contract business.

Its brand and products are well penetrated across all key income segments, which

reduce dependence on any particular customer base. Recent client mix in real estate

business suggests for 35-40% of sales volume catering to IT/ITES professionals, while

balance widely distributed among non-IT and business clienteles. A meaningful 20-

25% has been contributed by NRI customers on a consistent basis over FY11-13. More

than 50% of the customers are self funded, and therefore, volumes are partially

shielded from any big impact of vagaries of interest rate cycle. It bolsters conviction

on a better monetization potential even in a weaker scenario.

Diversified product mix (%) and...

... wide client base (%) offer resilience to demand

Source: Company, MOSL

4 October 2013

Sobha Developers

Balance in product and market-mix and consolidation to drive pre-sales

We model in for 10% CAGR in pre-sales value over FY13-15E (INR25.8b/27b in FY14E/

15E), led by stable sales volume (4msf) and 7% CAGR in realization. Despite recent

launches being skewed towards city centric premium products, lower realization

growth assumption here on would be due to (1) sluggish contribution from NCR

projects, and (2) foray into new southern cities which may offer competitive pricings

initially. While we anticipate a relatively slower sales velocity for projects above

INR15m ticket size, diversification should offer resilience if the volume sales dip in

Bangalore market. Additionally, we believe in an unfavorable macro, the tier I

developer like Sobha to remain better-off from market consolation.

Our presales-mix assumptions factor in (a) decline in Bangalore volume in FY14-15,

with ontribution tending to 53% (v/s 63% in FY13), and (b) ~50% drop in NCR volume.

Sobha plans to reduce product sizes in International City (Gurgaon) project to boost

volume, which otherwise, has shown drop in recent quarters. However we believe

maintaining its guided presales of INR26-27b would not be a daunting task especially

on the back of a strong launch pipeline of 6.8msf in FY14, and ~25msf planned in FY15-

16, which should offer wide enough base to drive momentum. Only major risks we

perceive are further worsening of broad based economic sentiment and liquidity.

Projects to be launched over FY14

Projects

Sobhas share of

saleable area (msf)

Rajajinagar, Bangalore

0.8

Mysore Road, Bangalore

1.2

IVC Rd, Bangalore

0.2

Thalaghattapura

0.7

Ols Madras Rd

0.4

Yamlur, HAL Rd

0.3

Chennai

1.6

Mysore

0.1

Calicut

0.5

Calicut

0.4

Cochin

1.0

Thrissur, Kerala

0.3

7.6

3.6

Locations

Indicative realizations

(INR/sf)

12,000

6,000

3,500

6,000

7,500

8,500

6,000

1,700

4,800

7,200

5,500

5,000

6,554

7,619

*Already launched

Sobha's entry into Calicut

has met positive

response backed stable

market and growing NRI

demand

Indraprastha*

Hosakerehalli Property

Lifestyle Legacy*

Kanakpura Prop

Hirandahalli Property

Palladian*

Sholinghanallur

Nadanahalli property

Faroke Property (Aptmt)

Bella Encosta*

Vytilla Prop

Sobha City- Residential

Total

Banaglore Total

Maintaining current pre-sales run-rate with moderate growth

sould not be a daunting task for Sobha

Expect a decline in Bangalore volume contribution

4 October 2013

Sobha Developers

Liquidity strong enough to drive growth

Positive FCFE visibility; Selective capex a long term positive



We estimate the company to generate post tax core operating cash flow of ~INR13b over

FY14-16E (18% CAGR) and cash EBITDA of INR18.5b (24% CAGR).

Liquidity is strong enough to facilitate its entry into select capex cycle, which has been an

untapped asset class for Sobha, with ability unleash long-term value accretion.

Cash surplus picking up pace to catch up with strong pre-sales

Healthy pre-sales and steady execution led to rise in customer collections in tandem

and resulted in positive operating cash flow consistently for the past couple of years.

