India Research

Relative Performance
140 120 100 80 60 40 Feb-07 Apr-07 Akruti Parsvnath
Source: ENAM Research, Bloomberg

Real Estate Sector Report
Jun-07 Anant Raj Sensex

Relative Performance
140 120 100 80 60 40 Feb-07 Apr-07 Peninsula Unitech
Source: ENAM Research, Bloomberg

Time to ‘bank’ on execution
Jun-07 Sobha Sensex

Financial summary
Company DLF Ltd Unitech Ltd Sobha Dev. Parsvnath Dev. Anant Raj Indus. Akruti Nirman Peninsula Land Price Mkt cap (Rs.) (USD mn) 550^ 22,869 546 10,868 918 1,646 318 1,443 1,135 957 360 590 540 558 Sales (Rs bn) FY08E 138 46 16 23 8 10 6 FY09E 230 76 25 41 15 23 10 EBITDA (Rs bn) FY08E 95 20 5 8 5 3 4 FY09E 163 42 8 14 9 5 6 EPS (Rs.) FY08E 44.4 15.4 34.5 24.6 111.5 26.4 45.3 FY09E 79.9 34.0 46.8 43.8 184.7 53.8 76.1 RoE (%) FY08E 77 59 25 27 22 29 56 FY09E 62 68 27 37 24 41 51 RoCE (%) FY08E 50 32 20 26 21 26 34 FY09E 57 46 20 36 20 31 36 Tgt Price Relative (Rs.) to Sector 404 UP 526 N 907 N 483 OP 1,256 OP 352 N 472 UP

Source: Company, ENAM Research, Industry estimates; ^ Assumed at upper price band; Note: OP: Outperformer; N: Neutral; UP: Underperformer

Lead Analyst: Chirag Negandhi

chirag.negandhi@enam.com (+91 22 6754 7618)

Associate: Nitin Idnani

nitin.idnani@enam.com (+91 22 6754 7655)

June 6, 2007 1

Table of contents
Slide No. Investment Summary Industry Dynamics Valuation Approaches Peer Comparison Company Section
Unitech Sobha Developers Parsvnath Developers Anant Raj Industries Akruti Nirman Peninsula Land DLF Ltd 17 26 35 44 54 64 73

3 4 10 14 16

Appendix

81
2

Investment Summary
Much gain after some immediate pain
Combination of demographics and income growth to continue to catapult demand Long Term Demand Drivers

Indian Realty: Long Term Opportunity Intact
Rising disposable income Improving regulatory framework Shift from rented to owned houses Indian Real Estate Retail / IT / ITES / BPO Nuclear Families Easy access to financing

Robust long term opportunity However, short term conditions unfavourable
Dampened affordability, rising interest rates and oversupply to play spoilsport in the near term

Current valuations: On blue sky scenario
Short Term Dampeners

Valuations do not factor near term concerns
Inevitable execution delays and lack of easy access to capital to lower projected RoEs Subdued demand and the resultant price correction in the short term to affect project IRRs

Inadequate execution ability

Higher interest rates

Lack of easy access to capital

Focus to shift from owning land to execution
Possible Scenarios Owning land Actual Execution Cash flows Stock prices to remain volatile due to the current expectation-reality mismatch Delays in project completion Bruised affordability to result in lower off take Difficulty in achieving financial closures

Recommendations:
Attractive entry points ahead
Stock prices expected to correct to reflect current unfavorable conditions

Shift in Valuations

We recommend entry at lower levels to benefit from the secular growth opportunity Initiating coverage on the following companies
Outperformer: Parsvnath Developers, Anant Raj Neutral: Unitech, Sobha Developers, Akruti Nirman Underperformer: DLF, Peninsula Land

Euphoria Subsides Leading to pain in the short term.

Shift in approach imminent Valuations based on land banks considered inappropriate – greater weightage to scalability and execution capabilities

Source: ENAM Research

3

Industry Dynamics

4

Long Term Opportunity Intact
Real estate market

60 50 40 30 20 10 0

~USD 50bn market in 2010

Real Estate Potential in India
Market expected to grow at 33% thru 2005-10 to USD 50bn Housing: Current shortage seen at ~19.8mn housing units 5x increase in office space over the next 3-5 years Over ~200 mn sq. ft. for organized retail by 2010 Over ~50,000 new hotel rooms in the next 5 years

(US$bn)
33% CAGR

50bn

Housing 74% Others 12%

12bn

2004-05

2009-10E

Retail 14%

Source: Industry Experts, TSMG estimates , ENAM Estimates

Opportunity for all real estate players - large & still real
Residential
300 250 200 150 100 50 0 (mn) (mn) 30 25 20 15 10 5 0 1961 1971 1981 1991 2001 2005E Usable Housing Stock No. of Households Shortfall (RHS)
Source: HDFC

600 500 400 300 200 100 0

Commercial
(mn sq.ft) 125-260 70-130 180-220 FY05-10 -IT/BPO FY05-15 -Non IT
500 400 300 (USD bn)

Retail
(USD bn) 60 50 40 30 20 10 0 FY05 FY06 FY07E FY08E FY09E FY10E Retail Sales (LHS) Organized Retail (RHS)
Source: Images 2006

350-400

200 100 0

Source: DGCI and Statistics & Economic Survey

5

But not without cyclical hiccups…
Rapid surge in property prices
35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 (Rs/sq.ft)
16 12 8 4 (%)

Higher Interest Rates

Sensitivity of EMI to rising rates
Interest Rate (%) 7.5 8.5 9.5 10.5 11.5 EMI (Rs) 806 868 933 999 1067

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0 2002 2003 2004 2005 2006 2007 Lending Rates Source: HDFC Inflation Rate

Mumbai Source: ENAM Research

Delhi

Source: ENAM Research; Note: Tenure/EMI increase for a Rs. 100,000 20 year loan

..Resulting in a shift to lower gear in the short term
30 29 28 27 26 25 2004 2005 2006 2007

Higher interest rates leading to slowdown in off take
(%) (%)

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Jul-06

Oct-06

Jan-07

Apr-07

Real Estate Index (LHS)# Disbursement Gwth (LHS) Int. Rates (RHS) Interest Rate Index (RHS)* Source: HDFC, Trammell Crow Meghraj, ENAM Research # Free float weighted index of stocks under coverage and Ansal Housing, Ansal Properties & D.S Kulkarni Developers * Average of home loan rates for HDFC Bank and ICICI Bank

Mumbai Chennai

Delhi Kolkatta

Bangalore

While mortgage rates are being seen as peaking out, another 25bps hike (expected) could further derail the sector’s growth trajectory in the near term

2007

14 700 600 500 12 400 300 10 200 100 0 8 Apr-06

Real estate sector highly sensitive to interest rates
13 12 11 10 9

Yield Rates Bottoming out
16 14 12 10 8 (%)
Reversal in yield rates seen

6

Blue sky assumptions to be tested
Huge Scale up in Execution: Can it be achieved?
1,000 100 10 1 Unitech DLF Since inception
Source: Company estimates
7

(mn sq.ft)
70

430 150 29

419 101 51 12 4 4 2 2 1 46 9 13 12 10 143 39

Sobha

Parsvnath FY07-09E

Peninsula Land

Akruti FY10E-FY15E

Anant Raj

Valuations based on 10-15x Scale up from current execution levels Even if achieved, this would lead to either/both of the following scenarios:
Over Build Price Crash Consolidation Supply withheld- Prices maintained - Lower offtake than current assumptions Supply withheld to not exceed demand Price not allowed to correct Off take at lower levels than that assumed in current valuations

Increased supply to lead to glut in key markets Prices lowered to clear inventory Consolidation among smaller players Shift in focus from volume to quality

Thus, while current players could scale up 5-6x over the longer term, we believe current valuations based on 10-15x scalability are too aggressive
Source: ENAM Research

7

Other implicit assumptions…
Variable Real estate prices Assumption 5% escalation YoY Comment Real estate prices have moved up significantly in the last 2 years, with signs of cooling off being seen Unsustainable growth rate of prices to stabilize, if not fall Competition may lead to undercutting and a fall in prices for all Demand Sustainable Developers are planning to build 10-15x their total development since inception Most of the portfolio consists of residential offerings targeting the top 10 to 15 cities Can all players sell all the stock being developed in such an aggressive timeframe? Interest Rate & Liquidity Easy Access Mortgage rates have risen by at least 4% from the bottom over the past 18 months RBI clamps down on Bank funding through adverse risk weights and other measures

…may not hold water in light of the current scenario
Prices stagnating in pockets
City Residential Marathalli, Whitefield, Airport Rd. Bangalore Banerghatta Road Indiranagar, Cunningham Road South Mumbai Central Suburban
Source: Cushman & Wakefield Stagnant, likely to rise

Restrictions of Lending to Developers
Trend Commercial Peripheral - ITPL Whitefield /Elect. City Peripheral Outer Ring South Suburban Navi Mumbai
Stagnant
Apr-07 Apr-06

Trend

Date Apr-06

Regulation Risk weight on exposures to commercial real estate raised to 150 per cent Provisioning for standard advances raised to 1.0 per cent for residential housing loans beyond Rs.2mn and commercial real estate loans Proposed clamping down on overseas financing via ECBs for real estate to contain inflation.

