CRISIL CRBCustomised Research Bulletin

May 2012
Sector Focus: Real Estate
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CRISIL Customised Research Bulletin CRB
Foreword
In this edition of Customised Research Bulletin, we present our views
on Real Estate sector.
Sluggish growth in the economy, high interest rates and rising input
costs have taken a toll on many sectors in India. The real estate sector,
which has also borne the brunt of the macroeconomic scenario, has
seen a slowdown in demand and fall in transactions over the past 18
months. In the Opinion section, we have analysed the performance of
this sector and its various segments viz. residential, commercial office
space, organised retail and hospitality.
This edition also features interview of our Real Estate sector expert, Mrs
Binaifer Jehani, Director CRISIL Research
The sector insights draw upon our rich and extensive experience and
knowledge base built over the last 20 years.
We are confident that you will find this report highly informative and
useful.
Prasad Koparkar
Senior Director
CRISIL Research



































































































Opinion
Segment-wise review of the Indian real estate market 01
Interview
Mrs Binaifer Jehani, Director CRISIL Research 05
Economic Overview June 2012 08
Industry Overview
Educational services 09
Hospitals 12
Hotels 16
Retailing 19
Independent Equity Research Report
Ashiana Housing Ltd 22
Customised Research Services
Real Estate 23
Media Coverage 24
Contents
CRISIL CRB Customised Research Bulletin
1
1. Residential Real Estate
Muted growth in capital values as macro-
economic factors continued to weigh down
demand
The period between January 2011 and March 2012
proved to be a relatively difficult time for the Indian real
estate market with both, developers and potential
buyers reeling under adverse macro-economic
conditions. An inflationary environment coupled with
high interest rates dealt a double whammy to the
developers due to the rising cost of construction and
difficulty in servicing debt. In the residential segment,
transactions declined, especially during the latter half of
2011, as buyers became increasingly wary of rising
interest rates, which were increased 8 times during the
period between Jan 2011 and March 2012. As a result,
average capital values ended up flat during the second
half of 2011 vis--vis the first half and increased just
marginally during the first quarter of 2012.
Capital Value Index (for 10 major cities)
Note: Indexed to 2005
Source: CRISIL Research
Mumbai and NCR to account for nearly 55 per
cent of the total estimated supply during 2012-
2014
As far as residential supply in the 10 major cities is
concerned, CRISIL Research expects nearly 70 per
cent or around 1.4 billion sq ft. of the total planned
supply of 2.0 billion sq ft. to come up by 2014 against
an expected demand of around 0.9 billion sq ft. during
the same period. Mumbai and NCR alone are expected
to account for nearly 55 per cent of the estimated
supply. In terms of configuration, 2 and 3 BHK
apartments constitute almost 75 per cent of the total
planned supply. Value-wise, almost 60 per cent of the
planned supply is priced between Rs 2-6 million,
signifying a shift towards a relatively affordable
segment.
Planned v/s CRISIL Research's Estimated Supply
(2012-14)
Source: CRISIL Research
2. Commercial Office Space
Rentals in 90 per cent of the micro-markets
across 10 major cities still lower than their
2008 peaks
During the economic slowdown of 2008-09, demand for
commercial office space especially from the IT/ITeS
and BFSI sectors plummeted leading to a sharp
100
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Capital Value Index
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39
71
100
99
66
121
138
182
590
31
59
115
125
126
134
161
169
303
825
Kochi
Chandigarh Tricity
Ahmedabad
Kolkata
Chennai
Hyderabad
Bengaluru
Pune
Mumbai - MMR
NCR
Planned Supply (mn sq ft.)
CRISIL Research's Estimated Supply (2012-14) (mn sq ft.)
Opinion
Segment-wise review of the Indian real
estate market
2
CRISIL CRB Customised Research Bulletin
correction in lease rentals. Between the first half of
2008 and the second half of 2009, average lease
rentals corrected by almost 30-35 per cent. The
subsequent period has seen a rather sideward
movement in average lease rentals in the 10 major
cities barring a few areas which have witnessed either
an uptrend or a downtrend. During this period, demand
gained momentum briefly in the first half of 2011, but
the existing vacancy levels prevented any major
appreciation in lease rentals. A lean demand scenario
has also adversely impacted the execution of many
projects. Currently, lease rentals in almost 90 per cent
of the micro-markets in the 10 major cities are nearly
20-25 per cent short of their peak levels seen in the first
half of 2008.
Lease Rental Index (for commercial office spaces in
10 major cities)
Note: Indexed to 2005
Source: CRISIL Research
Top 10 cities account for 70-75 per cent of the
total supply of office space planned till 2014
In terms of supply, CRISIL Research expects around
229 million square feet of office space of the total
supply of 607 million sq ft. planned in 10 major cities
(Mumbai, NCR, Bengaluru, Kolkata, Chennai,
Hyderabad, Pune, Ahmedabad, Chandigarh and Kochi)
to come up during 2012-14. Expected demand during
the same period is 107 million sq ft. Although
Hyderabad has the largest planned supply, only 24 per
cent of that would materialise during 2012-14 as
political uncertainty continues to hamper development.
Supply in the top 10 cities account for approximately
70-75 per cent of the total supply of office space
planned to come up by 2014.
Planned v/s CRISIL Research's Estimated Supply
(2012-14)
Source: CRISIL Research
3. Organised Retail
Vacancy levels continue to impact rentals
growth
In the post 2008-09 era, the organised retail real estate
segment has struggled to gain traction due to an
oversupply situation. In the period since the first half of
2010, lease rentals have remained flat in most micro-
markets across the 10 major cities in India due to high
vacancy levels. Lease rentals have not breached the
peak levels observed during the first half of 2008 in any
of the micro-markets of the 10 major cities. The market,
however, appears to have bottomed out with the lease
rentals remaining largely stable since the beginning of