We estimate it to generate post tax core operating cash flow (OCF) of +INR3.7b/4.3b/

4.7b and cash EBITDA of INR5.4b/6.1b/6.9b in FY14E/15E/16E respectively as against

INR3.1b of OCF and INR4b of cash EBITDA in FY13. Both real estate and contract business

have shown favorable (negative-to-moderately positive) trend in net working capital

movement (ex-cash) and debtors over FY10-13. This coupled with periodic

monetization of non-strategic land parcels (~INR6b over FY10-13) have induced

sufficient liquidity and strength in balance sheet to adopt growth strategy (new

acquisitions) and foray into annuity business.

We expect the company to witness a steady uptrend in OCF hereon, as the current

collection run-rate of ~INR16b is still lagging the pre-sales run-rate (INR22b+) by ~27%

and is likely to catch up as execution progresses and new launches hit the ground. We

estimate 10% CAGR in pre-sales trend over FY13-15 and ~24% CAGR in construction

spending (v/s 20% in FY13) in Sobha's real estate business to drive ~22% annual growth

in customer collections. This coupled with steady contractual business is likely to

post 24% CAGR in core cash EBITDA over FY13-15E.

As a benefit of strong

pre-sales and

commensurate execution

progress, operating cash

flow (OCF) has posted

steady uptrend and aids

further scope for

improvement

Trend of change in working capital and debtors suggests for

commensurate cash generation

Collections to Pre-sales should catch up over time

Source: Company, MOSL

Liquidity in comfort zone and expected to continue

Sobha had witnessed a sharp increase in gearing level over FY06-08 (to DER of 1.75x)

due to its aggressive land banking strategy. It came out of this high stress zone through

multiple strategies viz. financial restructuring (QIP, PE, loan refinancing etc), discipline

in core operations etc, and re-gained balance sheet strength over FY10-11, with net

4 October 2013

Sobha Developers

On the back of improving

liquidity comfort, ICRA

has upgraded long term

rating of the company

from BBB+ to A- in

2QFY14

debt standing at INR12.9b/0.6x in FY13 (v/s INR19.1b/1.75x in FY09). However with the

company consistently generating operating surplus, its capital allocation plan, hereon,

has again raised a concern, on account of recently adopted strategy to deploy fund in

asset heavy vertical and land buying.

Nonetheless, on the back of INR2-3b of net annual FCFE generation visibility over

FY14E-15E, we expect the gearing level to remain broadly stable assuming a moderate

(INR1.5-2b annually) spending towards strategic land replenishment and capex. We

estimate net debt to remain at INR13-14b over FY14E-16E (management's target range

of 0.5-0.6x), albeit there could be short-term increase in gross debt to maintain working

capital liquidity and upfront spending for new market entry. We foresee no liquidity

stress similar to FY08 given a much superior operational resilience.

Sobha should post ~24% CAGR in core cash EBITDA over FY13-15E (INR b)

Collections

Contract

Land sales

Rental income

Construction outflow

Contract

Approvals

Overheads

Marketing

Capex and others

Gross Cash flow

Tax Paid

OCF

Core OCF

Land payment

Stake acqusition

Other income

Interest

FCFE

Dividend

Net CF

FCF

Core cash EBITDA

FY12

18.3

11.8

3.2

3.3

10.8

7.4

3.4

0.9

1.0

0.3

0.1

5.1

0.5

4.6

1.3

0.8

1.0

0.1

2.2

0.7

0.6

0.2

2.9

1.8

FY13

21.2

16.1

4.1

1.0

0.0

12.4

8.9

3.5

1.3

1.4

0.3

0.9

5.0

0.9

4.1

3.1

1.9

0.6

0.0

2.1

-0.5

0.6

-1.0

1.6

4.0

FY14E

24.5

20.0

4.4

0.0

14.8

11.0

3.8

3.4

1.4

5.0

1.3

3.7

1.0

0.0

0.1

1.8

0.9

0.8

0.1

2.7

5.4

FY15E

28.9

24.0

4.9

0.0

17.9

13.7

4.1

3.4

FY16E

31.6

26.2

5.4

0.0

0.1

19.3

14.7

4.6

3.6

Sobha's real estate

business to witness ~22%

annual growth in

customer collections.