Source: RBI

Adjustment the current blue sky scenarios provide attractive entryentry points attractive points, going Adjustment inin current blue sky scenarios toto provide RBI Source: forward going ahead
8

Massive supply coming…prices already weakening!!
City wise planned supply*
City NCR Residential Commercial Others Chennai Residential Commercial Others Bangalore Residential Commercial Others Kolkata Residential Commercial Others Mumbai Residential Commercial Others Mn sq. ft. 505.9 374.6 112.6 18.5 209.6 141.5 37.1 30.9 117.8 76.4 25.8 15.6 305.4 245.5 41.7 18.2 128.9 117.6 8.0 3.2

Price trend (q/q) over the last year, given the current supply
150% 100% 50% 0% -50% -100% Dec-06 Mar-07 Sep-06

NCR
80% 60% 40% 20% 0% -20% Dec-05 Mar-06

Mumbai

Dec-06 Dec-06

Jun-06

Def. Col Ghaziabad Faridabad
120% 90% 60% 30% 0% -30% -60% Dec-05 Mar-06

Green Prk G. Noida Noida

E Delhi Gurgaon

Andheri Worli

Bandra Vashi

S Mumbai

Chennai

Executed since inception
Company Akruti Anant Raj Parsvnath Peninsula Land Sobha Developers Unitech DLF
Source: ENAM Research; *Note: Includes only plans of companies covered in this report

mn sq. ft. 1.4 11.8 3.8 2.4 4.5 7 29

100% 80% 60% 40% 20% 0% -20% -40%

Bangalore

Dec-06

Jun-06

Mar-07

Dec-05

Mar-06

Jun-06

Boat Club Guindy

T Ngr Egmore

Source: Cushman & Wakefield, Knight Frank India

Rajaji Ngr Basvangudi Indira Ngr Sadashiv Ngr

Malleswaram Kormangla J P Ngr M G Rd

Can the prices truly sustain, given the exponential jump in planned supply?

9

Mar-07

Sep-06

Sep-06

Mar-07

Sep-06

Valuation approaches will evolve
Consensus on appropriate valuation methodology yet to emerge
Earnings multiple approaches some time away, given uncertainty of execution visibility and monetization of land gains (historical purchase, future land sale v/s construction)

Our recommended valuations approach: Key components
1. 2. 3. 4.

Land bank value: Market value of land based on: Historical cost + appreciation from readying the land for development
Stages: Land acquisition and aggregation -- > title clearances -- > zoning -- > plan approvals and other clearances

Conversion margin on sold properties: Multiple on conversion margin – This is based on actual execution schedule of projects without factoring in any land gain Leased properties: Valued as income yielding assets on a rent capitalization basis Other real estate related businesses: Asset management, contractual construction, facilities management, etc valued on a multiple of FY09 operating income

Valuations based on 3 scenarios of Execution
Best Case: Respective company’s estimates Base Case: Our estimate of what the company can execute Bear Case: Execution growth at a 35% p.a. from FYE 07 for all companies

Key Assumptions
Components of Valuation Bear Case Conversion margin multiple (x) Land Value appreciation (x) Finished Projects – Cap Rate (x) Related Businesses – FY09 OPM multiple (x)
Source: ENAM Research

Assumptions Base Case 10 2 10 10 Best Case 12 3 8 12 8 1.5 12 8

Based on the project locations, portfolio diversification, brand name, balance sheet size, quality of construction, we have assumed marginal differences in our assumptions to reflect individual company valuations

10

Valuation Methodology: An Example
Conversion Margin Rollout plans 35 30 25 (mn sq. ft.) 20 15 10 5 0 FY07E Co estimate FY08E Our estimate FY09E Industry rate
FY07E FY08E FY09E Co estimate Our estimate Industry rate XX XX XX XX XX XX XX XX XX

Best Case
(Rs bn) 5 6 7 8 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800
Sensitivity matrix for valuing conversion margin as per company estimates of execution

Final Valuations
Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt + Unpaid land cost Best Case target price xx xx xx xx xx XX

Base Case
(Rs bn) 5 6 7 8 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800
Sensitivity matrix as per our estimates of what the company can execute

Bear Case
(Rs bn) 5 6 7 8 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800
Sensitivity matrix as per industry growth rate of 30% CAGR

Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt + Unpaid land cost Base Case target price

xx xx xx xx xx XX

Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt + Unpaid la Bear Case target price

xx xx xx xx xx xx XX

Land value calculated as a multiple to book value
Land Value (Rs bn) Bear Case 1.5x Book Value XX Base Case 2x Best Case 3x Fee income XX (FY09) Asset Management (Rs bn)

Annual fee income from real estate funds
Completed Assets Bear Case 8x Base Case 10x Best Case 12x Rental income XX (FY09) (Rs bn)

Leased assets valued on a capitalization basis
Bear Case 8x Base Case 10x Best Case 12x

11

Alternative Approach: NAV
In addition to the above methodology, we have further calculated the Net Asset Value (NAV) using a Discounted Cash Flow (DCF) approach for the companies covered* NAV Valuation Methodology Adopted 1. Calculation of inflows from sale (build and sell projects) and capitalized value (leased assets) 2. Deducting of land cost, construction cost as well as administration cost, interest and tax outgo 3. Discounting the same at an assumed cost of capital Key Assumptions Escalation in selling prices: 5% p.a. Escalation in construction costs: 4% p.a. Contingency costs: 2% of development costs Discount rate used: 14% Completion schedule: As per our estimates
NAV Valuation Methodology
Type Build and Sell Projects Build and Lease projects Construction
Source: ENAM Research * DLF not included

Methodology Discounted Cash Flow based on actual cash flow from sales Rent Capitalization method after 100% completion EBIDTA Multiple

12

How the key players stack up…
Execution Ability Balance Sheet Size Pricing Power Portfolio Diversification Quality Focus Comments Unitech
Largest listed player with a diversified portfolio across segments. Strong execution skills Quality player, backwardlyintegrated, premium pricing, however, mainly focused in Bangalore Rich promoter pedigree, asset light strategy, with a western India focus. Unproven execution Presence in 46 cities in 17 states across all real estate segments. Unproven execution NCR focused player with a high quality land bank. However lacks a strong brand name Predominantly Mumbai-based player with outsourced constr. Unproven execution

Sobha Developers

Peninsula Land Parsvnath Developers Anant Raj Industries Akruti Nirman

High

Medium

Low

Source: ENAM Research

13

Peer Comparison
DLF Ltd
(Rs bn) Rollout in FY09 (mn sq ft) Conversion margin assumed (Rs./psf) Multiple to conversion margin (x) Conversion Margin Value (Rs. Bn) Book Value of land (Rs. Bn) Multiple to book value (x) Land Value (Rs. Bn) Rental income (FY09) (Rs. Bn) Multiple assigned (x) Completed Assets Total Valuation Less: Net debt + Unpaid land cost Target Price (Rs) ^ Assumed at upper price band CMP: 550^ RECO: UP Best Case 63.7 1500 10.0 956 70 3.0 210 13 12.0 156 1322 107 712 Base Case 35.0 1500 10.0 525 70 2.0 140 13 10.0 130 795 107 404 Bear Case 26.0 1500 10.0 390 70 1.5 105 13 8.0 104 599 107 289

Sobha Developers
Best Case Rollout in FY09 (mn sq ft) 8.1 1150 Conversion margin assumed (Rs./psf) 10.0 Multiple to conversion margin (x) 93 Conversion Margin Value (Rs. Bn) 32 Book Value of land (Rs. Bn) 2.0 Multiple to book value (x) 63 Land Value (Rs. Bn) Fee income 0.6 12.0 Multiple assigned (x) Contractual Business 7 Total Valuation 163 47 Less: Net debt + Unpaid land cost 1593 Target Price (Rs) Net Asset Value/ share (ENAM estimates) (Rs bn)

CMP: 918 Base Case 5.2 1150 10.0 60 32 1.5 47 0.6 10.0 6 113 47 907 935

RECO: N Bear Case 3.7 1150 10.0 42 32 1.2 38 0.6 8.0 5 85 47 517

Unitech Ltd
Best Case 32.4 Rollout in FY09 (mn sq ft) Conversion margin assumed (Rs./psf) 1250 Multiple to conversion margin (x) 10.0 Conversion Margin Value (Rs. Bn) 405 Book Value of land (Rs. Bn) 75 Multiple to book value (x) 3.0 Land Value (Rs. Bn) 225 Rental income (FY09) (Rs. Bn) 6 Multiple assigned (x) 12.0 Completed Assets 67 Annual income from asset managemen 2 Multiple assigned (x) 12.0 Asset Management 24 Total Valuation 720 Less: Net debt + Unpaid land cost 83 Target Price (Rs) 786 Net Asset Value/ share (ENAM estimates) (Rs bn)

CMP: 546 Base Case 22.7 1250 10.0 284 75 2.0 150 6 10.0 56 2 10.0 20 510 83 526 428

RECO: N Bear Case 20.8 1250 10.0 260 75 1.5 113 6 8.0 45 2 8.0 16 433 83 432

Parsvnath Developers
Best Case 26.6 Rollout in FY09 (mn sq ft) Conversion margin assumed (Rs./psf) 350 Multiple to conversion margin (x) 10.0 Conversion Margin Value (Rs. Bn) 93 Book Value of land (Rs. Bn) 39 Multiple to book value (x) 1.5 Land Value (Rs. Bn) 59 Rental income (FY09) (Rs. Bn) 3 Multiple assigned (x) 12.0 Completed Assets 34 Total Valuation 186 Less: Net debt + Unpaid land cost 34 Target Price (Rs) 822 Net Asset Value/ share (ENAM estimates) (Rs bn)
Source: ENAM Research

CMP: 318 RECO: OP Base Case 13.2 350 10.0 46 39 1.3 49 3 10.0 28 124 34 483 438 Bear Case 9.2 350 10.0 32 39 1.0 39 3 8.0 22 94 34 324

14

Peer Comparison
Anant Raj Industries
(Rs bn) CMP: 1,135 Base Case 4.8 1200 10.0 57 9 2.0 17 2 10.0 20 94 25 1256 1187 RECO: OP Bear Case 1.4 1200 10.0 17 9 1.5 13 2 8.0 16 46 25 367