2011. The year FY12 also proved to be a difficult year
for organised retailers as the revenue growth of most
players dipped sharply on account of weak demand,
rising apparel prices and higher excise duty levies.
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Lease Rental Index
3
7
25
6
26
23
34
26
51
27
7
25
36
48
49
66
70
79
111
115
Chandigarh Tricity
Ahmedabad
Kolkata
Kochi
Mumbai - MMR
Pune
Chennai
Bengaluru
NCR
Hyderabad
Planned supply (mn sq ft.)
CRISIL Research expected supply (2012-14) (mn sq ft.)
3
Lease Rental Index (for retail spaces in 10 major
cities)
Note: Indexed to 2005
Source: CRISIL Research
NCR to see maximum additions in mall space
during 2012 to 2014
The total planned supply across 10 major cities
(constituting 75 per cent of the pan-Indian market) is 81
million sq ft., of which CRISIL Research estimates
around 44 million sq ft. to come up during the 2012-
2014 period. In number terms, CRISIL Research
expects around 145 malls out of the total planned 210
malls to come up by 2014, of which 36 malls are
expected to come up in NCR.
Planned v/s CRISIL Research's Estimated Supply
(2012-14)
Source: CRISIL Research
4. Hospitality
The hotels market including the premium segment
hotels grew at a robust pace of over 35 per cent CAGR
between 2005-06 and 2007-08. However, the
economic crisis which started in the latter half of 2008-
09 led to a slowdown in room demand in 2008-09 and
2009-10. This situation was exacerbated by large
supply additions, which forced players to reduce ARRs
(average room rates). Recovery in the macro economic
situation in 2010-11 led to a revival in room demand in
India. According to CRISIL Research estimates, the
overall hotels market grew by 13 per cent to reach Rs
318 billion in 2011-12. During the year, the market for
premium segment hotels is expected to grow faster at
16 per cent to Rs 184 billion.
Hotel industry market size
Source: CRISIL Research
100
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Lease Rental Index
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13
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14
22
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36
8
10
13
17
18
21
22
24
30
47
Kolkata
Kochi
Chennai
Chandigarh Tri-City
Bengaluru
Mumbai
Pune
Ahmedabad
Hyderabad
NCR
Planned malls
CRISIL Research's estimated supply of malls (2012-2014)
(No. of units)
-25.0
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E
(per cent)
5 D/5 star market size (Rs. billion)
Total market size (Rs. billion)
Premium growth (per cent)
(Rs. billion)
4
CRISIL CRB Customised Research Bulletin
Hotel Industry market size (Number of rooms)
Source: CRISIL Research
Supply additions restrict growth in ORs and
ARRs
Room demand in the premium segment hotels
increased by 13 per cent (y-o-y) in 2011-12. Foreign
tourist arrivals (FTAs), which are a key demand driver
for premium segment hotels rose by 10 per cent (y-o-y)
during the year. However, supply of rooms in the
premium category during this period also rose by 13 per
cent (y-o-y). As a result, occupancy rates (ORs) and
average room rates (ARRs) remained stable at around
62 per cent and Rs 7,900 respectively in 2011-12.
Consequently, revenue per available room (RevPAR)
remained range bound at Rs 4,900.
0
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50,000
75,000
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5D/5 star segment Total market
5
Binaifer F. Jehani, Director, CRISIL Research,
Binaifer leads the research function on the real estate
sector at CRISIL Research. She is responsible for
overseeing a large team of analysts, offering
comprehensive research coverage on real estate,
spanning residential, commercial and retail space. Her
areas of expertise also comprise healthcare delivery,
hospitality and housing finance.
In addition, Binaifer manages customised assignments,
which involve gauging the feasibility, underlying market
potential, etc of prospective business models for
developers, private equity firms, investment bankers
and banks. Research findings of such bespoke
assignments empower these players to make informed
and effective investment decisions.
Binaifer joined CRISIL in 2004. During the course of her
eight-year stint, she has successfully handled several
projects, involving estimation of market and financial
feasibility. These projects have driven critical business
activities in areas of expansion, capacity building, etc.
She has been an active participant at real estate
forums, where she proffered valuable insights and
opinions on vital sectoral issues.
In 2008, Binaifer pioneered the product called City
Reality, which determined underlying potential in the
top ten cities of India. Further, in 2011, she was
instrumental in conceptualising the Reality Next report,
covering the newly emerging cities, by going beyond
the conventional top ten Indian cities.
Binaifer is a Qualified Chartered Accountant and holds
a Post Graduate Diploma in Business Administration
with specialisation in finance from Symbiosis Institute of
Business Management in Pune.
What is your outlook on prices in the
residential, commercial office space and retail
segments of the Indian real estate market?
As far as the residential segment in the 10 major cities
(Ahmedabad, Bengaluru, Chennai, Chandigarh,
Hyderabad, Kochi, Kolkata, Mumbai, NCR and Pune) is
concerned, macro-economic factors such as high
interest rates, sticky inflation, weak IIP numbers, etc
coupled with apprehensions about the repercussions of
the ongoing economic turmoil in Europe on the Indian
economy have continued to keep buyers in a wait-and-
watch mode, in effect creating latent demand. CRISIL
Research expects this pent-up demand to propel capital
values by 5-6 per cent y-o-y in 2013 after remaining
largely stable in 2012. Pune, Ahmedabad and Mumbai
are expected to see maximum appreciation in 2013 with
capital values in these three cities projected to grow by
6-7 per cent during the year.
The current economic uncertainty has also affected
demand in the commercial office space and retail
segments in the 10 major cities, with corporate majors
putting expansion plans on the backburner. However,
with the overall economy expected to fare better in
2013, CRISIL Research expects office space rentals to
appreciate by 5-6 per cent after ending relatively flat in
2012. Lease rentals for retail spaces are expected to
Interview
Binaifer F. Jehani
Director, CRISIL Research