This coupled with steady

contractual business is

likely to post 24% CAGR

in core cash EBITDA over

FY13-15E

1.8

2.1

5.8

6.6

1.5

1.9

4.2

4.7

4.2

4.7

1.0

0.0

0.1

1.8

1.5

1.9

0.9

0.6

1.0

3.3

3.7

6.1

6.9

Source: Company, MOSL

Not overtly disappointed on capital allocation plan

Sobha looks to capitalize on its comfortable liquidity to propel growth strategy by

augmenting land, almost after a hiatus of four years, to expand footprints in (a) new

geographies, (b) aggregating the currently non-contiguous parcels in a few places

like Cochin, Chennai etc and (c) foraying into uncapped asset class. It has invested

~INR4.3b over FY12-13 to acquire new projects and buy out PE or JDA partners' stakes.

Nonetheless, we are not overtly worried on its capital allocation plan. Management

has guided on majority land expansion through JDA route and outright purchase to be

a preferred route only in case of high certainty of churning the project over next 12-

4 October 2013

Sobha Developers

18months. While entry plan into speculative NCR markets like Noida, Ghaziabad is

concern, but it is still in evolution phase and plans for only JDA projects to limit

capital allocation initially. A lack of good executors in these markets has been the key

factor behind its decision to evaluation these markets. Otherwise, entry into southern

cities viz. Calicut, Kochi and Hyderabad should be proven to be positive for the

company due to strong untapped opportunities thrown by these markets.

Induced liquidity through recapitalization, Sobha becomes sustainable in internal accruals

Bank loan restructuring,

QIP (INR5.3b, June-09),

Land sales and PE funding

(Pan Atlantic and Purna

Partners) led to dilution

of liquidity risk

Steady pick up in OCF to aid sustained

resilience to liquidity hereon

12.9

Source: Company, MOSL

Better liquidity triggers project acquisition plans and to set up next growth drivers

Sobha has invested

~INR4.3b over FY12-13 to

acquire new projects and

buy out PE or JDA

partners' stakes

Recent update on acquisitions

MoUs (JDA) for 19-acre land in Chennai

(Sholinghanallur, OMR), with saleable area of

2.1msf (1.4msf of Sobha share)

PPP with Karnataka government (APMC) for 30-

acre land near commercial hub of north

Bangalore (close to Jakkur Flying Club), with

60-year lease. Sobha has to hand over 0.7msf

of construction to the government

Bought back 30% stake of Tree Hill Estates in

Sobha City project (Thrissur)

Purchase of 6-acre high value land in

Bangalore (near old airport) in 50:50 profit

sharing along with institutional partner (Sun

Area)

Entered into 3 JDAs in Calicut and Kochi

Guided for planned entry into other untapped

geographies such as NCR (Noida, Ghaziabad

along with Gurgaon), Hyderabad etc

Remarks

It plans to launch the project in FY14

Plans to monetize 2.1msf of mixed use

(commercial/ retail/hotel) development under

the annuity model. Estimated project cost of

INR8.75-9b, with tentative ground breaking in

FY14

The purchase consideration was INR550m.

Total investment stood at INR1b (Sobha's

investment of INR550m)

Projects of 1.8msf (Sobha's share of 1.5msf)

under launch radar over next four quarters

MoUs are in progress

Will the new capex heavy asset class and expansion pose any threat to

liquidity and capital efficiency?

A significant portion of Sobha's new acquisitions were under joint development (JDA)

route, barring select ones like Sun-Area JV project near old airport road. Over the past

two years, it acquired almost 163 acre land (113 acres in Bangalore) under the JDA

route out of total acquisitions of ~290acre (~200 acre in Bangalore), which implies

~57% of land buying under capital light model with limited upfront capex and back-

4 October 2013

Sobha Developers

ended liability. Therefore, the gearing level is unlikely get disturbed materially owing

to expansion plan.

