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February 1, 2010
DB Realty Limited
Issue opens Issue closes Issue size (Rs crore) No of shares on offer - Fresh Issue to the public - Employee Reservation QIB ( 60% ) Non Institutional ( 10% ) Retail ( 30% ) Minimum lot size
Another Mumbai-based player…
January 29, 2010 February 02, 2010 Rs. 1500 crore 3.1-3.2crore 3.1-3.2 crore NA 1.85-1.92crore 0.31-0.32 crore 0.93-0.96 crore 14 11,385-11,765
Price band Rs 468 – Rs 486
Incorporated in 2007, DB Realty Limited (DB Realty) is a real estate developer focused in and around Mumbai. DB Realty has a land bank of 61 million (mn) sq ft (Ongoing projects – 19.5 mn sq ft, forthcoming– 19.3 mn sq ft and upcoming– 22.2 mn sq ft). Approximately 85% of the land bank is spread in and around Mumbai. Land bank spread in Mumbai As on December 31, 2009 DB Realty has a land bank of 61 mn sq ft (Ongoing projects – 19.5 mn sq ft, forthcoming – 19.3 mn sq ft and upcoming– 22.2 mn sq ft). Out of 61 mn sq ft, ~85% of the land bank is spread in and around Mumbai in places such as Goregaon, Mira Road, Dahisar, Kandivali, BKC and Andheri. Additionally, ~7% of the land bank is spread in the southern part of the Mumbai where the realisations are pretty high given the lack of scarcity of land in these areas. Parentage advantage The families of the promoters have been in the real estate and related businesses for decades and have developed several large projects in and around Mumbai.
Market cap (Post issue) (Rs. Crore)
Objects of the Issue
Particulars Construction & development cost for certain of the projects Pre-payment of loan from IDFC Amount (Rs. Crore) Rs. 1044.7 crore Rs. 80 crore
General corporate purposes & issue Rs.375.3crore ISIEmergingMarketsPDF in-pwcdel from 126.96.36.199 on 2011-08-15 03:39:26 EDT. DownloadPDF. Concerns related expenses
Pre-Issue No of shares (In crore) Promoters (%) Others (%) Public (%) 21.1 73.7 0.0 26.3 Post-Issue 24.2-24.3 64.0-64.3 0.0 35.7-36.0
Crisil has assigned the IPO grade of 2/5 indicating that the fundamentals of the IPO are below average relative to the other listed equity securities in India DB Realty has invested Rs 705.1 crore in unlisted entities related to DB Realty. It has provided corporate guarantees, aggregating to ~Rs 2519 crore, in connection with certain debt facilities availed by such entities, which are in excess of DB Realty’s net worth
Rs. Crore Sales EBITDA PAT EPS ( post issue) EBITDA margin (%) PAT margin (%) FY08 0.0 -12.8 -23.6 -1.0 NA NA FY09 464.4 225.8 143.8 6.0 48.6 31.0 H1 FY10 39.4 146.8 64.1 2.7 37.2 16.2
DB Realty is available at 3.9x P/BV at the lower price band of Rs 468 per share and 4.0x P/BV at the higher price band of Rs 486 per share. While, we like the quality of the land bank, we see better opportunities available in the secondary markets at these levels of valuation. Hence, we recommend investors AVOID the issue. Exhibit 1: Key Financials
Particular Net sales EBITDA Margin (%) Reported PAT Margin (%) Post Issue Diluted EPS (Rs) RoE(%) RoCE(%)
Source: Company, ICICIdirect.com Research *Annualised
FY08 0.0 -12.8 -23.6 -1.0
Deepak Purswani email@example.com
FY09 464.4 225.8 48.6 143.8 31.0 6.0 18.7 10.2
H1FY10 394.4 146.8 37.2 64.1 16.2 2.7 11.5* 11.1*
ICICIdirect.com | Equity Research
Downloaded by in-pwcdel from 188.8.131.52 at 2011-08-15 03:39:26 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.