6
CRISIL CRB Customised Research Bulletin
increase as well, rising by 4-5 per cent in 2013, after
charting a largely flat trajectory in 2012. With the
frequency of new mall launches decreasing, vacancy
levels are also expected to fall. As lease rentals are
believed to have bottomed out in both the commercial
office space and retail segments, a decline from current
levels is probably a far cry.
In the residential segment, which of the 10
major cities in India have performed relatively
better post the slowdown of 2008-2009?
Of the 10 major cities, Pune and Chennai are the only
two where capital values in all the micro-markets have
breached the peak levels reached during the first half of
2008. The demand for residential units in these two
cities is driven primarily by the end-user segment. Even
during the economic slowdown, the decline in capital
values in these cities were on the lower side as
compared to most of the other major cities. Between the
first half of 2008 and first half of 2009, the average
capital values in Pune and Chennai declined by 20 per
cent and 15 per cent, respectively. During the same
period, capital values fell more steeply in cities such as
Bengaluru, Kolkata, the NCR and Mumbai, with Kolkata
and Bengaluru correcting by up to 25-30 per cent.
Between 2009 and 2011, capital values in Pune and
Chennai posted CAGRs of 14 per cent and 11 per cent,
respectively, next only to Mumbai, which grew by 19 per
cent CAGR during the same period. The fact that during
the brief recovery period of 2010 these cities did not
see the kind of run-up in capital values that was evident
in Mumbai actually helped affordability levels and
demand conditions remain relatively better. Apart from
the easily discernible quantitative factors, softer ones
like the Pune and Chennai markets being dominated by
regional players rather than national players with
exposure to several markets also makes the two cities
relatively insulated to the contagion effect wherein the
poor performance of one market spreads to other
markets.
Taking off from the previous question, how do
you expect Pune and Chennais residential
market to perform in times to come?
As far as growth in capital values is concerned, CRISIL
Research expects Pune to grow at about 8 per cent y-o-
y during 2012 to 2013, while Chennai is expected to
grow at nearly 4 per cent over the same period.
Chennais relatively subdued growth can be explained
by the fact that only one micro-market accounts for
almost 45 per cent of the total planned supply,
consequently exerting pressure on the capital values. In
terms of supply, CRISIL Research expects nearly 80
per cent or almost 237 million sq ft of the total planned
supply in these two cities to come up by 2014. This
estimated supply, as a proportion of the total planned
supply, in these two cities is higher than the overall
proportion (nearly 70 per cent), which signifies healthy
pace of construction, shorter delays and fewer
postponements.
How is the Indian hospitality sector expected
to perform in the longer run?
CRISIL Research believes that increase in Foreign
Tourist Arrivals (FTAs) and recovery in business-related
travel expenditure will translate into a 9 per cent
increase (CAGR) in demand for premium segment hotel
rooms across the 12 cities (Agra, Ahmedabad,
Bengaluru, Chennai, Goa, Hyderabad, Jaipur, Kolkata,
Mumbai, NCR, Pune, Kerala: Kochi, Trivandrum,
Kovalum) tracked during 2012-13 to 2015-16. Supply
during the same period is likely to grow by 10 per cent
CAGR. Due to a supply overhang, Occupancy Rates
(ORs) are expected to decline marginally while Average
Room Rentals (ARRs) would remain flat. As a result,
average Revenue Per Available Room (RevPARs) will
remain stable at Rs 4,900.
Among the business destinations, during the next 4
years, the NCR is likely to record the highest addition to
supply at around 6,000 rooms. Due to a decline in
7
ARRs and ORs on account of large supply additions,
RevPARs across most business destinations are
expected to decline over the next 4 years. Considerable
supply is also expected in leisure destinations such as
Jaipur and Kerala. As a result, RevPARs in Kerala and
Jaipur are expected to decline by 1-4 per cent CAGR
over the same period. On the other hand, RevPARs in
Agra and Goa will increase marginally due to relatively
low supply additions in the two regions.
8
CRISIL CRB Customised Research Bulletin
Indian Economy
Economic Overview June 2012
Macroeconomic Indicators - Forecast
Low Threat High Threat Medium Threat
Inflation Industrial production growth Trade growth Interest rates
Sectoral inflation Currency Foreign inflow (US$ bn) Credit growth
-2
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WPI CPI-IW
-40
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Exports Imports
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1 Yr 10 Yr
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FDI+ECBs Net FII flows
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Mfg
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Avg Rs per US$
2012-13 F Rationale for 2012-13 forecast
GDP (y-o-y %) 6.5 Rising uncertainty in the Eurozone, muted investment demand, and policy logjam, will keep GDP
growth at 6.5 per cent. Services growth is revised downwards to ref lect the sluggish growth in
IT/ITES as a result of slowing export demand f rom the Eurozone, and slower-than-earlier-
anticipated growth of the hotels, trade and transport sector due to moderation in private
consumption growth. Although industry may benef it fromexpansion of the mining sector on a low
base, manufacturing and construction growth will remain weak due to limited scope f or reduction
in interest rates, and weak investment demand. Sub-normal monsoons and a f urther worsening
of the Eurozone situation can create downside risks to our tepid growth f orecast of 6.5 per cent
f or 2012-13.
WPI inflation (average, %) 7.0 WPI inflation f orecast is revised upwards to 7.0 per cent ref lecting the higher-than-anticipated
increase in food inf lation, and the impact of the weak currency. The weak rupee is off setting the
gains from lower global crude oil and commodity prices, and will keep the cost of imported items
high.
10-year G-sec (%, March-
end)
8.0-8.2 A higher f iscal def icit would increase the governments borrowing requirement and push the 10-
year G-sec yield higher than our earlier projection. Even if the repo rate is cut further, the
downside to 10-year G-sec yield below 8.0-8.2 per cent is limited, given the size of the
government borrowings.
Exchange Rate (`per US$
March-end)
50.0 The rupee is expected to settle around 50 per US$ by March-end 2013 in the base case scenario.
An appreciation of the rupee f romthe current level would be supported by a slight easing of the
current account deficit in 2012-13 and return of f oreign capital inf lows towards the last quarter
of the fiscal year. This assumes some improvement in the Eurozone situation by early next year
which will improve the risk appetite of f oreign investors.
Fiscal Def icit (% of GDP) 5.8 With slower GDP growth compared to the earlier projection, government revenue growth will be
lower than estimated earlier. Coupled with huge government borrowings, the fiscal def icit is now
projected to be at 5.8 per cent of GDP.
F: Forecasted
Source: CRISIL Research
9
Industry Overview
Educational services: B-Schools
High demand but shortage of quality supply
The decreasing return on investment and increasing
awareness amongst students about quality of education
provided across business schools has significantly
dimmed the allure of management education for
students. Consequently, the utilisation of intake
capacity has been falling, particularly in tier-4 B-
schools. CRISIL Research estimates the average
capacity utilisation across B-schools to be around 65
per cent in 2011-12. This trend can be attributed to
significant increase in number of seats offered over the
years, shortage of quality faculty, absence of industry
link ups, and several companies increasingly preferring
to recruit graduates and train them. As a result, we
foresee a number of B-schools either closing down or
changing hands over the next couple of years. B-
schools that focus on imparting quality education,
developing the all-round skill sets of students and
forging relevant partnerships with industry, however,
would continue to thrive owing to the strong demand for
quality education.
Significant increase in number of seats
According to CRISIL Research, there are around 3,500-
4,000 B-schools in the country, offering over 4 lakhs
seats. With the increasing demand for management
education, there have been several institutes
mushrooming all over the country. This is reflected in
the fact that the number of AICTE-approved institutes
has grown by more than 16 times since 1988.
Number of institutes affiliated to AICTE
Source: AICTE, CRISIL Research
Of the total institutes operating in the country, we
estimate around 82 per cent to be either affiliated to
AICTE or to be state universities in India. The remaining
18 per cent constitute autonomous institutes, which are
private colleges not affiliated to AICTE or any other
university, and deemed universities. Despite being
affiliated with AICTE, however, most colleges in India
fall under the tier-3 and tier-4 bucket.
Over one-third of seats in tier-4 colleges
According to CRISIL Research, in terms of intake
capacity, around 36 per cent of the B-schools fall under
the tier-4 category; around 52 per cent under the tier-3