Sobha is also looking to deploy surplus operating cash to build annuity portfolio,

which has been an untapped asset class for the company so far. So far it has undertaken

2 annuity projects, viz. (1) APMC project at North Bangalore (2.7msf developable and

2.1msf leasable area) and (2) city-centric St.Mark's Road Property (0.1msf leasable

area). We estimate both these projects together would necessitate a capex of INR10-

11b over the next four to five years. However sufficient cash generation visibility

from core operations should be able to address capex need (INR0.75-1b in FY14/15

and INR1.5-2b annually post FY15) comfortably.

We resonate management's outlook over its entry into commercial vertical which has

been untapped so far and can provide with the resilience of an annuity revenue

stream over medium term, especially during the vagaries on economic down-cycle.

Moreover, its entry plan has been selective and limited to a few assets with lower

near-term cash outgo - which renders comfort on unlikely deterioration of balance

sheet health.

We estimate APMC

project to enjoy post tax

IRR and rental yield of

8-14% and 12-14%

respectively, based on

FY18 rentals of INR60-70/

sf/month

Regarding the impact on capital efficiency of its recently-acquired APMC project, it

hinges significantly on how favourably the micro-market matures over next 3-4 years.

Its true potential is yet not entirely know on account of long gestation nature and

nascent market. We estimate the project to enjoy post tax IRR and rental yield of 8-

14% and 12-14% respectively, based on FY18 rentals of INR60-70/sf/month (v/s

prevailing cost of debt of 12.9%). We factor in a NAV contribution of INR5/share (based

on conservative assumption of INR60/sf/month of rentals as on FY18).

APMC project should post 8-14% post tax IRR; Rental yield of 12-14%

APMC project

Cost of construction (INR b)

Leasable area (2.1msf @ INR4000/sf)

Transferable area 0.7msf @INR2000/sf

Project construction duration

Prevailing rental in sorrounding (INR/sf/m)

Assuming annual escalation of (%)

Indicative FY18 rentals (INR/sf/m) SENSITIVITY

Annualized rental EBITDA (INR b)

Capitalized value (INR b)

Post-tax IRR (%)

Rental yield (%)

9.9

8.5

1.4

FY14-17

45-55

1.2

12.2

1.3

1.4

13.3

14.3

Source: Company, MOSL

Backward integration offers execution prowess, quality and cost assurance

Sobha is unique among real estate players due to its backward integrated business

model, with verticals like (1) contractual business and (2) manufacturing. This makes

it present throughout the development value chain. Much of Sobha's (a) competitive

edge in superior quality of construction and (b) timely execution emerges from its in-

house expertise, which helps to maintain quality at every stage of supply chain, from

conceptualization to completion, along with competitive cost.

4 October 2013

Sobha Developers

The contractual business is still 75% dependent on Infosys' projects. Growth in contractual and real

estate business is the key driver for manufacturing segment as it largely caters to in-house

requirements. Both the segments together provide a stable revenue stream of INR3.5-4.5b (posted

~19% revenue CAGR over FY10-13), along with 18-20% blended margin. The businesses have minimal

capital employed, as it gets the mobilization advances and operates at a two-month working capital

days, which seems to be at par for private clients base. The segment has generated gross cash flow

of -INR0.2b and INR0.6b in FY12 and FY13 respectively. We assume a conservative 10% revenue CAGR

and INR0.7-0.8b annual cash EBITDA over FY14E-15 on the back of potential slowdown in expansion

plan of IT/ITES companies.

Sobha's integrated business model



Manufacturing segment includes

a. Building material division (50:50)*

b. Glazing and metal division (90:10)*

c. Interior division (85:15)*

d. Mattresses division (100:0)*

Total factory area of 1.5msf

Entire production is mainly used for in-house

requirements (75-80% contractual and balance

real estate)