8 20.0 6. Project Name Orchid Zone. forthcoming – 19. Mahul. forthcoming – 19.70 0.198.5 0.58 0.52 2.6 0.7 22. ICICIdirect.4 1.Goregaon Orchid Heights.9 61. which is largely focused on the residential vertical in the Mumbai real estate market. Yerawada.0 0.9 66.24 0.1 0. Mahalaxmi Orchid Corporate Park. ISI Emerging Markets.9 mn sq ft of real estate development.Andheri Orchid Hills. 2009.6 29.47 0.49 8.0 0.2 19.8 93. Dahisar Orchid Woods.2 3.0 Source: Company.6 8.5 40. DownloadPDF.com | Equity Research Downloaded by in-pwcdel from 117. The company is jointly promoted by Vinod Goenka and Shahid Balwa.6 3. Exhibit 2: Break-up of saleable are Land bank of 61 mn sq ft (Ongoing -19.Company Background Incorporated in 2007. In terms of land bank. 2009.62 0.4 10.88 0.7 12. Kandivali Mahul Nagar.3 mn sq ft and upcoming -22.0 0. DB Realty has a land bank of 61 mn sq ft (Ongoing project – 19.120. Andheri Orchid Turf View.5% of the ongoing projects are in Mumbai Source: Company.0 0. As on December 31.2 0.1 100.Andheri Ascot Centre.2 100. retail and other projects such as mass housing and cluster redevelopment in and around Mumbai. Page 2 .163 on 2011-08-15 03:39:26 EDT.Mumabi Orchid Hills.5 56.2 mn sq ft) Residential Commercial Retail Mass Housing & cluster Redevelopement Total Ongoing Forthcoming Upcoming Total Mn sq ft % Mn sq ft % Mn sq ft % Mn sq ft 6.com Research Exhibit 3: Details of ongoing projects ISIEmergingMarketsPDF in-pwcdel from 117.0 17.6 2. As on December 31.6 1.Chandivali.0 0. Jacob Circle Orchid Suburbia.120. Andheri Orchid Centre. Pune Orchid Crown.25 0.3 32.48 1. This includes residential projects – developable area of 15. respectively.4 1.5 mn sq ft.Chandivali.163 at 2011-08-15 03:39:26 EDT.03 0.2 1.198.0 0. Dadar Total Type Residential Retail Residential Residential Residential Mass Housing TDR Residential TDR Commercial Residential Commercial Residential & Retail Residential Expected Saleable completion Area (in mn sq ft) Start date date 1. Unauthorized Distribution Prohibited.6 mn sq ft. the promoters and promoter group companies have collectively developed ~15. whose families have been in the real estate business for more than 25 and 95 years.51 Aug-09 Aug-09 Feb-07 Nov-09 Jan-09 Mar-07 Mar-09 Mar-09 Feb-07 Jan-10 Jan-10 Jan-09 Jan-10 Sep-12 Sep-12 Jun-11 Mar-13 Dec-11 Mar-11 Mar-13 Mar-13 Dec-12 Mar-13 Nov-12 Jun-12 Dec-12 Total estimated Cost cost (Rs incurred cr) (Rs cr) 625 542 506 471 854 878 155 675 472 135 567 5882 193 404 123 280 643 50 10 74 101 4 7 1888 Total 97.34 1.9 19.3 mn sq ft and upcoming– 22.com Research ICICIdirect. commercials.90 19.3 100.2 mn sq ft).9 35. DB Realty is a real estate development company that is focused on residential.3 100.3 mn sq ft and commercial & retail projects with developable area of 0. the company currently has a land bank of 61 mn sq ft.6 mn sq ft. ICICIdirect.0 % 66. Dahisar Orchid Zone.