category and the remaining 12 per cent fall under the
tier-1 and tier-2 category. The key differentiators
between colleges are quality of infrastructure and
faculty and opportunities for self development offered to
students, which ultimately manifests in higher
placements and salaries for students.
1523
1940
2262
2385
1.50
1.80
2.78
3.53
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0
500
1,000
1,500
2,000
2,500
3,000
2008 2009 2010 2011
AICTE approved no of institution (LHS)
Intake (in lakhs) (RHS)
10
CRISIL CRB Customised Research Bulletin
Proportion of colleges according to intake capacity
Source: CRISIL Research
Categorisation of B-schools*
Utilisation levels have dipped
CRISIL Research estimates the average utilisation
rates has declined over the years, and was at around
65 per cent in 2011-12. Tier-3 B-schools have a
capacity utilisation rate of 70 per cent, which is slightly
higher than the industry average. On the other hand,
tier-4 B-schools have the lowest capacity utilization rate
of 50 per cent. This can be attributed to decreasing
return on investment for students joining tier-4 B-
schools (owing to lower salaries received as opposed to
fees charged by schools) and increasing awareness
amongst students about the quality of education offered
by different institutes. B-schools with low utilisation
rates are also found to be wanting in respect of
infrastructure and faculty, as well as industry link ups.
Capacity utilisation levels across buckets
Source: CRISIL Research
despite strong demand for management
education
The demand for seats in tier-1 and tier-2 B-schools
continues to remain strong despite the fact that the fees
charged by these colleges has increased sharply over
the last few years. This is primarily on account of
students being increasingly alert and conscious about
quality education. Also, the number of B-school
aspirants, as reflected in CAT entrance exam takers, is
higher as compared to total enrollments across
business schools in the country.
Rationale for poor utilization
Decreasing RoI - Students are getting
increasingly aware about the merits of quality
education. This alertness has helped them
recognise the inadequate return on investment
they get after passing out from a tier-4 college.
Shortage of quality faculty - The lack of
adequate faculty members is the key challenge for
most B-schools in India. Consequently, it is difficult
to impart quality education. According to our
interaction with industry sources, at least 25 per
Tier-1
2
Tier-2
10
Tier-3
52
Tier-4
36
(Per cent)
Buckets
Capacity
utilisation
Number of
students placed
(2010)
Average
salary
offered
(2010)
Tier-1 95-100 per cen 98-100 per cent > Rs 9 lakhs
Tier-2 80-95 per cent 80-98 per cent Rs 5-9 lakhs
Tier-3 70-80 per cent 60-80 per cent Rs 3-5 lakhs
Tier-4 <70 per cent <60 per cent <Rs 3 lakhs
Source: CRISIL Research
*Business schools have to f ulf ill the requisite criteria f or all three
parameters considered-capacity utilisation, average salary
of f ered to students and percentage of students placed- to f all in a
particular bucket. For instance, f or a business school with the
capacity utilisation rate of 98 per cent, with 100 per cent of the
students placed but with an annual average salary to students of
Rs 7 lakhs would classif y as a tier-2 college and not a tier-1
college.
97%
85%
70%
50%
65%
Tier-1
college
Tier-2
college
Tier-3
college
Tier-4
college
Industry
11
cent additional faculty is required at B-schools in
India, indicating the shortage of permanent faculty
members with business schools. Also, a lot of
lower rung colleges do not have a strong
curriculum aimed at developing the overall skill set
of students.
Absence of industry link ups - Most of the
smaller rung B-schools do not have sufficient
industry tie-ups to give students practical
experiences and thus develop their skill sets. As a
result, a number of corporates have started their
own professional courses in order to attract
students and train them accordingly. A large
number of top companies increasingly prefer to
recruit graduates and train them for the job, rather
than recruit post graduates. This has diminished
the attraction of management courses for students,
particularly from small towns. In some cases,
salaries of graduate students are equivalent to that
of management graduates.
Outlook
The increasing proportion of working age population
together with economic growth is expected to lead to
increasing demand for management education in India.
B-schools that focus on imparting quality education,
developing the all round skill sets of students and
forging relevant partnerships with industry would
therefore, continue to be in demand. On the other hand,
B-schools that do not improve the quality of education
provided are either expected to close down or change
hands, as students increasingly become aware of the
quality of education being imparted and the likely return
on investments.
12
CRISIL CRB Customised Research Bulletin
Industry Overview
Hospitals
India fares poorly on healthcare indicators and universal
health coverage still appears to be a distant goal. Not
only is public spending on health as a percentage of
GDP far below that of other nations, both physical and
human infrastructure is severely inadequate. The
healthcare sector needs Rs 6 trillion in investments to
achieve the global median of 24 beds per 10,000
population. The private sector can be tapped for this
purpose, but increased participation from private
players will clearly be contingent on government
policies that attract such investments. We believe that
the government should draw appropriate lessons from
its PPP model successes in sectors such as airport
and roads and adopt similar approaches in healthcare.
The government can also learn from the experience of
other countries where the PPP model is well
established and has enabled greater investment flows
into the healthcare sector.
The economic and social well-being of its people is the
raison detre for any government, be it developed or
developing, and achieving universal health coverage is
central to the achievement of that objective. The
importance of having in place adequate, top-notch,
efficient health infrastructure, thus, cannot but be
overemphasised. In recent years, both China and the
US have been radically transforming their healthcare
infrastructure and delivery systems in pursuance of that
vision, and are widely acknowledged to have made
impressive progress.
As a developing country, India too has made great
strides in healthcare since Independence. According to
the first annual report on health released by the
government in September 2010, despite vast inequity
across states, the average life expectancy has nearly
doubled since Independence to around 64 years. There
has also been an appreciable decline in both the infant
mortality rate and the maternal mortality ratio (IMR has
more than halved from 129 per 1,000 live births in 1971
to 53 in 2008, while MMR has fallen from 460 per
100,000 live births in 1984 to 254 in 2004-06).
India fares poorly on health indicators
compared with other nations
Notwithstanding the progress made by the country over
the years, India fares poorly compared to most
countries, including developing ones such as China,
Thailand, and Vietnam, on almost every key health
indicator, some of which are illustrated below. Even
existing public infrastructure facilities (i.e. hospital
buildings, equipment, laboratories, diagnostics, and
pharmacies) are ineffectively managed due to resource
constraints.
Global human and physical infrastructure
Primary factors for this are the abysmally low share of
the government in total healthcare expenditure (around
Countries Nurses Physicians beds
Germany 108 35 82
UK 103 21 34
Canada 101 19 34
USA 98 27 31
Australia 96 30 38
Russia 85 43 97
Brazil 65 17 24
Italy 65 42 37
South Af rica 41 8 28
Sri Lanka 19 5 31
Thailand 15 3 22
China 14 14 41
India 13 6 9
Vietnam 10 12 29
Global median 28 12 24
Source: WHO statistics, CRISIL Research
per 10,000 population
13
32 per cent), compounded by the lack of skilled human
resources. For instance, the overall ratio of doctors per
bed is 0.6 and ratio of nurses per bed is 1.4. In private
hospitals, the ratio of doctors to bed is 0.6 and that of
nurses to bed is 2.3, but these ratios are far lower in
government hospitals, indicating an acute shortage of
manpower. Government hospitals find it difficult to
attract talent because, on an average, salaries are 25
per cent lower compared with those offered by private
players.
Sector needs Rs 6 trillion in investments to
meet the global median
One key vision articulated in the XI Plan document was
to transform public healthcare into an accountable,
accessible and affordable system of quality services.
Central to this objective was steeply increasing public
spending on health to 2-3 per cent of GDP from around
0.9 per cent of GDP in the previous plan. But this has
failed to materialise, and government estimates suggest
that it is only around 1.1 per cent of GDP.
Health expenditure /GDP
Source: WHO statistics, CRISIL Research
As the graph above indicates, Indias total healthcare
expenditure as a percentage of GDP too is far lower
than the global median. Not only is the healthcare
spend/GDP ratio close to 10 per cent or above for most
developed western countries, even BRICS nations such
as Brazil and South Africa are far superior to India on
this score. It is evident that even if public spending
increases further in the next few years, a lot more