*The product wise usage break-up between contract

and real estate business are mentioned in brackets



Contractual business has completed 228 projects

(29.3msf) and has 38 (10.65msf) ongoing projects of

unbilled value of INR5.34b

Dependency on Infosys contract has declined over

time. While 86% of completed projects belong to

Infosys, the percentage figure came down to 76%

for ongoing projects, with other corporate clients

such as Dell, HP, Timken, Taj, Bayer Science, HCL,

Forge, ITC, Biocon, IPE, Bosch, GMR ,Hotel Leela etc

Contract business offers stable stream of revenue



Real estate projects

Sobha addresses the execution of all its real

estate projects across geographies through in-

house expertise

4 October 2013

Sobha Developers

P&L to catch up on strong operations with ~17.5% PAT CAGR over FY13E-15E

Revenue run-rate continues to lag strong pre-sales due to POCM accounting and shift to more conservative recognition policy as

per new guideline. Total unrecognized revenue from pre-sales stood at ~INR18b, which is expected to cross the threshold with

execution progress. We estimate Sobha to post 13% revenue CAGR over FY13E-15E

Scope of revenue

uptick in high on the

back of strong pre-

sales booked in FY12-

Margins to improve on the back of increasing realizations and greater focus on high value projects

Expect better operating leverage to trigger steady

improvement in capital efficiencies

Cash flow trend (INR b)

4 October 2013

Sobha Developers

Valuation room still ample; Initiating coverage with Buy

TP of INR410 (40% upside); Macro and sub-optimal capital allocation key risk



Correction in stock price, which was led by concerns over future capital allocation in capex

business and land diversification, was overdone. We expect recent recovery to continue

further. Its strengths of operations and healthy balance sheet offers comforts to concerns.

We estimate Sobha's SOTP at INR47b (INR479/share): (1) real estate EV at INR55b (INR561/

share), with net debt of INR12.9b (INR132/share), and (2) contractual business at INR4.9b

(INR50/share).

We initiate coverage with a Buy rating and TP of INR410 (15% discount to SOTP, implied

8.8x EV/ FY15E cash EBITDA of INR6.1b).

Comforts emerge from management quality

Besides operational comforts, Sobha has maintained a strong management quality

and governance standard, with an improvement in independent functioning of its

board. Promoters' family representation on the board is only 25%, while independent

directors comprise 50% of the strength. Managerial compensation has historically

moved in line with earnings growth, while payout has improved over time, led by

better cash flow visibility.

Some key trends

Source: Company, MOSL

Valuing SOTP at INR47b

To partially capture the

benefit of MTM gain, we

value its Bangalore-based

land bank at FSI cost of

INR300/sf (lower end of

MTM range)

We value Sobha's real estate business EV at INR55b (INR561/share) by trifurcating its

development potential into (1) ongoing projects (NPV of 16msf at ~INR16.2b), (2)

FY14 launches (NPV of ~9msf of at ~INR7.8b) and (3) balance land bank (INR31b). We

have assumed WACC of 14% and annual escalation in realizations and cost of 5% for its

ongoing and upcoming development potential.

Contractual business is expected to offer a steady cash flow. We assume 10% revenue

CAGR over medium term, against ~19% over FY10-13, along with EBITDA margin of

18%. The business segment is valued at 5x FY15E EBITDA at INR4.9b (INR50/Share).

To value its balance land bank of 217msf, where the company is yet to provide visibility

in development plan, we have adopted a mix of book value and marked-to-market

(MTM) gain approach. Blended BV of Sobha's Bangalore FSI stood at INR120/sf, against

current MTM land transaction value in Bangalore market prevailing at INR300-2,000/

sf. To partially capture the benefit of MTM gain, we value its Bangalore-based land

4 October 2013

Sobha Developers

bank at FSI cost of INR300/sf (lower end of MTM range). While a similar gain has also

happened in non-Bangalore markets (where its blended cost of FSI is INR66/sf), we

have valued those land at book value.

Correction overdone, initiate coverage with Buy rating

Based on our SOTP valuation, we set a 1-year forward price target at INR410/share

(15% discount to SOTP of INR47b or INR479/share), which also implies target EV of

8.8x FY15E core cash EBITDA of INR6.1b. Discount of 15% applied to SOTP is based on

relative risk perception approach among our MOSL coverage universe.