Exhibit 4: Details about forthcoming project Total Saleable Expected estimated Cost Area (in completion cost (Rs incurred mn sq ft) Start date date cr) (Rs cr) 1. ICICIdirect. Mumbai Central Orchid Lawn.Goregaon Orchid Hills Park. DownloadPDF.35 Jan-11 Dec-16 22.163 on 2011-08-15 03:39:26 EDT. BKC Orchid Town. Mumbai Central Orchid Park. Sangamwadi.2% of forthcoming project are in Mumbai Project Name Orchid Hills Park.35 Jan-11 Dec-16 0. Pune Orchid Lawn.3 5110 438 Total 65. Mumbai Central Orchid Apartments.198.4% of upcoming projects are in Mumbai Project Name Orchid Acre.19 Jul-10 Jun-12 461 15 0.69 Jul-10 Dec-12 272 20 0. Byculla Orchid Central.99 Jan-11 Dec-16 951 39 0.64 Sep-10 Mar-13 267 27 0. Pune Orchid Lawn. Mankhurd Orchid Splendour.120.21 Aug-10 Jul-13 2. BKC DB Tower.19 Apr-10 Mar-13 6.69 Apr-10 Mar-13 476 16 0.43 Mar-11 Feb-15 447 560 0.93 Apr-10 Dec-13 2910 105 0. Byculla DB Tower. Pune Total Type Residential Residential Residential TDR Residential Residential Residential Commercial Retail Source: Company.com Research Exhibit 5: Details about upcoming project Total estimated Cost Expected Saleable completion cost (Rs incurred Area (in (Rs cr) cr) mn sq ft) Start date date 17. Sangamwadi.30 Sep-10 Aug-13 244 1 0. ICICIdirect.72 Aug-09 Sep-12 2137 53 19.42 Apr-10 Mar-13 170 21 0. Sangamwadi.73 Mar-11 Feb-15 0.67 Aug-10 Jul-13 683 2 6.Goregaon Orchid Garden. Bacchuwadi Orchid Skyz. Pimpari Total Type Residential TDR Residential Residential Residential Residential Residential Residential Commercial Residential Source: Company. Mankhurd Orchid Apartments.com Research ISIEmergingMarketsPDF in-pwcdel from 117.2 4. Mira Road Orchid Enclave II. Malad Orchid View. Dahisar Orchid West View.01 Apr-10 Mar-13 582 309 0.com | Equity Research Page 3 . ICICIdirect.869 760 Total 92.34 Jul-10 Dec-12 121 16 0.66 Apr-10 Mar-13 260 15 0.
Dahisar.198.0 20. 85% of the total land is spread in Mumbai. ICICIdirect. Importantly. Kandivali and BKC & Andheri. The land bank is spread in areas such as Goregaon.0 100. ICICIdirect. ISIEmergingMarketsPDF in-pwcdel from 117.3 Mumbai Source: Company. However. these projects are long gestation projects with initial two years involved in negotiations with tenants and getting regulatory approvals. ISI Emerging Markets. Mira Road.4 85. The company is looking to focus only on the Mumbai real estate market.Investment Rationale Land bank spread in island city of Mumbai DB Realty is largely focused on the Mumbai real estate market.0 60. and have developed several large projects in and around Mumbai. Page 4 .163 at 2011-08-15 03:39:26 EDT.5 65. respectively. Exhibit 6: Area wise break-up of land bank (%) 120.7 97.0 0.2 92. approximately 7% of the total land bank is spread in southern parts of Mumbai where the realisations are pretty high given the scarcity of the land. These projects typically have FSI as high as 4x while realisations are pretty high in southern parts of Mumbai.com | Equity Research Downloaded by in-pwcdel from 117. Unauthorized Distribution Prohibited. The families of Vinod K Goenka and Shahid Balwa have been in the real estate and related businesses for more than 25 years and 95 years.120.com Research Pune Strong parentage providing access EDT.163 on 2011-08-15 03:39:26 to experience & capabilities The promoter’s family has been in the real estate business for a long time DB Realty benefits from its promoter’s background in the real estate development industry. DownloadPDF.6 14. May participate in redevelopment space in Mumbai May enter into block redevelopment in Mumbai DB Realty may look for redevelopment space in southern parts of Mumbai in future for block redevelopment under DCR 33(9).0 40.0 80.120.0 Ongoing Forthcoming Upcoming Total 2. Out of 61 mn sq ft.198.5 34.8 7.
ISIEmergingMarketsPDF in-pwcdel from 117.7% of the total debt sanctioned to such entities. DownloadPDF. which are in excess of DB Realty’s net worth. Page 5 .Key concerns Crisil rates IPO grade of 2/5 Crisil has assigned the IPO a grade of 2/5. ISI Emerging Markets.1 crore in unlisted entities related to DB Realty and provided corporate guarantees. Corporate guarantees provided for subsidiaries DB Realty has provided corporate guarantees of subsidiaries.163 on 2011-08-15 03:39:26 EDT.2009. This grade indicates that the fundamentals of the IPO are below average relative to other listed equity securities in India. ICICIdirect. The grading reflects the fact that DB Realty lacks operating history in real estate development. Higher concentration on Mumbai real estate market DB Realty’s land bank is highly concentrated in and around Mumbai. These corporate guarantees constitute about 68. DB Realty has invested Rs 705.198. In the current land bank of 61 mn sq ft.120.com | Equity Research Downloaded by in-pwcdel from 117. aggregating to ~Rs 2519 crore.120.163 at 2011-08-15 03:39:26 EDT. in connection with certain debt facilities availed by such entities. which are in excess of its net worth As on September 30.198. Unauthorized Distribution Prohibited. ~85% of the land bank is spread in and around Mumbai. Any slowdown in the Mumbai real estate market could impact its financial significantly.