resources will need to be raised through other avenues
to bridge this gap.
There has been an notable increase in public spending
since the launch of the National Rural Health Mission in
2005 (according to government statistics, with the
launch of NRHM, the level of public spending on health
has risen nearly 2.6 times between 2004-05 and 2009-
10. The overall growth rate for states during 2000-01 to
2008-09 was 12.8 per cent CAGR, but if one breaks it
up into pre-NRHM and post-NRHM phases, it stands at
5.7 per cent and 18.4 per cent respectively).
During 2006-07 to 2010-11, the total number of beds
increased at a CAGR of 2 per cent to reach 1.1 million.
Over the next 5 years, CRISIL Research estimates the
number of beds to increase at a CAGR of 4 per cent to
reach 1.4 million by 2015-16. Assuming an average
capital expenditure of Rs 3.4 million per bed excluding
land cost, CRISIL Research estimates investments of
Rs 842 billion during 2011-12 and 2015-16.
We anticipate that the sector needs nearly Rs 6 trillion
to attain the global median of 24 beds per 10,000
persons. We believe that enhanced private sector
participation and novel methods of financing, similar to
that seen in sectors such as roads, power, ports,
airports etc, will be necessary to bridge the resultant
estimated shortfall of nearly Rs 5 trillion.
PPP model the way forward; win-win for all
stakeholders
Innovative modes of financing, whether through Budget
or off-Budget, will be critical to meet this objective.
Gabon, a tiny nation in Africa, for instance, levies a
cess on mobile phone use to raise resources for
healthcare. In this context, the success that the Indian
government has achieved over the last decade in the
4.1
4.1
4.2
4.3
4.8
6.1
7.2
8.2
8.4
8.5
8.7
8.7
9.8
10.5
15.2
Thailand
Sri Lanka
India
China
Russia
Global median
Vietnam
South Africa
Brazil
Australia
Italy
UK
Canada
Germany
USA
14
CRISIL CRB Customised Research Bulletin
roads and airports sectors through innovative ways of
financing and public private partnerships should provide
important lessons for government policymakers. We
believe that, based on the evidence from other
countries, similar methods can be replicated
successfully in the healthcare sector in India as well.
Variants of the PPP model are already in operation in
certain parts of the country. One such is the contract
system wherein state governments contract out the
management of primary healthcare centres in rural
areas to NGOs. This system is in vogue in many states.
Yet another model that is slowly becoming popular is
the DBFOT (Design Build-Finance-Operate-Transfer)
model, under which the government enters into a
partnership with private players to build hospitals,
wherein a certain percentage of beds are reserved for
the poor patients. The beds are reserved to provide
healthcare services to the poor, free of cost. This model
is already operational in a few states such as
Maharashtra, Delhi, Punjab, Karnataka, Chhattisgarh,
and Uttarakhand.
This mode is a win-win for both the government and the
private player, because land cost is a major component
of capital cost for constructing hospitals, and rising land
prices are discouraging expansion. Therefore, private
players are also interested in such an arrangement,
where the government provides land either at a nominal
price or free of cost and the private party has to bear
only the construction and equipment cost.
We believe that given the existing constraints on both
financial and human resources, this PPP model is the
way forward for India. But for it to succeed and radically
transform healthcare coverage, there are challenges
that need to be overcome. For instance, there is
currently no standard policy framework for PPP in
healthcare in the country. A standard policy framework
on various parameters like extent of grant or revenue
share, computation of user fee, operating and
maintenance of a hospital, monitoring and supervision
etc can help provide clarity and in turn help enhance
private sector participation.
The key objective of a PPP in healthcare is to provide
quality healthcare facilities to poor patients. To achieve
this, the government typically reserves a certain
percentage of beds for poor patients in every PPP
hospital project. However, a monitoring body is
essential to supervise the utilisation of beds reserved
for poor patients as there have been instances where
the reserved beds have been used for commercial
purpose.
For successful and timely implementation of PPP
projects, speedy decisions and fast execution of
processes such as selection of private players,
preparation of project agreement is crucial.
What is fairly clear from our analysis is that the project
economics is attractive. CRISIL Research estimates the
equity IRRs generated by a multi-specialty hospital
under a DBFOT model located in a metro to be in the
range of 15 per cent vis--vis 11 per cent generated by
a similar hospital located in a tier-II city.
As the returns generated by a multi-specialty hospital
under the DBFOT 'patient fee' model are lower in tier-II
cities, CRISIL Research believes that the DBFOT
'annuity model' can be adopted to enhance private
sector participation in tier-II cities as the annuity
payment model ensures the private player a fixed
income on an annual basis. Globally too, the DBFOT
model is popular, as indicated below.
15
Instances of PPP in healthcare in other
countries
UK: The Birmingham Hospital an acute and
psychiatric hospital in UK operates on a DBFOT
annuity model. It has a capacity of 1,213 beds with
project a cost of 619 million. For this contract, the
private concessionaire receives annual payments
of 67 million over a period of concession of 40
years. The Barts Royal and London Hospital, a
tertiary hospital, is another PPP project that is
currently under construction. The project cost is 1
billion and the annuity to be paid to the private
player amounts to 97 million every year post
completion, over a period of 42 years.
Canada: The Abbotsford Regional Hospital and
Cancer Centre was built on a DBFOT annuity
model at a project cost of $355 million for a
concession period of 33 years. The private player
receives annual payments from the government.
Another Canadian hospital Royal Jubilee was built
on a DBFOT annuity model at a project cost of
$283 million. Annuity payments of $23 million per
year were paid to the private party over the
concession period of 32 years.
Italy: The New Mestre Hospital, a multi specialty
hospital, was built on the DBFOT 'patient fee'
model for a project cost of 236 million. The Italian
government provided a grant of 105 million, which
covered 45 per cent of the project cost. The
concession period for the project was 29 years.
South Africa: The 846-bed Inkosi Albert Luthuli
Hospital, a tertiary hospital, was built on a DBFOT
'annuity' model at a project cost of R 1,650 million
for a concession period of 15 years. The private
party received annual payments of R 304 million
from the government.
Australia: The Royal Women's Hospital
Redevelopment Project was built under the
DBFOT model, with a capacity of 160 beds and a
project cost of $364 million. The private party
received annuity payments from the government
over a period of 25 years. Another hospital the
New Royal Adelaide Hospital is to be built in a
span of 5 years on the DBFOT 'annuity' model.
The private party will receive annuities of $ 397
million from the government over the period of
concession of 35 years.
16
CRISIL CRB Customised Research Bulletin
Industry Overview
Hotels
The average occupancy rates (ORs) of premium
segment hotels in India will touch a 5-year low of 60 per
cent in 2011-12 before sliding to 56 per cent in 2012-13
the net impact of demand slowdown coinciding with
huge supply additions. While the incremental supply
over the next 2 years is expected to be around 14,400
rooms, demand will be limited to 5,300 rooms. The
mismatch will leave over 23 per cent of the existing
inventories vacant and precipitate a fall in the industrys
RevPAR. Both large and small business destinations
including NCR, Bengaluru, Chennai, Hyderabad and
Ahmedabad will see a dip in their ORs. In contrast,
Mumbai, due to its limited planned additions, is
expected to remain resilient to the downtrend. Among
leisure destinations, Jaipur and Kerala will witness the
steepest fall in occupancy rates.
Growth in room demand will nearly halve to 9-
10 per cent over the next 2 years
After a year of high growth (18 per cent) in 2010-11,
growth in room demand is expected to nearly halve to
9-10 per cent (CAGR) over the next 2 years. The
setback in growth will primarily be on account of the
looming global economic slowdown.
Demand growth is expected to slow down
F: Forecast; Source: CRISIL Research
.as domestic passenger traffic and FTAs are
expected to weaken
The shrinking corporate budget for travel expenses,
affected by the sluggish macro-economic climate, and a
drop in domestic leisure travel are expected to hurt
domestic passenger traffic over the next 2 years.
Foreign tourist arrivals (FTAs) in India nearly 50-60
per cent of which is from the USA and Europe is also
expected to slow down in 2011-12 and 2012-13
following deterioration in the global economic health. In
November 2011, y-o-y growth in arrivals was lower at 5
per cent as compared to the 12 per cent growth seen in
November 2010.
The demand dip will coincide with a 17 per
cent annual increase in room inventories
Supply growth will outpace demand growth
F: Forecast
Source: CRISIL Research