Sobha's stock price is down 30% from peak of YTD FY14, even after recent upswing

partially offsetting the steep discount. Barring macro, key concerns have been on (1)

potential slowdown in Banaglore, (2) strategy of diversification into capex product,

newer markets, and (3) possible liquidity stress due to land aggregation like FY08.

However as discussed in earlier section, we consider the concerns and correction

were overdone, and hence ecent recovery is likely to continue further. The stock

offers a preferred play, as amidst current macro uncertainty, the companies with

strong operations and liquidity aid most resilience. Ittrades at 9.5x FY15E EPS and 1.1x

FY15E BV (v/s RoE of 12.5%), which is favorable v/s its historical level and valuation of

key peers, especially when seen in the context of robust operations and Balance

sheet. We initiate coverage with a Buy rating and 40% upside potential.

Sobha trades at attractive cash EBITDA multiple (x) compared to peers

Cash flow (INR b)

DLF

IBREL

ORL

PEPL

Sobha

PHNX

JPIN

FY13

24.8

9.5

14.7

1.7

2.7

4.0

3.0

9.1

Cash EBITDA

FY14E

FY15E

24.8

32.5

9.2

10.6

15.8

15.1

4.1

5.6

5.8

7.7

5.4

6.1

5.1

6.0

6.3

7.6

FY13

-17.4

-6.3

8.8

-1.4

-3.8

0.1

-0.4

-2.5

Core FCFE

EV/Cash EBITDA (x)

FY14E

FY15E

FY14E

FY15E

-10.2

1.2

19.2

14.6

-1.5

-1.6

10.9

9.4

11.5

10.6

3.2

3.3

-0.8

1.6

11.0

8.2

-2.0

-0.4

10.4

7.9

0.9

1.5

7.7

6.8

1.9

2.4

10.2

8.5

-5.1

-4.8

15.3

12.6

Source: Company, MOSL

We value Sobha using the SOTP method at INR479/share

SOTP calculation

Real Estate

Ongoing projects

Upcoming projects (next 12 months)

Land bank

(INR m)

54,995

16,218

7,767

31,010

NAV/Share

561

165

316

Method of valuation

~16msf of ongoing projects offer ~INR38b of net cash flow

visibility over next 3-4 years

~9msf of planned launches over next 3-4 quarters

~218msf of balance land bank, with average FSI cost of INR86/sf.

Value Bangalore land at the lowest range of MTM value

(INR300/sf) and rest at the cost of acquisition

Valued at 5x FY15E EV/EBITDA

GAV-based on NPV of development potential

Contractual Business

Gross Asset Value (GAV)

Less: Net debt

Net Asset Value (NAV)

Target price

Implied EV @ Target price (INR b)

Cash EBITDA FY15E (INR b)

Implied multiple at target price (x)

4,890

59,885

12,900

46,985

53.1

6.1

8.8

611

132

479

410

15% discount to SOTP

Source: Company, MOSL

4 October 2013

Sobha Developers

Valuations at discount to historical average

RoE (%)

Source: Company, MOSL

Location-wise GAV break-up for ongoing and upcoming projects (%)

Source: Company, MOSL

4 October 2013

Sobha Developers

Concerns: Unfavorable macro outlook and reinvestment are key risks

Inefficiency in Bangalore

market and suboptimal

capital allocation would

be the key risk

Bangalore market saturation…:

Sustenance of Sobha's strong operating performance

hinges on stability of Bangalore market which accounts for 60% of its pre-sales and

43%/71% of the GAV of ongoing/upcoming projects. Also, the demand in Bangalore

market depends overtly on the prospect of IT/ITES segment, hiring strengths and

controlled pricing so far. Over the past two years, the volume story is sailing smoothly

in Bangalore and has been a key success factor for Sobha. Going forward, if this market

catches some inefficiency and shows any sign of saturation due to (a) steady rise in

pricing and decline in affordability, (2) oversupply pressure and (3) possible torpidity

in IT/ITES hiring, then the growth story could be negatively impacted.