Peninsula Land
Best Case 1.6 Rollout in FY09 (mn sq ft) Conversion margin assumed (Rs./psf) 1200 Multiple to conversion margin (x) 8.0 Conversion Margin Value (Rs. Bn) 15 Book Value of land (Rs. Bn) 3 Multiple to book value (x) 2.0 Land Value (Rs. Bn) 7 Rental income (FY09) (Rs. Bn) 1 Multiple assigned (x) 12.0 Completed Assets 6 Annual income from asset managemen 0 Multiple assigned (x) 12.0 Asset Management 4 Total Valuation 32 Less: Net debt + Unpaid land cost 7 Target Price (Rs) 600 Net Asset Value/ share (ENAM estimates) (Rs bn)
Source: ENAM Research

CMP: 540 RECO: UP Base Case 1.4 1200 8.0 13 3 1.5 5 1 10.0 5 0 10.0 3 26 7 472 504 Bear Case 1.0 1200 8.0 9 3 1.0 3 1 8.0 4 0 8.0 2 19 7 299

Best Case Rollout in FY09 (mn sq ft) 7.7 Conversion margin assumed (Rs./psf) 1200 Multiple to conversion margin (x) 10.0 Conversion Margin Value (Rs. Bn) 92 Book Value of land (Rs. Bn) 9 Multiple to book value (x) 3.0 Land Value (Rs. Bn) 26 Rental income (FY09) (Rs. Bn) 2 Multiple assigned (x) 12.0 Completed Assets 24 Total Valuation 142 Less: Net debt + Unpaid land cost 25 Target Price (Rs) 2124 Net Asset Value/ share (ENAM estimates)

Akruti Nirman
Best (Rs bn) Case Rollout in FY09 (mn sq ft) 9.2 Conversion margin assumed (Rs./psf) 1200 Multiple to conversion margin (x) 6.0 Conversion Margin Value (Rs. Bn) 66 Book Value of land (Rs. Bn) 6 Multiple to book value (x) 1.5 Land Value (Rs. Bn) 9 Rental income (FY09) (Rs. Bn) 0 Multiple assigned (x) 12.0 Completed Assets 4 Total Valuation 79 Less: Net debt + Unpaid land cost 10 Target Price (Rs) 1036 Net Asset Value/ share (ENAM estimates)

CMP: 360 Base Case 3.1 1200 6.0 23 6 1.3 8 0 10.0 3 33 10 352 399

RECO: N Bear Case 2.7 1200 6.0 20 6 1.0 6 0 8.0 2 28 10 276

15

Companies Section

16

India Research
Stock Data No. of shares Market cap 52 week high/low Avg. daily vol. (6mth) Bloomberg code Reuters code : 810mn : Rs.459bn : Rs 624 / Rs 123 : 3.6mn shares : UT IN : UNTE.BO

Unitech
Relative to Sector:

Shareholding (%) Mar-07 QoQ chg Promoters FIIs MFs / UTI Banks / FIs Others : : : : : 74.6 7.4 0.3 0.0 17.7 0.0 0.8 (0.0) 0.0 (0.8)

Rs 546
Target Price: Rs 526
Potential Upside: -4%

Neutral

Relative Performance
1500 1000 500 0 Apr-06 Sensex
Source: ENAM Research, Bloomberg

Proxy to India’s real estate play
Oct-06 Apr-07 Unitech

Financial summary
Y/E March 2006 2007 2008E 2009E Sales (Rs mn) 9,322 33,183 45,501 75,981 PAT (Rs mn) 846 13,054 12,469 27,599 EPS (Rs.) 1.0 16.1 15.4 34.0 Change (YoY %) 145 1,444 (4) 121 P/E (x) 0.0 24.1 35.5 16.0 RoE (%) 33.9 142.9 58.7 68.4 RoCE (%) 19.3 61.1 32.2 45.5 EV/EBITDA (x) 3.7 16.9 23.7 11.6

Source: *Consensus broker estimates, Company, ENAM estimates

Lead Analyst: Chirag Negandhi

chirag.negandhi@enam.com (+91 22 6754 7618)

Associate: Nitin Idnani

nitin.idnani@enam.com (+91 22 6754 7655)

June 6, 2007 17

Investment Summary
Company background
Started in 1972, Unitech is India’s largest listed real estate company with ~30 years of experience in infrastructure and real estate development

Development Plan Summary
Total Land Area (Acres) NCR Chennai Kolkata Kochi Hyderabad Bangalore Mohali, Chandigarh Agra Varanasi Total 2,441 2,085 5,198 673 359 103 350 1,500 1,500 14,209* Estimated Total Saleable Area (mn sq.ft) 107.7 104.7 167.1 38.3 18.7 9.9 11.8 31.4 34..1 523.6 (mn sq. yard) 1.2 1.4 4,8 0.4 0.4 0.3 1.3 1.6 11.5

Investment argument
Land bank of ~10,500 acres with a developable area of ~500mn sq. ft. across the residential, commercial, retail, hospitality and SEZ space Multiple revenue streams from development profits, sale of additional projects to Unitech Corporate Park (UCP), investment management fees and carry structure Large scale of operations planned on a high quality land bank with clear titles Continued focus on highly profitable and less risky residential segment (~70%+ of future revenues) Plans of a pan-India footprint to reduce its dependence on the NCR (< 25% over 3-5 years)

Source: Company; * Note: As of 21/09/2006 – Share of Unitech in land at certain locations is less than 100%. Unitech’s share in total land shown above is 10,332 acres

Key risk factors
Multifold jump in planned activity, with a pan-India presence, poses significant execution challenges Significant portion of revenue from longer gestation projects

Recent Additions to Land Bank
City Siliguri Noida Noida Chandigarh Total
Source: Company

Area (Acres) 232 71 53 73 429

Project Type Township Apartments Apartments Retail & Entertainment -

Valuation
At CMP of Rs.546, the stock trades at a marginal premium to our base case valuation of Rs.526. We believe the stock is fairly valued and initiate coverage with Sector Neutral rating and a price target of Rs.526.

18

Business Strategy
Unitech’s 3 pronged business strategy
Presence across segments Residential Strategic locations, superiors quality, large integrated projects Commercial Focus on IT, ITeS built to suit as well as multi-tenanted projects Retail Focus on quality, mall management, preferred anchor relationships Hospitality Build a portfolio of budget, 4 star, serviced apartments, resorts, etc Partner with global brands SEZ Build infrastructure, bring in quality tenants, enhance value Entertainment Family entertainment models based on international arrangements
Source: ENAM Research

Multiple Revenue Streams Real Estate Projects Land bank totaling ~500mn sq. ft. across ~10,500 acres of land Early exit before completion Sale of specific projects to real estate funds such as UCP to monetize projects early on Plans for additional such structures for hospitality and retail projects Regular fee income Investment fee of 2% of sum invested Project management fee of 5% of construction costs Performance fee of 20% above a hurdle rate (only on exit)

Focus on high value adds Investing in high value areas Efficient capital allocation in higher value added segment of land acquisition and aggregation Continued focus on high return low risk residential segment Build and sell model rather than lease to ensure efficient rotation of capital Emerging growth markets Focus to remain in high growth markets of emerging suburban areas Land acquisition Major source of land sourced from government agencies resulting in softer payment terms and clear titles

19

Competitive Advantage
High quality land bank
Over ~60% of land bank acquired from governmenthence no title/ zoning risks Added advantage of soft payment terms provided Focused on high growth suburban areas of major cities Projects offered to Unitech Corporate Park
Project Location Type G1-ITC G2-IST N1 N2 N3 K1 Total Gurgaon Gurgaon Noida Noida Noida Kolkata IT/ITES SEZ IT/ITES SEZ IT Park in IT/ITES SEZ IT/ITES SEZ IT/ITES SEZ Total Area (acres) 24.7 28.4 19.3 29.7 50 45.4 197.5 Start End Leasable Area Valuation (mn sq. ft.) * (Rs mn) 3.26 3.75 2.03 3.13 4.95 4.35 21.47 11,143 9,441 4,102 6,730 3,523 6,434 41,373 Feb-07 Jul-09 Oct-05 Mar-09 Jul-06 Dec-08 Jan-07 Jun-09 Jan-07 Jun-09 Dec-05 Apr-10

Efficient capital allocation
Investing in high value added segment of the real estate chain (acquisition and aggregation of land) Focus on residential segment (~61%) - most profitable & capital efficient segment Outright sale of commercial & retail properties to allocate capital more efficiently

Source: Company; Note: * Valuation as per Jones Lang Lasalle as on November 8, 2006

Large scale of operations
Experience in execution of large projects better positions it to successfully implement new projects Ability to identify and procure land parcels in strategic locations to establish its footprint across the country

Multiple Revenue Streams
Development Profits
Profit from sale of projects undertaken by the company Rental Income from lease of commercial/ retail/ hospitality projects

Sale of properties to UCP
Early exit from sale of under construction projects to Unitech Corporate Parks Plc Sale through SPV route in pre-identified projects

Investment Mgmt & performance Fees
Investment mgmt fees of 2% of committed capital Proj mgmt fee of 5% of construction costs Performance carry of 20% of returns above a hurdle rate

Multiple revenue streams
Co-investment with UCP allows for efficient exit of projects early on, freeing capital for further growth Investment & projects management fee along with a performance carry provides additional revenues
Investment management fee – 2% of sum invested Project management fee – 5% of construction costs Carry – 20% above a hurdle rate (only on exit)

Source: ENAM Research

20

Development Snapshot
Planned pipeline of projects
(mn sq. ft.) Unitech Residential Commercial Others
Source: Company
60% 50% 40% 30% 20% 10% 0% -10% -20% Mar-06 Dec-05

Since Inception 7.0 N/A N/A N/A
Kolkata NCR

FY07 to FY09E 69.5 43.9 21.8 3.7

Beyond FY09E 430.0 330.0 70.0 30.0
Chennai

Price Change q/q*
150% 100% 50% 0% -50%
Mar-07 Jun-06 Sep-06 Dec-06

Mar-06

South of Prk

Alipore

Source: Cushman & Wakefield; Knight Frank India * In Unitech’s key areas of operation