866 1. There are better opportunities available in the secondary market DB Realty is available at 3.452 61 56.0 2.929 1.632 71. Page 6 .7 1.975 328* 11.8 crore.198. Unauthorized Distribution Prohibited.0x P/BV at the higher price band of Rs 486 per share. there is limited financial history of the company.163 on 2011-08-15 03:39:26 EDT. DownloadPDF.317 541 582 667 EV/sq ft 1. ISI Emerging Markets.4 crore while net profit stood at Rs 64.651 700 742 722 P/BV 3.041 1.979 2.574 196 3. In FY09. we see better opportunities available in the secondary markets at these levels of valuation.7 4.337 3.1 crore. the company’s revenues stood at Rs 464.072 61 11.120. Valuations Avoid the issue.com Research ISIEmergingMarketsPDF in-pwcdel from 117. Exhibit 7: Valuation table DB Realty @Rs468 DB Realty @Rs486 DLF Unitech HDIL Godrej Properties Land bank ( Mkt cap (Rs mn sq ft) cr) EV (Rs cr) 11. the company’s revenues stood at Rs 394.2 1.120.9x P/BV at the lower price band of Rs 468 per share and 4.198.732 22. Hence.Financials Financials impacted by recent slowdown Since the company was incorporated in 2007.385 12. we recommend investors AVOID the issue.com | Equity Research Downloaded by in-pwcdel from 117.163 at 2011-08-15 03:39:26 EDT. In H1FY10. While we like the quality of the land bank.608 50 Mkt cap/ sq ft 1. ICICIdirect. ICICIdirect.3 Source: Company.765 12.9 4.012 430 17.433 14.4 crore and net profit stood at Rs 143.
8 6.4 247.8 4.198.3 Loans & Advances 984.2 -1.8 74.6 146.9 215.6 1411.6 2444.120.9 64.1 4.1 211.2 Total Liabilities 1824.0 0.com | Equity Research Downloaded by in-pwcdel from 117.0 Investment 178.163 on 520.5 1. Unauthorized Distribution Prohibited.8 48.8 2011-08-15536.7 6.5 0.2 Reserves & Surplus 718.8 1244.4 9.9 157.9 -25.6 -23.7 76.3 15. Page 7 .0 12.3 55. Unsecured Loans 380.6 31.6 801.8 -12.1 3.1 03:39:26 EDT.4 150.1 2670.2 25.2 342.8 1057.4 238.1 37.1 2670.5 1.5 0. ISI Emerging Markets.163 at 2011-08-15 03:39:26 EDT.7 Exhibit 2: Balance Sheet Particular FY08 FY09 H1FY10 Share capital 9.6 Sundry Debtors 9.0 2.1 452.7 ISIEmergingMarketsPDF in-pwcdel from 117.6 Cash & bank balance 103.0 0.8 1172.4 714.6 77.5 6.4 0.5 1200.3 20.8 Net Block 14.8 70.0 0.5 Capital WIP 0.6 0. DownloadPDF.9 64.6 Minority Interest 55.3 Deferred Tax Liability 0.0 0.1 42.6 225.2 16.0 H1FY10 394.4 1.7 7.6 2444.7 143.Financial Summary Exhibit 1: Profit and Loss Account Particular Net sales Total expenditure EBITDA Other income Interest Depreciation Profit Before Tax Taxes PAT OPM (%) NPM (%) Outstanding shares EPS (Rs) Diluted EPS (post issue) Source: Company FY08 0.3 Net Worth 728.8 Source: Company ICICIdirect.2 1302.4 Current Liabilities & provisions 438.6 86.4 55.4 Total assets 1824.2 21.1 Other current assets 0.0 12.4 Inventories 533.1 -23.8 6.0 810.8 18.120.0 FY09 464.4 Secured Loans 222.198.
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