…and delayed monetization in new cities:

Sobha's rising dependence on on other

southern cities calls for a brighter outlook on these markets for sustenance of sales

momentum. While the macro opportunity of these tier II markets remains encouraging,

the key risks for here are delay in approvals, brand establishment in newer markets

and immediate demand potential. Any headwind or operational delay could hinder

its ability to replicate the success of Bangalore market.

Reinvestment risk due to sub-optimal capital allocation in land, capex:

Steady positive

OCF generation has encouraged the company to aggregate new land and to diversify

into annuity segment, which requires higher upfront capex and back-ended

monetization. Land cost has spiralled multi-fold over the past four to five years and

thus new acquisitions might come at a reasonable cost. Any debt-backed high cost

acquisitions or sub-optimal capital allocation in capex projects could be a key risk for

future capital efficiency.

Macro pressure hurts broader sentiment:

Prevailing unfavorable macro outlook

remains the biggest risk for an otherwise operationally strong company. Despite south

being the best performing geography and Sobha being amongst operationally

outperforming companies, any broad based worsening of liquidity, rise in home loan

rates, and demand slowdown may impact the planned monetization and expected

cash flow trend adversely.

4 October 2013

Sobha Developers

Company description

Sobha Developers (Sobha) was incorporated in 1995 and is a leading real estate player

in Southern India (total saleable area of 243msf) with a strong presence in Bangalore,

Pune, Chennai, Kochi, Gurgaon etc. The company has a uniquely backward integrated

business model through presence in contractual and manufacturing segment. The

company manages the whole business value chain in house from project

conceptualization to execution. It enjoys a strong brand due to its quality of execution

and enviable delivery track record. It has been a preferred partner for Infosys in many

of its marquee assets development such as convention centers, software development

blocks, multiplex theatres, hostel facilities, guest houses etc. Other clients of repute

includes Dell, HP, Timken, Taj, HCL, ITC , Biocon, Hotel Leela Ventures to name a few.

Since inception, Sobha has executed over 307 projects, comprising a total development

area of 54.5msf.

The leaders and background

Mr. P.N.C. Menon, Chairman Emeritus

Mr. P.N.C. Menon, 64, is the founder Chairman of the company. He established Sobha

in 1995 and under his stewardship the company emerged as a reputed brand in

construction and real estate, and acquired a pan-India presence. He was conferred

with the prestigious 'Pravasi Bharatiya Samman Puraskar' by the President of India,

Ms. Prathiba Patil, in 2009.

Mr. Ravi Menon, Chairman

Mr. Ravi Menon, 31, is Sobha's Chairman. He holds a Bachelor of Science degree in

Civil Engineering from Purdue University, US. He primarily focuses on the company's

overall product delivery function and supervises various departments such as sales &

marketing, estimation, cost audit, value engineering, landscaping, human resources,

purchase, and architects.

Mr. J.C. Sharma, Vice Chairman & Managing Director

Mr. J.C. Sharma, 54, is the Vice-Chairman and Managing Director of the company. He

holds a Bachelor of Commerce (Honours) degree from St. Xavier's College, Kolkata.

He is a qualified Chartered Accountant and Company Secretary with over 28 years of

experience in diversified industries. Mr. J.C. Sharma is entrusted with the responsibility

of managing the overall affairs of the company and is instrumental in spearheading

the company's growth mantle.

Mr. P. Ramakrishnan, Deputy Managing Director

Mr. P. Ramakrishnan, 49, is the Deputy Managing Director of the company. He holds a

Bachelor's Degree in Technology (Electrical and Electronics Engineering) from

Bharathiyar University and a Master's Degree in Business Administration from Madurai

Kamaraj University. Mr. P. Ramakrishnan supervises Sobha's operations in Thrissur

(Kerala) and is responsible for overseeing the company's contractual projects and

manufacturing facilities

4 October 2013

Sobha Developers

Financials and Valuation

Income Statement

Y/E March

Net Sales

Change (%)

Construction expenses

Office and site establishment exps

EBITDA

% of Net Sales

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Reported PAT

Adjusted PAT

Change (%)