Def. Col Ghaziabad Faridabad

Green Prk G. Noida Noida

E Delhi Gurgaon

Mar-07

Sep-06

Dec-06

Boat Club

T Ngr

Guindy

Egmore

Location wise break-up
Hyderabad 5% Chennai 26% Kolkata 42% Plots 2%

Segmental Contribution

Retail 6% NCR 27% Commercial Source: Company 26%

Residential 66%

Source: Company

Mar-07

Jun-06

Sep-06

Dec-05

Dec-06

-100%

120% 100% 80% 60% 40% 20% 0% -20% -40%

21

Valuations
Rollout plans Best Case 35 30 25 Mn. sq. ft. 20 15 10 5 0 FY07E Co. estimates FY08E Our estimates FY09E Industry rate
(Rs bn)
FY07E FY08E FY09E Co estimate 7.44 Our estimate 7.44 Industry rate 7.44 22.74 16.00 16.00 32.36 22.73 20.80

Conversion Margin Final Valuations
9 10 11 12 Conversion Margin (Rs./psf) 1,000 1,250 1,500 1,800 291 364 437 524 324 405 485 582 356 445 534 641 388 485 582 699 Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt+Unpaid Lan Best case target price Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt+ Unpaid La Base case target price Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt+Unpaid Lan Bear case target price 405 225 24 67 720 83 786 284 150 20 56 510 83 526 260 113 16 45 433 83 432

Best Case
(Rs bn) 9 10 11 12 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 1,000 1,250 1,500 1,800 205 256 307 368 227 284 341 409 250 313 375 450 273 341 409 491

Best Case
(Rs bn) 9 10 11 12 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 1,000 1,250 1,500 1,800 187 234 281 337 208 260 312 374 229 286 343 412 250 312 374 449

Land Value (Rs bn) (x) Book Value 75 Bear Case 1.5 112.5 Base Case 2 150 Best Case 3 225

Asset Management (Rs bn) (x) Fee income (FY09) 2 Bear Case 8 16 Base Case 10 20 Best Case 12 24

Conv. Margin Multiple (x)

Completed Assets (Rs bn) (x) Rental income (FY09) 5.6 Bear Case 8 44.6 Base Case 10 55.7 Best Case 12 66.8

22

NAV Approach
Y/E 2006 Square feet completed Operating Cash Flow Less: Interest Costs Contingency Net Cash Flow (Pre-tax) Less: Taxation Free Cash Flow Sensitivity Matrix (Rs mn) 12 13 14 15 16 0 281 275 269 263 258 Selling price escalation (%) 3 5 7 378 450 527 369 439 514 361 428 501 353 419 490 345 409 478 2007 7.1 24,997 3,020 125 21,851 4,864 16,988 2008E 12.8 88,309 4,038 213 84,059 4,427 79,631 2009E 2010E 2011E 72.9 84,834 3,887 1,666 79,281 30,728 48,554 2012E Beyond 2012E 82.5 29,383 3,633 2,418 23,331 31,237 (7,906) 153.2 367,729 2,518 2,849 362,361 78,639 283,722 23.1 57.4 75,730 125,888 5,486 246 69,997 9,797 60,200 3,643 597 121,649 26,206 95,443

Key Assumptions Variable Escalation in selling price Escalation in construction costs Contingencies considered (% of costs) No of years considered beyond 2012E Assumption 5% 4% 2% 3

10 654 637 621 606 592

WACC (%)

Segmental Contribution
Retail 6% Plots 2%

Note: Escalation in construction costs assumed to be constant

Net Cash Flows over FY08E to FY12E Discount rate Net Present Value No. of shares Net Asset Value per share

559644 14% 347,767 812 428

Commercial 26%

Residential 66%

Source: ENAM Research, Pre tax contribution to valuation considered

23

Company Financials
Income statement
Y/E March Net sales Other operating income Total income Cost of goods sold Contribution (%) Advt/Sales/Distrn O/H Operating Profit Other income PBIDT Depreciation Interest Other pretax Pre-tax profit Tax provision (-) Minority Interests Associates Adjusted PAT E/o income / (Expense) Reported PAT 2006 9,322 0 9,322 6,501 2007 33,183 0 33,183 12,865

(Rs mn)
2008E 45,501 0 45,501 19,705 2009E 75,981 0 75,981 26,407

Key ratios
Y/E March Sales growth OPM Oper. profit growth COGS / Net sales Overheads/Net sales Depreciation / G. block Effective interest rate Net wkg.cap / Net sales Net sales / Gr block (x) Incremental RoCE RoCE Debt / equity (x) Effective tax rate RoE Payout ratio (Div/NP) EPS (Rs.) EPS Growth CEPS (Rs.) DPS (Rs.) 2006 43.4 19.6 117.2 69.7 10.7 2.5 6.5 0.4 2.8 17.6 19.3 3.7 36.9 33.9 0.0 1.0 145.2 1.2 0.0 2007 256.0 61.2 1,013.2 38.8 0.0 1.3 12.0 0.6 6.3 54.1 61.1 2.6 27.1 142.9 0.0 16.1 1,443.5 16.2 0.0 2008E 37.1 44.5 (0.3) 43.3 12.2 0.7 9.2 0.8 4.3 (0.4) 32.2 1.8 26.2 58.7 0.0 15.4 (4.5) 15.5 0.0

(%)
2009E 67.0 55.6 108.5 34.8 9.7 0.8 10.2 0.7 3.9 56.4 45.5 1.1 26.2 68.4 0.0 34.0 121.3 34.3 0.0

0
995 1,825 141 1,967 112 465 0 1,390 513 33 2 846 (5) 841

0
0 20,318 700 21,018 80 3,020 0 17,918 4,864 0 0 13,054 0 13,054

0
5,536 20,260 770 21,031 97 4,038 0 16,896 4,427 0 0 12,469 0 12,469

0
7,338 42,236 847 43,084 201 5,486 0 37,397 9,797 0 0 27,599 0 27,599

Source: Company , ENAM Research

24

Company Financials
Balance sheet
Y/E March Total assets Gross block Net fixed assets CWIP Investments Wkg. cap. (excl cash) Cash / Bank balance Others/Def tax assets Capital employed Equity capital Reserves Borrowings Others 2006 14,486 4,530 3,620 1,268 145 4,731 3,899 824 14,486 125 2,704 10,449 1,208 2007 56,450 6,082 5,065 5,371 145 33,405 11,640 824 56,449 1,623 13,813 39,805 1,208 2008E 76,026 14,865 13,751 8,622 145 41,151 11,533 824 76,026 3,247 23,766 47,805 1,208

(Rs mn)
2009E 114,733 24,604 23,289 15,272 145 63,727 11,476 824 114,732 3,247 50,472 59,805 1,208

Cash flow
Y/E March Sources Cash profit (-) Dividends Retained earnings Issue of equity Borrowings Others Applications Capital expenditure Investments Net current assets Change in cash 2006 6,687 27 0 27 (50) 6,686 24 6,687 3,518 (358) 2,180 1,346 2007 43,988 13,134 0 13,134 1,499 29,355 0 43,988 5,629 0 28,674 9,685 2008E 22,189 12,566 0 12,566 1,623 8,000 0 22,189 12,034 0 7,746 2,409

(Rs mn)
2009E 39,800 27,800 0 27,800 0 12,000 0 39,800 16,389 0 22,576 835

Source: Company , ENAM Research

25

India Research
Stock Data No. of shares Market cap 52 week high/low Avg. daily vol. (1mth) Bloomberg code Reuters code : 72mn : Rs 62.4bn : Rs 1179 / Rs 620 : 370,800 shares : SOBHA IN : SOBH.BO

Sobha Developers
Relative to Sector:

Shareholding (%) Mar-07 QoQ chg Promoters FIIs MFs / UTI Banks / FIs Others : : : : : 87.0 5.8 0.7 0.2 6.2 0.0 4.0 (1.7) (0.2) (2.1)

Rs 918
Target Price: Rs 907
Potential Upside: -1%

Neutral

Relative Performance
130 110 90 70 50 Dec-06 Sensex Feb-07 Apr-07

A premium quality player
Sobha Devlopers

Source: ENAM Research, Bloomberg

Financial summary
Y/E March 2006 2007 2008E 2009E Sales (Rs mn) 6,252 11,865 16,489 25,198 PAT (Rs mn) 885 1,615 2,514 3,411 EPS (Rs.) 41.9 22.2 34.5 46.8 Change (YoY %) 155 (47) 56 36 P/E (x) 0.0 36.1 26.6 19.6 RoE (%) 95.7 32.6 25.4 26.6 RoCE (%) 30.0 23.4 20.0 20.2 EV/EBITDA (x) 2.8 24.8 18.1 12.2

Source: *Consensus broker estimates, Company, ENAM estimates

Lead Analyst: Chirag Negandhi

chirag.negandhi@enam.com (+91 22 6754 7618)

Associate: Nitin Idnani

nitin.idnani@enam.com (+91 22 6754 7655)

June 6, 2007 26

Investment Summary
Company background
Incorporated in 1995, Sobha Developers Limited (Sobha), has developed ~13.75mn sq. ft. since its inception in 1995 Sobha enjoys the distinction of being the preferred contractual developer for Infosys (66 projects totaling 8.54mn sq. ft.)

Sobha’s Scorecard
Year ended FY07 Development Projects Commercial Projects Contractual Projects Total No of Projects 26 2 83 111 SBA (mn sq. ft) 4.41 0.11 9.23 13.75

Investment argument
High quality developer with plans to develop 32 residential projects, aggregating ~13.37mn sq. ft. & 42 contractual projects totaling ~10.8mn sq. ft.
Association with Infosys gives it further critical visibility for its contractual projects Unique business model of contractual & own development helps hedge from the asset cycle risk. Sobha’s ‘backward integration’ enables it to maintain its high quality, without depending on 3rd party contractors

Planned pan-India Presence

Chandigarh Delhi

Key risk factors
Multifold jump in projects poses an execution challenge Major portion of near term projects within Bangalore exposes Sobha to a geographical concentration risk

Valuation
At CMP of Rs.918, the stock trades at a marginal premium to our base case valuation of Rs.907. We believe the stock is fairly valued and initiate coverage with Sector Neutral rating and a price target of Rs.907.