Supplies will grow at 17 per cent CAGR over the next 2
years, vis--vis a demand growth of 9-10 per cent. This
will aggravate the prevailing demand-supply imbalance
further. Total room additions over the next 2 years are
-10%
-5%
0%
5%
10%
15%
20%
2
0
0
7
-
0
8
2
0
0
8
-
0
9
2
0
0
9
-
1
0
2
0
1
0
-
1
1

2
0
1
1
-
1
2

F
2
0
1
2
-
1
3

F
2
4
,
4
8
5

2
6
,
7
6
2

2
9
,
8
1
3

3
9
,
3
4
0

4
4
,
8
1
2

5
3
,
7
2
7

2010-11 2011-12 F 2012-13 F
Demand (nos.) Supply (nos.)
17
expected to be around 37 per cent of total inventories in
2010-11.
Supply in business destinations will grow the
fastest
F: Forecast
Source: CRISIL Research
that will widen the demand-supply gap
further, causing ORs to dip to a 5-year low
Pan-India: Incremental supply will far exceed
demand
F: Forecast
Note: ORs are calculated on total demand and supplies.
Source: CRISIL Research
Occupancy in both business and leisure
destinations will dip
F: Forecast
Note: ORs are calculated on total demand and supplies
Source: CRISIL Research

The incremental supply over the next 2 years will be
around 14,400 rooms, whereas demand is expected to
be only around 5,300 rooms, which will leave around
9,000 rooms or 23 per cent of the existing inventories
vacant during this period. The skew in total supplies will
cause the occupancy rates to fall from 62 per cent in
2010-11 to 60 per cent in 2011-12 the lowest since
2007-08 and further down to 56 per cent in 2012-13.
and ARRs and RevPAR to slide down
Average room rentals (ARRs) will dip by about 1 per
cent over the next 2 years. The Revenue per available
room (RevPAR), which takes into account the ARR and
ORs, will dip by around 7 per cent. At Rs 4,331, the
RevPAR in 2012-13 will be the lowest in the 6 years
since 2007-08.
30,433
34,624
42,208
8,907
10,188
11,520
2
0
1
0
-
1
1

2
0
1
1
-
1
2

F
2
0
1
2
-
1
3

F
2
0
1
0
-
1
1

2
0
1
1
-
1
2

F
2
0
1
2
-
1
3

F
17.8% CAGR
13.7% CAGR
Demand (nos.)
Supply (nos.)
Business destinations Lesiure destinations
72%
64%
61%
62%
60%
56%
-2,000
0
2,000
4,000
6,000
8,000
10,000
2
0
0
7
-
0
8
2
0
0
8
-
0
9
2
0
0
9
-
1
0
2
0
1
0
-
1
1

2
0
1
1
-
1
2

F
2
0
1
2
-
1
3

F
(Nos.)
Incremental demand Incremental supply
Occupancy rate (OR)
62%
60%
57%
62%
59%
56%
50%
55%
60%
65%
70%
75%
2
0
0
7
-
0
8
2
0
0
8
-
0
9
2
0
0
9
-
1
0
2
0
1
0
-
1
1
2
0
1
1
-
1
2

F
2
0
1
2
-
1
3

F
Business destinations Leisure destinations
18
CRISIL CRB Customised Research Bulletin
RevPAR will hit the lowest in 6 years
F: Forecast
Source: CRISIL Research
Foreign exchange earnings contribute to nearly 35 per
cent of hotel revenues. About one-third of the industrys
revenues are thus vulnerable to the risk of currency
fluctuations.

9,627 9,565
7,739
7,964 7,885 7,806
6,948
6,080
4,692
4,957
4,709
4,331
2007-08 2008-09 2009-10 2010-11 2011-12 F 2012-13 F
Average room rate (ARR) (Rs per day)
RevPAR (Rs per day)
19
Industry Overview
Retailing
The near-term growth of organised retail is expected to
be moderate on account of weak consumer sentiment,
which will be offset to a certain extent by the ongoing
store expansions by organised retailers. In the long
term, however, the outlook for organised retail remains
bright, with penetration set to cross 10 per cent by
2016-17.
Uncertain macroeconomic environment to
moderate growth in near term
After a strong showing in 2010-11, organised retailers
experienced a disappointing year in 2011-12. Revenue
growth of most players was dented by weak consumer
sentiment. Prices of apparel (which accounts for one-
third of organised retail) also surged concomitantly with
the increase in cotton prices and the levy of excise duty
on branded apparel. This resulted in flat-to-negative
volume growth in apparels, and slowed same store
sales growth.
Same store sales growth slows down
Note: Companies considered are Shoppers Stop and
Pantaloon Retail (Value and Lifestyle segments)
Source: Company reports, CRISIL Research
Store expansions to drive revenue growth in
2012-13
However, subdued consumer sentiment did not appear
to dampen the spirits of organised retailers much, as
was evident in the continued store expansions of many
players in 2011-12. In the near term, we expect this
trend to continue, and be the main driver of revenue
growth. Same store sales growth is also expected to
recover in the second half of 2012-13, as apparel prices
are not expected to rise further due to the anticipated
fall in cotton prices. Moreover, organised retailers are
lowering price points to drive apparel volumes. We
believe that organised retail will grow at 19 per cent in
2012-13.
Expansion plans announced by key retailers
Retail consumption growth to remain strong
Notwithstanding short-term blips, we believe that the
retail story will play out strongly in India in the long term,
propelled by rising income, favourable demographics,
and increasing urbanisation and nuclearisation of
families. Thus, the overall retail market (organised and
unorganised) is likely to grow at a healthy compounded
rate of 15 per cent from Rs 23 trillion in 2011-12 to Rs
47 trillion in 2016-17.
0
5
10
15
20
25
2
0
1
0
-
1
1