2011

13,945

23.4

1,532

3,600

25.8

278

860

2,514

669

26.6

1,813

35.1

2012

14,079

1.0

1,694

4,665

33.1

388

1,165

3,177

1,076

33.9

2,060

13.6

2013

18,645

32.4

9,558

1,969

5,483

29.4

594

1,705

3,239

1,068

33.0

2,172

5.5

2014E

21,105

13.2

10,849

2,322

6,127

29.0

679

1,723

3,791

1,289

34.0

2,503

15.3

(INR Million)

2015E

23,981

13.6

12,359

2,638

6,978

29.1

761

1,735

4,543

1,544

34.0

2,999

19.8

Balance Sheet

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deffered Tax Liability

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Current Assets

2011

981

17,527

18,508

12,416

-74

30,850

3,164

1,791

1,373

647

36,816

10,685

4,310

230

21,592

2012

981

19,017

19,998

12,031

330

32,359

5,018

2,179

2,840

39,519

16,759

3,904

587

18,268

2013

981

20,386

21,367

13,536

638

35,541

5,418

2,773

2,646

45,295

19,018

6,935

670

18,672

(INR Million)

2014E

981

21,972

22,952

14,036

638

37,626

6,168

3,451

2,717

627

49,936

23,215

5,698

973

20,050

2015E

981

24,053

25,034

14,286

638

39,958

6,918

4,212

2,706

1,712

54,477

25,420

4,317

519

24,221

Current Liab. & Prov.

12,414

15,370

18,773

Creditors

6,757

8,272

11,518

Other Liabilities

4,715

5,712

5,818

Provisions

942

1,386

1,437

Net Current Assets

24,402

24,149

26,522

Application of Funds

26,459

27,002

29,182

E: MOSt Estimates; * Nine months ended Dec 2004, #Fifteen months ended

22,475

14,140

6,754

1,581

27,462

30,808

Mar 2006

26,199

17,266

7,194

1,739

28,277

32,697

4 October 2013

Sobha Developers

Financials and Valuation

Ratios

Y/E March

Basic (INR)

Adjusted EPS

Growth (%)

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation (x)

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

Turnover Ratios

Debtors (Days)

Creditors. (Days)

Leverage Ratio (x)

Debt/Equity (x)

2011

18.5

35.1

52.4

188.7

3.0

16.2

2012

21.0

13.6

64.6

203.9

5.0

23.8

2013

22.2

5.5

72.0

217.9

7.0

31.6

2014E

25.5

15.3

81.1

234.1

8.0

31.3

(INR Million)

2015E

30.6

19.8

94.0

255.3

8.0

26.2

13.9

4.5

8.6

2.8

1.4

1.7

13.2

4.1

7.6

2.2

1.3

2.4

11.4

3.6

6.8

2.0

1.2

2.7

9.5

3.1

6.1

1.8

1.1

2.7

10.2

10.7

13.6

10.5

14.5

11.3

15.0

12.5

16.1

0.7

0.6

Cash Flow Statement

Y/E March

PBT before Extraordinary Items

Add : Depreciation

Interest

Less : Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

(Inc)/Dec in FA

(Pur)/Sale of Investments

CF from Investments

(Inc)/Dec in Networth

(Inc)/Dec in Debt

Less : Interest Paid

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

E: MOSt Estimates

2011

2,514

278

860

669

217

3,200

-236

-10

-246

-21

-2,324

860

344

-3,549

-596

826

230

2012

3,177

388

1,165

1,076

-387

3,267

-1,221

-1,184

407

-385

1,165

574

-1,717

356

230

586

2013

3,239

594

1,705

1,068

-2,396

2,074

-877

-2

-878

308

1,505

1,705

803

-695

587

669

(INR Million)

2014E

3,791

679

1,723

1,289

-1,572

3,332

-887

500

1,723

918

-2,141

303

670

973

2015E

4,543

761

1,735

1,544

-1,710

3,784

-1,835

250

1,735

918

-2,403

-454

973

519

4 October 2013

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