Mumbai Pune Hyderabad Coimbatore Mysore Bangalore Chennai

Bhubaneshwar

Mangalore Trissur Cochin Trivandrum

(mn sq ft) Completed Planned

Residential Projects 4.41 13.37

Contractual Projects 9.23 10.8

Source: Company

27

Business Strategy
Shifting focus to own development work
Plans to increase share of its own real estate projects as against contractual projects
To result in increased execution capability for own projects Higher margins from of 25-30% from own real estate projects as against 14-16% margins in contractual projects Sobha has locked in critical land bank of 3,624 acres as on March 9th 2007 for its own real estate projects

Land Summary (as on 9th March, 2007)
Acres Location Bangalore Mysore Pune Chennai Cochin Trissur Coimbatore Hosur Gurgaon Total Total Land 1,768 63 329 2,882 734 62 130 1,000 214 7,182 Land Res. 1,768 63 329 482 419 62 26 261 214 3,624 Land Arr.* 0 0 0 2,400 315 0 104 739 0 3,558 Amt Paid (Rs mn) Land Res. 5,606 90 550 467 1,784 468 24 300 680 9,969 Land Arr.* 0 0 0 141 146 0 10 0 0 Amt Payable Land Res. 11,850 264 420 0 0 0 0 118 9,000 Land Arr.* 0 0 0 8,471 1,547 0 172 1,182 0

Differentiating itself with high quality
Sobha strives to ensure that it delivers the highest quality in its projects
Backward integration to help in maintaining standards without dependence on 3rd parties Ability to charge a premium over its peers

297 21,652 11,372

Source: Company: Res: reserves; Arr: Arrangement, * Note: Land is locked in via a MoU, affidavit, agreement with a third party, etc. and not currently in the company’s name

Business Model
Developmental Work Sobha carries an asset risk as it purchases land for its developmental projects High asset cycle risk Low asset cycle risk Contractual work is carried out on land parcels acquired by the client Since land purchase requires a larger capital outlay, Sobha has fewer devpmt projects Lower volumes Higher volumes Contractual projects do not require much capital infusion, except for capacity addition Contractual Work Land aggregation and price rises are captured in the final selling price

Expanding its reach
Expansion to lucrative markets outside of Karnataka
To expand its footprint to cities like Coimbatore, Pune, Mysore and Trichur by FY08 Subsequently to launch projects in key markets of Chennai, Cochin, NCR & Hosur by FY09

High profit margins Low profit margins Since land does not belong to Sobha, profit earned is only on the construction activity

Capitalizing on Infosys’ patronage
Preferred developer for all the real estate requirements of Infosys Technologies
Key catalyst in helping Sobha establish its mark, improve its visibility and build its brand

Source: ENAM Research

28

Competitive Advantage
Premium quality player
Sobha is regarded as a high quality developer having successfully created a brand, by providing worldclass structures, in a time-bound manner
Allows for higher margins than peers Also results in higher amount of presales upon launch

Competitive Advantages
Construction superiority Detailing Quality focus

Cued by extent of detailing learnt during customer interactions

Preferred developer for Infosys
Being the preferred developer for Infosys Technologies gives Sobha high visibility in its contractual work
Provides opportunity to showcase its capabilities Has built up ability to provide world-class office space as demanded by multinational companies entering India.

STRENGTHS

Quality of customer interactions Fairness in dealing Built in penalties Trustworthy

Accepted by customers as well as non-customers Largely as a result of customer interactions

Backward integration
‘Backward integration’ enables Sobha to build key competencies in executing its projects
In-house glazing, metal works, wood works, concrete block making, designing and procurement Strategy has helped maintain high quality standards without being dependant on any third party for key products and services.

Source: Company , ENAM Research

Backward Integration; Forward Thinking
Concrete Block Making A Masa super block German machine Fully automated Low W-I-P Wide range of products Glazing & Metal Works Metal fabrication Aluminium works Architectural glazing Prefabricated building sections Interior & Wood Works Wood based products – doors, windows, ceiling flooring, paneling, pillars Custom built furniture Modular furniture Project Execution & Delivery ‘Sobha Model’ highest efficiency with minimal wastage Co-ordination among various departments Construction programming Monitoring Post Sales Efficient after sales Customer Care Cell Dedicated Call Centre Responding to queries/concerns Building loyalty

Multiple revenue streams
In addition to own development work, regular income from low risk, high volume contracts de-risks Sobha’s business model from the asset cycle risk

Backward Integration Assured premium quality Higher margins Better execution

Source: ENAM Research

29

Development Snapshot
Planned pipeline of projects
(mn sq. ft.) Sobha Developers Residential Commercial Others
Source: Company
100% 80% 60% 40% 20% 0% -20% -40% Mar-06 Dec-05

Since Inception 4.5 4.4 0.1 0.0 Bangalore Chennai

FY07 to FY09E 12.4 10.3 2.1 0

Beyond FY09E 101 71.8 29.2 0 Pune
100% 80% 60% 40% 20% 0% -20% Mar-06

Price Change q/q*
120% 100% 80% 60% 40% 20% 0% -20% -40% Mar-06 Dec-05

Mar-07

Jun-06

Sep-06

Dec-06

Source: Cushman & Wakefield; Knight Frank India * In Sobha Developer’s key areas of operations
Others 15%

Rajaji Ngr Basvangudi Indira Ngr S d hi N

Malleswaram Kormangla J P Ngr L f d

Mar-07

Jun-06

Sep-06

Dec-06

Boat Club Guindy

T Ngr Egmore

Aundh Deccan Rd K Pk

Club Rd Kalyani Ngr Vi N

Location wise break-up
Bangalore 42%

Segmental Contribution
Contractual 12% Residential 50%

Cochin 22%

Pune 7% Chennai 14%

Commercial 30%

Source: Company

Source: Company

Plots 8%

Mar-07

Jun-06

Sep-06

Dec-05

Dec-06

30

Valuations
Roll out Plans Best Case 9 8 7 6 Mn. sq. ft. 5 4 3 2 1 0 FY07E Co. estimates FY08E Our estimates FY09E Industry rate
(Rs bn)
FY07E FY08E FY09E Co estimate 2.08 Our estimate 2.08 Industry rate 2.08 3.60 2.81 2.81 8.07 5.20 3.66

Conversion Margin Final Valuations
9 10 11 12 Conversion Margin (Rs./psf) 950 1,150 1,350 1,550 69 84 98 113 77 93 109 125 84 102 120 138 92 111 131 150 Conversion Margin Land Value Contractual Business Total Less: Net debt + Unpaid la Best Case target price 93 63 7 163 47 1593

Best Case
(Rs bn) 9 10 11 12 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 950 1,150 1,350 1,550 44 54 63 73 49 60 70 81 54 66 77 89 59 72 84 97 Conversion Margin Land Value Contractual Business Total Less: Net debt + Unpaid la Base Case target price 60 47 6 113 47 907

Best Case
(Rs bn) 9 10 11 12 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 950 1,150 1,350 1,550 31 38 44 51 35 42 49 57 38 46 54 62 42 50 59 68 Conversion Margin Land Value Contractual Business Total Less: Net debt + Unpaid la Bear Case target price 42 38 5 85 47 517

Land Value (Rs bn) (x) Book Value 31.6 Bear Case 1.2 37.92 Base Case 1.5 47.4 Best Case 2 63.2

Conv. Margin Multiple (x)

Contractual Business (Rs bn) (x) Fee income (FY09) 0.6 Bear Case 8 4.8 Base Case 10 6.0 Best Case 12 7.2

31

NAV Approach
Y/E 2006 Square feet completed* Operating Cash Flow Less:Administration Costs Interest Costs Contingency Net Cash Flow (Pre-tax) Less: Taxation Free Cash Flow
*N o te : Do e s no t inc lude c o ntrac tual pro je c ts

2007 2.1 1,351 1,542 481 57 (729) 251 (980)

2008E 2.8 (3,811) 2,082 688 472 (7,053) 709 (7,762)

2009E 5.2 1,181 2,186 903 572 (2,480) 1,462 (3,941)

2010E 5.8 29,608 2,623 1,141 340 25,504 4,255 21,249

2011E 8.6 28,698 3,148 1,198 464 23,889 7,501 16,388

2012E Beyond 2012E 10.3 29,499 3,777 1,258 523 23,940 2,214 21,726 78.9 178,780 19,282 5,692 3,964 149,842 32,790 117,052

Sensitivity Matrix (Rs mn) 12 13 14 15 16 0 482 464 446 429 413 Selling price escalation (%) 3 5 7 807 1049 1313 770 998 1246 735 950 1184 702 905 1126 672 863 1072

Key Assumptions Variable Escalation in selling price Escalation in construction costs Contingencies considered (% of costs) No of years considered beyond 2012E Contractual Projects - Operating Margin Construction Business EV/EBIDTA multiple Assumption 5% 4% 2% 6 15% 10

10 1756 1663 1577 1496 1421

WACC (%)

Note: Escalation in construction costs assumed to be constant

Segmental Contribution
163732 14% 62,139 6,000 68,139 73 935
Contractual 12% Residential 50%

Net Cash Flows Discount rate Net Present Value from Real Estate Valuation of contractual business Total Equity Value No. of shares Net Asset Value