Q
1
2
0
1
0
-
1
1

Q
2
2
0
1
0
-
1
1

Q
3
2
0
1
0
-
1
1

Q
4
2
0
1
1
-
1
2

Q
1
2
0
1
1
-
1
2

Q
2
2
0
1
1
-
1
2

Q
3
2
0
1
1
-
1
2

Q
4
(Per cent)
Player
Current
area
Net area
added in
FY 12 (9M)
Expansion
plan By
(Mn sq ft) (Mn sq ft) (Mn sq ft)
Shoppers Stop 4.0 0.9 0.4-0.5 2013
Pantaloon Retail 16.0 2.2 ~1.2-1.4 2013
Trent 2.6 0.3 ~1.5-2.0 2016
Spencers Retail 1.0 n.a. ~1 2014
Aditya Birla Retail 2.0 0.0 ~1.0-1.5 2014
Bharti Retail 1.5 1.4 ~0.5-1.0 2013
9M - 9 Months (April-December 2011)
Source: Media reports, CRISIL Research
20
CRISIL CRB Customised Research Bulletin
Overall retail growth in India
E: Estimate, P: Projected
Source: CRISIL Research
Organised retail penetration to cross 10 per
cent by 2016-17
Even as the overall retail pie grows, the share of
organised retail in it is set to rise steadily in the long
term. Organised retail growth is expected to remain
robust, and grow at an annual average rate of 23 per
cent to Rs 4.7 trillion in 2016-17 from Rs 1.7 trillion in
2011-12. This growth will be fuelled by rising affluence
among urban consumers, growing preference for
branded products and greater aspirations among youth.
On the supply side, this growth will be supported by
expansion plans of existing players and the entry of
new players. Consequently, organised retail
penetration is likely to rise to 10.1 per cent in 2016-17
from 7.1 per cent in 2010-11.
Organised retail in India took off by leaps and bounds
primarily in the last decade. Vibrant economic growth
had buoyed growth in organised retail from 2004-05 to
2007-08; at 28 per cent, growth in the organised retail
industry was more than double the growth rate of the
total retail industry (12-14 per cent). However, due to
the economic downturn that followed the global financial
crisis of 2008, consumer sentiment was hit and new
store rollouts decreased, adversely impacting organised
retail revenues. Consequently, the segment grew at a
modest 10 per cent during 2008-09. This was followed
by two extremely good years, following the economic
rebound, which resulted in organised retail expanding at
a compounded rate of 24 per cent in 2009-10 and 2010-
11.
Organised retail growth in India
ORP- Organised Retail Penetration (Per cent)
Source: CRISIL Research
Food and grocery offers the biggest potential
Food and grocery accounts for more than two-thirds of
the overall retail in India, but organised retail
penetration (ORP) in this vertical is the lowest at 2.2 per
cent. This vertical is dominated by kirana stores (mom
and pop stores), cart vendors and wet markets in the
unorganised space. These unorganised players have
extremely low overheads (stores, if applicable, are self-
owned and self-managed) and offer stiff competition to
organised players in terms of convenience (home
delivery facilities, credit facilities, locational advantage
etc). The low ORP indicates the extent of the
opportunity available, but the challenge for organised
retailers lies in achieving economies of scale and
managing the supply chain to ensure profitability.
The apparel vertical has the highest share in organised
retail and is also well-penetrated in the organised space
with an ORP of around 20 per cent. This relatively high
ORP is due to factors such as preference for brands
12
23
47
-
5
10
15
20
25
30
35
40
45
50
2006-07 (A) 2011-12 (E) 2016-17 (P)
(Rs trillion)
14.5%
CAGR
15%
CAGR
0.6
1.7
4.8
0
1
2
3
4
5
2006-07 2011-12 2016-17
ORP
21%
CAGR
23%
CAGR
5.4 7.1 10.1
(Rs trillion)
21
and the ability to differentiate products on the basis of
cuts, styles, colour, fabric etc. Consumer durables,
mobiles, and IT and footwear are the other verticals
where organised retail has a relatively strong presence.
Share of verticals in overall and organised retail
Food and grocery, and beauty products to
grow faster
We expect strong growth in the long term in verticals
such as food and grocery, and beauty products (which
includes jewellery, watches, eyecare, accessories, etc).
Under-penetration and the huge latent potential have
made the food & grocery vertical 'too big to ignore' for
organised retailers, who intend to gain a share of this
pie by rolling out convenience stores, supermarkets,
and hypermarkets. The growth of the beauty products
vertical will be supported by increasing affluence and
aspirations among the youth.
Slower growth expected in books, home decor
and consumer durables
Verticals such as books and music, consumer durables,
mobiles and IT and home decor and furnishings are
expected to grow at a slower pace compared with the
other verticals. In the case of books and music, the
online retailing model has more advantages in terms of
the variety available and price discounts that are
offered. As a result, we do not anticipate large
expansions by existing players or the entry of new
players in the retailing of books through offline stores.
The current trend among existing book retailers is to
diversify their product mix to include games, stationery,
gift items and accessories, which offer higher margins.
Consumer durables and home decor and furnishings
are challenging businesses, where we expect players to
focus on profitability, rather than expansion. In
consumer durables, the gross margin of a multi-brand
retailer is typically 10-12 per cent. Sustaining a modern
retail format on such low gross margins is a difficult
proposition. Similarly, the home decor and furnishings
vertical is challenging on account of significant
investment required in working capital.
Verticals
Market Size Share Market Size Share ORP
Rs. billion in total Rs. billion in total
Food & Grocery 16,342 70% 363 22% 2.2%
Apparel 2,727 12% 543 33% 19.9%
Consumer
durables, Mobile
and IT
1,358 6% 312 19% 23.0%
Home dcor &
f urnishing
1,014 4% 54 3% 5.3%
Beauty,
personal and
health care
(products)
1,238 5% 144 9% 11.6%
Pharmacy 298 1% 20 1% 6.7%
Jewellery,
watches,eyecare
and others
940 4% 124 7% 13.2%
Footwear 605 3% 94 6% 15.5%
Books,music 149 1% 13 1% 8.6%
Total 23,433 100% 1,667 100% 7.1%
Source: PFCE, CRISIL Research
Total Retail (2011-12) Organised Retail (2011-12)
22
CRISIL CRB Customised Research Bulletin
Ashiana Housing Ltds (Ashianas) Q4FY12 results significantly exceeded
CRISIL Researchs expectations on higher-than-expected revenues and
operating margin. Driven by growth in revenues, earnings beat our estimates
and grew 57% y-o-y to Rs 267 mn. We may revise our earnings estimates
post discussion with the management. We continue to remain positive on
Ashiana given its strong brand in the affordable housing segment and maintain
our fundamental grade of 4/5.
Q4FY12 and FY12 consolidated result analysis
Q4FY12 revenues grew 68% y-o-y and q-o-q to Rs 903 mn and beat our
expectations of Rs 532 mn. The growth was driven by revenue
recognition in some of the key projects such as Rangoli Gardens, Jaipur
and Ashiana Aangan, Bhiwadi. Bookings during the quarter remained
strong at 0.5 mn sq.ft. - highest quarterly run-rate till date - vs. 0.42 mn
sq.ft. in Q3FY12 and 0.38 mn sq.ft. in Q4FY11. Average realisation grew
15% y-o-y and 5% q-o-q to Rs 2,302 per sq.ft. in Q4FY12. FY12
revenues grew 62% y-o-y to Rs 2,431 mn.
Despite increase in realisations, EBITDA margin declined 630 bps y-o-y
to 36.2% in Q4FY12 mainly due to increase in raw material costs.
However, it was above our expectations of 34.5%. On a q-o-q basis,
EBITDA margin improved 390 bps due to increase in contribution from
high-margin projects such as Lavasa, Pune and Rangoli Gardens,
Jaipur. For FY12, EBITDA margins declined 180 bps y-o-y to 34.5%.
Despite a decline in EBITDA margin, PAT registered strong growth of
57% y-o-y to Rs 267 mn due to lower tax expenses. EPS was reported
at Rs 14.3 vs. Rs 9.1 in Q4FY11. FY12 PAT grew 59% y-o-y to Rs 696
mn.
Analysis of FY12 standalone results
Revenues grew 51% y-o-y to Rs 2,180 mn in FY12. EBITDA margin
improved slightly by 40 bps y-o-y to 38.1%.
PAT grew 62% y-o-y to Rs 687 mn driven by revenue growth and
improvement in EBITDA margin.
Change in accounting policy from FY12 onwards
The company will transition to the contract completion method of accounting
from FY12 onwards vs. the current percentage completion methodology.
Owing to this, revenue recognition in the projects launched after April 2012 will
undergo a change but there will be no impact on cash inflows. We will provide
further clarity on the same and incorporate changes in the earnings estimates,
if any, post discussion with the management.
Valuations: Current market price has upside
We continue to value Ashiana by the net asset value method. Our fair value is
Rs 205 per share. We may revise it post interaction with the management. At
the current market price of Rs 173, the valuation grade is 4/5.
Key Forecast (Consolidated)
(Rs mn) FY09 FY10 FY11 FY12# FY13E
Operating income 918 1,139 1,396 2,431 2,223
EBITDA 222 398 441 838 767
Adj Net income 286 363 429 696 548
Adj EPS-Rs 15.8 20.1 23.1 37.4 29.5
EPS growth (%) -26.1 26.8 15 62 -21.2
Dividend Yield (%) - 1 1.2 1.6 1.2
RoCE (%) 24.7 32.6 26.9 36.9 26.1
RoE (%) 34.9 32.1 28.2 33.6 20.8
PE (x) 10.9 8.6 7.5 4.6 5.9
P/BV (x) 3.2 2.4 1.8 1.3 1.1
EV/EBITDA (x) 13.6 7.7 6.2 3.6 3.8
NM: Not meaningf ul; CMP: Current market price
#Abridged f inancials
Source: Company, CRISIL Research estimates
CFV matrix
Shareholding pattern
Performance vis--vis market
1
2
3
4
5
1 2 3 4 5
Valuation Grade
F
u
n
d
a
m
e
n
t
a
l