Commercial 30% Plots 8%

Source: ENAM Research, Pre tax contribution to valuation considered

32

Company Financials
Income statement
Y/E March Real estate projects Contractual projects Total income Cost of goods sold Contribution (%) Advt/Sales/Distrn O/H Operating Profit Other income PBIDT Depreciation Interest Other pretax Pre-tax profit Tax provision (-) Minority Interests Associates Adjusted PAT E/o income / (Expense) Reported PAT 2006 4,228 2,024 6,252 4,035 2007 7,538 4,327 11,865 7,761 2008E 12,489 4,000 16,489 9,714

(Rs mn)
2009E 21,198 4,000 25,198 15,430

Key ratios
Y/E March Sales growth OPM Oper. profit growth COGS / Net sales Overheads/Net sales Depreciation / G. block Effective interest rate Net wkg.cap / Net sales Net sales / Gr block (x) Incremental RoCE RoCE Debt / equity (x) Effective tax rate RoE Payout ratio (Div/NP) EPS (Rs.) EPS Growth CEPS (Rs.) DPS (Rs.) 2006 38.0 22.1 157.9 64.5 13.4 10.3 6.3 0.5 6.9 34.0 30.0 3.4 17.1 95.7 16.4 41.9 155.4 47.9 6.9 2007 89.8 21.6 85.3 65.4 13.0 10.5 9.5 0.7 6.6 13.1 23.4 0.7 13.5 32.6 21.3 22.2 (47.1) 25.5 4.7 2008E 39.0 28.5 83.2 58.9 12.6 8.4 9.9 1.1 5.7 13.4 20.0 1.7 22.0 25.4 0.0 34.5 55.7 38.5 0.0

(%)
2009E 52.8 30.1 61.6 61.2 8.7 7.6 10.0 1.1 5.0 25.0 20.2 1.8 30.0 26.6 0.0 46.8 35.6 53.8 0.0

0
835 1,382 21 1,403 129 208 0 1,067 182 0 0 885 0 885

0
1,542 2,562 29 2,591 244 481 0 1,866 251 0 0 1,615 0 1,615

0
2,082 4,693 35 4,727 290 1,214 0 3,223 709 0 0 2,514 0 2,514

0
2,186 7,583 42 7,625 508 2,244 0 4,872 1,462 0 0 3,411 0 3,411

Source: Company , ENAM Research

33

Company Financials
Balance sheet
Y/E March Total assets Gross block Net fixed assets CWIP Investments Wkg. cap. (excl cash) Cash / Bank balance Others/Def tax assets Capital employed Equity capital Reserves Borrowings Others 2006 5,616 1,252 999 21 27 4,119 450 0 5,616 211 1,070 4,318 17 2007 14,484 2,334 1,839 109 528 11,325 684 0 14,483 729 7,895 5,837 22 2008E 29,842 3,473 2,688 2,130 528 24,030 467 0 29,843 729 10,409 18,683 22

(Rs mn)
2009E 40,753 6,691 5,398 3,176 528 30,954 697 0 40,753 729 13,820 26,183 22

Cash flow
Y/E March Sources Cash profit (-) Dividends Retained earnings Issue of equity Borrowings Others Applications Capital expenditure Investments Net current assets Change in cash 2006 2,833 1,008 172 836 0 1,997 0 2,833 595 27 1,828 384 2007 9,111 1,864 390 1,474 6,118 1,519 0 9,111 1,172 501 7,205 234 2008E 15,650 2,805 0 2,805 0 12,846 0 15,650 3,160 0 12,706 (216)

(Rs mn)
2009E 11,419 3,919 0 3,919 0 7,500 0 11,419 4,265 0 6,924 230

Source: Company , ENAM Research

34

India Research
Stock Data No. of shares Market cap 52 week high/low Avg. daily vol. (6mth) Bloomberg code Reuters code : 185mn : Rs 60bn : Rs 579/ Rs 222 :3.6mn shares : PARSV IN : PARV.BO

Parsvnath Developers
Relative to Sector:

Shareholding (%) Mar-07 QoQ chg Promoters FIIs MFs / UTI Banks / FIs Others : : : : : 80.3 3.1 0.6 0.1 15.9 0.3 (1.0) (0.3) (0.2) 1.2

Rs 318

Outperformer

Potential Upside: 52%

Target Price: Rs 483

Relative Performance
120 100 80 60 40 20 Nov-06

A diversified player with pan-India reach
Jan-07 Mar-07 Parsvnath

Sensex

Source: ENAM Research, Bloomberg

Financial summary
Y/E March 2006 2007 2008E 2009E Sales (Rs mn) 6,438 15,103 23,416 41,409 PAT (Rs mn) 1,066 2,922 4,541 8,084 EPS (Rs.) 5.8 15.8 24.6 43.8 Change (YoY %) 62 174 55 78 P/E (x) 0.0 16.4 12.9 7.3 RoE (%) 70.3 34.5 27.0 36.7 RoCE (%) 45.1 27.6 25.7 36.4 EV/EBITDA (x) 1.3 12.8 9.1 5.2

Source: *Consensus broker estimates, Company, ENAM estimates

Lead Analyst: Chirag Negandhi

chirag.negandhi@enam.com (+91 22 6754 7618)

Associate: Nitin Idnani

nitin.idnani@enam.com (+91 22 6754 7655)

June 6, 2007 35

Investment Summary
Company background
Having completed ~15mn sq. ft. of development across segments, Parsvnath Developers Ltd (PDL) has embarked on an aggressive roadmap to establish a national presence with a well diversified portfolio

Parsvnath’s Scorecard*
Year ended Residential Projects Commercial Projects DMRC l Projects Total No of Projects 9 9 5 24 SBA (mn sq. ft) 3.08 0.40 0.30 3.79

Investment argument
Project portfolio of 109 projects (~153mn sq. ft.), geographically diversified across 46 cities in 17 states. PDL is also developing 12 SEZ projects (Formal approval –4; In Principle approval – 8) totaling 195.83mn sq. ft. Diverse mix of projects across categories and segments It has won 12 DMRC (Delhi Metro Rail Corp) projects totaling 2.07mn sq. ft.( 5 completed - 0.3mn sq. ft.) Plans to increase footprint to 20 States and 250 cities. Targeted rental income of Rs.11,350mn p.a. by 2011 It also has plans to develop malls in 200 cities in India, as well as 20 large highway malls

Source: Company; * Note: Refers to completed and handed over projects

Planned pan-India presence
- Dharuhera (Rewari) - Faridabad - Gurgaon - Rohtak - Kurukshetra - Sonepat - Panchkula - Bhiwadi - Jodhpur - Jaipur - Ahmedabad - Derabassi - Malerkota - Mohali - Rajpura - Amritsar - Chandigarh Punjab Uttaranchal Haryana Delhi Uttar Pradesh Rajasthan Madhya Pradesh - Agra - Greater Noida - Ghaziabad - Lucknow - Mohan Nagar - Moradabad - Noida - Saharanpur - Shahibabad - Dehradun - Haridwar

Key risk factors
Multifold jump in activity (15mn sq. ft. to 153mn sq. ft.) in newer markets poses significant execution challenges
High dependence on township projects over next 5 years

Valuation
At CMP of Rs.318, the stock trades at a significant discount to our base case valuation of Rs.483. We believe the stock is currently undervalued and initiate coverage with Sector Outperformer rating and a price target of Rs.483

- Pune - Shirdi

Maharasthra Andhra Pradesh Karnataka - Hyderabad Tamilnadu Kerala - Kanchipuram - Indore - Ujjain

- Bangalore

- Cochin

Source: Company, ENAM Research

36

Business Strategy
Pursuing a diversified portfolio
Diversified portfolio mix across 46 cities & 17 states to hedge itself against the prevalent asset cycle risk
Categories - Residential, commercial, SEZ, Township Segments - High income, middle income

Planned Project Portfolio
Segment Residential Commercial Integrated Township DMRC Hotel IT Parks SEZs Total No. of Saleable Area* Projects (sq. ft in mn) 32 22 18 12 17 4 4 109 32.63 4.74 79.90 2.06 2.27 6.01 26.18 153.79 Est. Cost (Rs. bn) 50.8 16.3 76.4 7.2 7.4 6.5 46.0 210.6

To pursue additional DMRC opportunities made available in the next 2-3 years in the NCR and other cities

2010 target
Increase footprint to 20 States and 250 cities with Integrated Townships, Residential Group Housing, Shopping Malls, Hotels, IT Parks etc.
To develop malls in 200 cities in India, ranging in size from 0.3 to 0.5mn sq. ft. To develop 20 large highway malls (built up area of 2.5mn to 10mn sq. ft. per mall)

Breakup of saleable area
IT Parks 4% Hotel 1% DMRC 1% SEZs 17% Residential 21% Commercial 3%

Plot sales to reduce execution risk
More than ~30% of the developable area earmarked for other use such as educational institutes, hospitals etc. to be sold outright, as plots reducing the execution risk
SEZs 22% IT Parks 3% Hotel 4% DMRC 3% Integrated Township 36%

Integrated Township 53%

Breakup of total cost
Residential 24%

New initiatives
Proposed development of a multimedia-cum-film city at Chandigarh totaling 15.62mn sq. ft. across 30 acres Development of a bus terminus project from B.E.S.T Ltd. at Bandra Kurla Complex in Mumbai along with a commercial / shopping complex

Commercial 8%

Source: Company, ENAM Research; * Note: Includes total land bank

37

Competitive Advantage
Multiple revenue streams
PDL is consciously building multiple revenue streams to hedge itself from any cyclicality
To retain 30-35% of the commercial properties to earn regular rental income from the same. It also has the concession for 12 DMRC stations where it shall earn rental income Foray into hospitality segment with 21 planned projects Re-Development of Bus Stations on BOT Basis

Competitive Advantage
Experience of Over 15 Years Diversified Business Model Pan-India Presence Extensive Area Under Development – 43% of planned projects totaling 66 mn. sq. ft. (Excluding SEZ)

First Mover Advantage Identification of Emerging Markets

Parsvnath Developers

Presence across the value chain
Development rights totaling ~153mn sq. ft. In house materials purchase and construction ability with no third party dependence Strong marketing network spanning 46 cities

Presence in HighGrowth Market

Strong Financial Performance

Future Businesses (including SEZs)

Source: ENAM Research

Scaling up execution capability
Over ~43% of planned projects totaling 66mn sq. ft. of space under construction across verticals Professionally managed company with 900 employees including a strong technical team.

Presence across the value chain
Land Selection & aggregation PDL on the forefront with development rights for 134mn sq.ft. Land Development Procedural activity with no major competency requirement Planning/ Designing Specialized job; outsourced by contracting the best talent Construction & Marketing Marketing and material purchase in house. Labour is outsourced

Source: Company

38

Development Snapshot
Planned pipeline of projects
(mn sq. ft.) Parsvnath Residential Commercial Others
Source: Company
Others 71%

Since Inception 3.8 3.1 0.4 0.3

FY07 to FY09E 51.3 41.0 7.8 2.4

Beyond FY09E 46.5 35.8 9.4 1.3

Location wise break-up
Bangalore 3% NCR 26%

Price trend q/q*
NCR

150% 100% 50% 0% -50% -100% Mar-07 Sep-06 Dec-06

Source: Company

Segmental Contribution
Others, 26%

Def. Col Ghaziabad Faridabad

Green Prk G. Noida Noida

E Delhi Gurgaon

Commercial, 13%

Residential, 61%

Source: Cushman & Wakefield; Knight Frank India * In Parsvnaths’ key areas of operation

Source: ENAM Research, Pre tax contribution to valuation considered

39

Valuations
Rollout plans Best Case 30
FY07E FY08E FY09E

Conversion Margin Final Valuations
9 10 11 12 Conversion Margin (Rs./psf) 300 350 400 450 72 84 96 108 80 93 107 120 88 103 117 132 96 112 128 144 Conversion Margin (Rs./psf) 300 350 400 450 36 42 48 53 40 46 53 59 44 51 58 65 48 55 63 71 Conversion Margin (Rs./psf) 300 350 400 450 25 29 33 37 28 32 37 42 30 36 41 46 33 39 44 50 Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid cost Best Case target price Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid cost Base Case target price Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid cost Bear Case target price 93 59 34 186 34 822 46 49 28 124 34 483 32 39 22 94 34 324 (Rs bn) Conv. Margin Multiple (x) (Rs bn) 9 10 11 12 Conv. Margin Multiple (x) (Rs bn) Conv. Margin Multiple (x)

25 20 (mn sq. ft.) 15 10 5 0

Co estimate 8.50 Our estimate 8.50 Industry rate 8.50

16.19 11.76 8.23

26.63 13.19 9.24

Base Case

Bear Case
9 10 11 12

FY07E Co. estimates

FY08E Our estimates

FY09E Industry rate

Land Value (Rs bn) (x) Book Value 39.5 Bear Case 1 39.5 Base Case 1.25 49.3 Best Case 1.5 59.2

Completed Assets (Rs bn) (x) Rental income (FY09) 2.8 Bear Case 8 22 Base Case 10 28 Best Case 12 34

40

NAV Approach
Y/E March Square feet completed Operating Cash Flow Less:Administration Costs Interest Costs Contingency Net Cash Flow (Pre-tax) Less: Taxation Free Cash Flow Sensitivity Matrix (Rs mn) 12 13 14 15 16 0 319 313 308 303 297 Selling price escalation (%) 3 5 7 399 458 520 391 448 508 383 438 496 376 429 485 368 420 474 2007E 8.5 (9,863) 197 193 670 (10,924) 981 (11,905) 2008E 14.6 11,175 223 1,232 585 9,134 1,946 7,188 2009E 14.3 21,037 421 2,028 582 18,006 4,163 13,844 2010E 18.6 43,353 867 2,215 508 39,763 7,206 32,557 2011E 18.2 43,570 871 2,215 449 40,034 7,566 32,468 2012E Beyond 2012E 14.6 26,845 537 2,215 324 23,769 7,944 15,825 28.0 39,403 788 6,645 648 31,322 4,158 27,164

Key Assumptions Variable Escalation in selling price Escalation in construction costs Contingencies considered (% of costs) No of years considered beyond 2012E Assumption 5% 4% 2% 3

10 622 606 591 577 563

WACC (%)

Segmental Contribution
DMRC Projects 14% Plot Sales 10% Residential 38%

Note: Escalation in construction costs assumed to be constant

Net Cash Flows Discount rate Net Present Value No. of shares (fully diluted) Net Asset Value

117,141 14% 80874 184.7 438

Hospitality 15%

Commercial 23%

Source: ENAM Research, Pre tax contribution to valuation considered

41

Company Financials
Income statement
Y/E March Net sales Other operating income Total income Cost of goods sold Contribution (%) Advt/Sales/Distrn O/H Operating Profit Other income PBIDT Depreciation Interest Other pretax Pre-tax profit Tax provision (-) Minority Interests Associates Adjusted PAT E/o income / (Expense) Reported PAT 2006 6,438 4 6,442 4,725 2007 15,103 0 15,103 10,592 2008E 23,416 0 23,416 15,253

(Rs mn)
2009E 41,409 0 41,409 26,349

Key ratios
Y/E March Sales growth OPM Oper. profit growth COGS / Net sales Overheads/Net sales Depreciation / G. block Effective interest rate Net wkg.cap / Net sales Net sales / Gr block (x) Incremental RoCE RoCE Debt / equity (x) Effective tax rate RoE Payout ratio (Div/NP) EPS (Rs.) EPS Growth CEPS (Rs.) DPS (Rs.) 2006 112.3 22.5 100.6 73.3 4.2 9.5 1.5 0.4 15.6 26.6 45.1 1.2 27.1 70.3 0.0 5.8 61.6 6.1 0.0 2007 134.6 27.6 188.3 70.1 2.2 15.1 2.8 0.8 19.2 15.9 27.6 0.8 24.0 34.5 0.0 15.8 174.0 16.6 0.0 2008E 55.0 32.7 83.4 65.1 2.2 12.4 9.3 1.0 19.5 38.8 25.7 0.8 30.0 27.0 0.0 24.6 55.4 25.6 0.0

(%)
2009E 76.8 34.5 86.8 63.6 1.8 12.6 11.8 0.8 23.1 54.0 36.4 0.8 34.0 36.7 0.0 43.8 78.0 45.2 0.0

27
269 1,448 99 1,547 59 27 0 1,462 396 0 0 1,066 0 1,066

30
337 4,174 242 4,416 143 193 0 4,080 981 176 0 2,922 0 2,922

35
506 7,657 242 7,899 180 1,232 0 6,487 1,946 0 0 4,541 0 4,541

36
758 14,301 242 14,544 269 2,028 0 12,247 4,163 0 0 8,084 0 8,084

Source: Company , ENAM Research

42

Company Financials
Balance sheet
Y/E March Total assets Gross block Net fixed assets CWIP Investments Wkg. cap. (excl cash) Cash / Bank balance Others/Def tax assets Capital employed Equity capital Reserves Borrowings Others 2006 4,370 619 529 0 42 3,387 412 0 4,370 989 1,022 2,359 0 2007 26,606 950 717 380 42 19,470 5,998 0 26,606 1,847 13,070 11,690 0

(Rs mn)
2008E 33,356 1,450 1,037 680 42 27,722 3,876 0 33,356 1,847 16,820 14,690 0 2009E 45,032 2,134 1,452 15 42 40,106 3,418 0 45,032 1,847 23,496 19,690 0

Cash flow
Y/E March Sources Cash profit (-) Dividends Retained earnings Issue of equity Borrowings Others Applications Capital expenditure Investments Net current assets Change in cash 2006 3,176 1,118 0 1,118 907 1,152 0 3,176 416 0 2,205 556 2007 22,919 3,242 0 3,242 10,347 9,331 0 22,919 711 (0) 16,084 6,125 2008E 7,721 4,721 0 4,721 0 3,000 0 7,721 800 0 8,252 (1,331)

(Rs mn)
2009E 13,353 8,353 0 8,353 0 5,000 0 13,353 19 0 12,384 950

Source: Company , ENAM Research

43

India Research
Stock Data No. of shares Market cap 52 week high/low Avg. daily vol. (6mth) Bloomberg code Reuters code : 34mn : Rs 42bn : Rs 1,475 / Rs 587 : 22,400 shares : ARCP IN : ANRA.BO

Anant Raj Industries
Relative to Sector:

Shareholding (%) Mar-07 QoQ chg Promoters FIIs MFs / UTI Banks / FIs Others : : : : : 67.1 17.0 0.3 0.0 15.6 (2.9) (0.1) (0.3) 0.0 3.4

Rs 1,135

Outperformer

Target Price: Rs.1,256

Potential Upside: 11%

Relative Performance
220 180 140 100 60 Apr-06 Sensex Oct-06 Apr-07 Anant Raj

Building blocks in place

Source: ENAM Research, Bloomberg

Financial summary
Y/E March 2006 2007 2008E 2009E Sales (Rs mn) 568 2,043 8,090 15,219 PAT (Rs mn) 281 1,309 3,822 6,333 EPS (Rs.) 8.2 38.2 111.5 184.7 Change (YoY %) 9,886 366 192 66 P/E (x) 62.7 28.9 10.2 6.1 RoE (%) 6.6 13.0 21.7 24.2 RoCE (%) 8.5 14.7 21.1 19.7 EV/EBITDA (x) 44.8 22.8 9.3 7.1

Source: *Consensus broker estimates, Company, ENAM estimates

Lead Analyst: Chirag Negandhi

chirag.negandhi@enam.com (+91 22 6754 7618)

Associate: Nitin Idnani

nitin.idnani@enam.com (+91 22 6754 7655)