G
r
a
d
e
Poor
Excellent
S
t
r
o
n
g
D
o
w
n
s
i
d
e
S
t
r
o
n
g
U
p
s
i
d
e
Key stock statistics
Nifty/Sensex 4951/16312
NSE/BSE ticker ASHIANA/ASHIHOU
Face Value (Rs per share) 10
Shares outstanding (mn) 18.6
Market cap (Rs mn)/(USD mn) 3,220/57
Enterprise value (Rs mn) 2,891/51
52-week range (Rs) (H/L) 185/112
Beta 1.4
Free float (%) 33.5%
Avg daily volumes (30-days) 135,285
Avg daily value (30-days) (Rs mn) 4.07
66.1% 66.1% 66.1% 66.1%
0.2% 0.2% 0.2%
0.4%
0.8% 0.0%
0.0% 0.0%
32.9% 33.7% 33.7% 33.5%
0%
20%
40%
60%
80%
100%
Jun-11 Sep-11 Dec-11 Mar-12
Promoter FII DII Others
1-m 3-m 6-m 12-m
ASHIANA
-1% 2% 14% 33%
NIFTY
-6% -8% 2% -10%
Returns
Independent Equity Research Report
Ashiana Housing Ltd
May 31, 2012
23
Customised Research Services Real Estate
Coverage
Key Customised Offerings
Real estate: Residential, Commercial, Malls & Multiplexes, IT/SEZs etc
Feasibility study/ Land development mix
Market potential of a city and Area-wise analysis
Valuation
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Market analysis, Industry sizing and Feasibility Study
Competitive analysis
Franchisee evaluation
Valuation
Healthcare: Speciality, Super-speciality, Multi-speciality, and allied segments like diagnostic centres,
standalone clinics, etc.
Market analysis, Industry sizing and Feasibility Study
Competitor analysis/Benchmarking
Valuation
Studies on allied services like health insurance, medical colleges, pharmacies and diagnostic centres
Hospitality: Premium, budget hotels, Service apartments, Quick-service restaurants, coffee shops, etc.
Market analysis and Feasibility study
Valuations
Management company/Franchisee evaluation
Ahmedabad Bhopal
Bengaluru Bhubaneswar
Chandigarh Coimbatore
Chennai Indore
Hyderabad Jaipur
Kochi Lucknow
Kolkata Nagpur
Mumbai Surat
NCR Vadodara
Pune Visakhapatnam
Organised retail
Educational Services
Hospitals
Hotels
City Real(i)ty Real(i)ty Next
Cities covered: Cities covered:
24
CRISIL CRB Customised Research Bulletin
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