June 6, 2007 44

Investment Summary
Company background
Leading developer in the NCR having completed ~11.5mn sq. ft. across various segments
Incorporated in 1985, ARIL has ~9 decades of experience in construction & ~3 decades in real estate development

Scorecard of Completed Projects
Completed Projects Residential houses / row houses/ multi-storey apartments Buildings for use as office / colleges / hospital/ factory Shopping complex / mall Farm houses complex with infrastructure Development of roads and drainage systems Parks Laying of water pipe lines Laying of sewage pipe lines Area (mn sq. ft.) 9.82 1.5 0.375 210 Acres/ 70 Houses 55 Sq. Kms. 75 Acres 30 Kms 15 Kms

Also manufactures ceramic tiles with a total capacity of~4.2mn sq. meters per annum

Investment argument
High quality portfolio of ~49mn sq. ft. (~837 acres) in the NCR Development activities consciously restricted to the NCR wherein it has considerable expertise High potential in NCR for hotels (shortage of ~12,000 rooms) & comm. projects (2-3% vacancy)

Current Project Portfolio
Segment Residential Commercial Hospitality Retail Total
Source: Company

Consolidation of subsidiary companies underway to bring in Rs.4,900mn of land assets into the company

(mn sq. ft.) 11.59 28.42 8.22 1.08 49.31

Key risk factors
Restricting itself to the NCR exposes ARIL to a geographical risk of a regional slowdown Execution bandwidth to be tested as it undertakes its expansion plans in an aggressive time frame Lack of a premium brand name results in a lack of pricing premium for its projects enjoyed by others

Retail 2% Hospitality 16%

Residential 24%

Valuation
At CMP of Rs.1135, the stock trades at a significant discount to our base case valuation of Rs.1,256. We believe the stock is currently undervalued and initiate coverage with Sector Outperformer rating and a price target of Rs.1,256

Source: Company,ENAM Research

Commercial 58%

45

Business Strategy
Consolidation ARIL to now be the flagship company of the AR Group Upon completion of the planned reorganization, all construction, development of the AR group to be concentrated within ARIL Land Acquisition Actively identify low cost land in fast growing locations 3 pronged approach to acquiring new land Anant Raj’s Business Model A Focused NCR player Flexible Development Strategy Flexible approach to selling or leasing of its projects Plan to enter into JVs in certain cases to hedge risks – more likely in IT / ITES and hospitality
Source: ENAM Research

Farmers Land development auth Individuals/ corporates Diversified Approach Present across segments: IT Parks, Hotels, SEZs, Commercial and Residential Realize full potential of land and prevailing market trends Capitalize on the opportunities generated by different sectors 46

Benefiting from Reorganization
ANANT RAJ INDUSTRIES LTD. (Post Reorganisation) Subsidiary/ Equity Stake 1st Merger 2nd Merger 3rd Merger

100% Subsidiaries Company HIGHLAND MEADOWS PVT. LTD. (1 subsidiary) Anant Raj Hotels Pvt. Ltd. Century Promoters Pvt. Ltd. GREEN LINE BUILDCON PVT.LTD. (9 subsidiaries) Echo Properties Pvt Ltd Elegant Buildcon Pvt. Ltd. Elegant Estates Pvt. Ltd. Empire Promoters Pvt. Ltd. Goodluck Buildtech Pvt. Ltd. Grand Buildtech Pvt. Ltd. Greatways Estates Ltd. Green Retreat & Motels Pvt. Ltd. Greenline Promoters Pvt. Ltd. Lucky Meadows Pvt. Ltd. Oriental Buildtech Pvt. Ltd. Oriental Meadows Limited Parkland Developers Pvt. Ltd. Pasupati Aluminium Limited. Pelikan Estates Pvt. Ltd. Pioneer Promoters Pvt. Ltd. Rapid Estates Pvt. Ltd. Rapid Realotrs Pvt. Ltd. Springview Promoters Pvt. Ltd. Springview Properties Pvt. Ltd. Suburban Farms Pvt. Ltd. Woodland Promoters Pvt. Ltd. Dhruv Theatres & Production Pvt. Ltd 50% Equity Stake Roseland Buildtech Pvt. Ltd. (16 subsidiaries)

Kalinga Meadows Pvt. Ltd. Sarvodaya Buiders Pvt. Ltd. Carnation Buildcon Pvt. Ltd. B.T.Estates Pvt. Ltd. Elegant Buildtech Pvt. Ltd.

Grand Meadows Limted Papillon Estates Limited Roseview Estates Pvt. Ltd. Bhasin Resorts Pvt. Ltd.

Anant Raj Exports P.Ltd. Victor Promoters P.Ltd. Parkland Promoters Pvt.Ltd. Greenwood Promoters P.Ltd. Construction and development undertaking of Anant Raj Agencies Pvt. Ltd. North Land Estates P Ltd 6. P. Ltd. Springdales Estates P.Ltd. Jasmine Promoters Pvt. Ltd. Sunrise Buildtech Pvt.Ltd. Mayur Buildtech Pvt. Ltd. West Land Buildtech P. Ltd. Rockfield Buildtech Pvt. Ltd.

Already part of ARIL To become part of ARIL on the completion of the reorganisation

Source: Company *As on December 31, 06 showing only first tier subsidiaries i.e subsidiaries of subsidiaries are not shown

47

Competitive Advantage
High quality land bank
Fully paid up land bank of ~49mn sq. ft. with an average cost of ~Rs 315/ psf Real estate prices have moved up significantly, providing immediate profitability Portfolio includes 2 SEZs in partnership with Reliance ADAG in Manesar, Haryana, spread over 335 acres

ARIL’s current land bank
Location Manesar Manesar Dhumaspur RAI Rewari NH-8, Near Intn’l Airport NH-8, Near Intn’l Airport Shahoorpur & Bhatti Najafgarh Najafgarh Najafgarh/ Kirti Nagar Pur Kapashera Tej Pul (NH-2) Jindpur (NH-1) Nangli Puna (NH-1) Tikri (NH-1) Alipur & Holambi (NH-1) Properties in Central Delhi Tirlokpuri Karol Bagh Bhatti Hauz Khas Greater Noida Faridabad Vazirabad, Gurgaon New Acquisitions in Fazalwas Rockfield (Shimla) Jhandewalan (E-2) M M Road Faiz Road Total
Source: Company

Sector

Land Area (acres)

Extensive expertise in the NCR
Over 90% of its land bank falls within a 50km radius from Delhi with ~500 acres in Delhi itself
Conscientious restriction of activities to the NCR to leverage management’s 40 years of experience in this region

De-risked portfolio across residential, commercial, hospitality and retail segments

In-house construction team
Dedicated team of engineers & workers with a focus on cost control and timeliness Not dependent on 3rd party contractors for its project execution

Recent budget impetus
Tax holiday for all 2,3 and 4 star hotels becoming operational in the NCR between 1st April 2007 and 31st March 2010 for a period of 5 years

IT 10.00 SEZ 270.00 IT 32.50 IT 25.00 Ceramic Tile Factory 16.90 Hospitality 26.18 Commercial 2.50 Hospitality 28.31 Hospitality 45.80 Resi/Service Aptt 27.65 Commercial/ Mall 6.20 River Front Entertainment 180.00 Resi/Service Aptt 2.95 IT 5.77 Hospitality 14.15 Resi/Service Aptt 27.85 Resi/Service Aptt 11.10 Resi/Service Aptt 35.00 Resi/Service Aptt 3.60 Entertainment 0.71 Commercial 0.72 Housing 23.98 Resi/Service Aptt 2.40 Commercial 1.25 Resi/Service Aptt 11.20 Hospitality 4.23 Part Purchase for Mega Township 14.00 Hospitality 6.20 Commercial 1.00 Commercial 0.10 Commercial 0.14 837.4

48

Development Snapshot
Planned pipeline of projects
(mn sq. ft.) Anant Raj Residential Commercial Others
Source: Company

Location wise break-up
FY07 to FY09E 9.8 2.4 3.6 3.8 Beyond FY09E 39.4 9.2 25.1 5.1

Since Inception 11.8 9.8 1.5 0.5

NCR 51% Punjab/ Haryana 49%

Source: Company

Price trend q/q*
NCR
150% 100% 50% 0% -50% -100% Sep-06 Def. Col Ghaziabad Faridabad Dec-06 Green Prk G. Noida Noida Mar-07 E Delhi Gurgaon
Hospitality 23%

Segmental Contribution
Residential 32%

Retail 5% Commercial 40%

Source: ENAM Research, Pre tax contribution to valuation considered

Source: Cushman & Wakefield; Knight Frank India *In Anant Raj’s key area of operation

49

Valuations
Rollout Plans Best Case
9 8 7 6
(Rs bn)
FY07E FY08E FY09E Co estimate 0.46 Our estimate 0.46 Industry rate 0.46 1.60 1.07 1.07 7.70 4.78 1.40

Conversion Margin Final Valuations
9 10 11 12 Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 69 83 104 125 77 92 116 139 85 102 127 152 92 111 139 166 Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 43 52 64 77 48 57 72 86 53 63 79 95 57 69 86 103 Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 13 15 19 23 14 17 21 25 15 18 23 28 17 20 25 30 Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid cost Best Case target price Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid cost Base Case target price Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid cost Bear Case target price 92 26 24 142 25 2124 57 17 20 94 25 1256 17 13 16 46 25 367

Base Case
(Rs bn) 9 10 11 12 Conv. Margin Multiple (x) (Rs bn) 9 10 11 12 Conv. Margin Multiple (x)

Mn. sq. ft.

5 4 3 2 1 0 FY07E Co. estimates FY08E Our estimates FY09E Industry rate

Bear Case

Land Value (Rs bn) (x) Book Value 8.7 Bear Case 1.5
13.1

Conv. Margin Multiple (x)

Completed Assets Base Case 2
17.4

Best Case 3
26.1

(Rs bn) (x) Rental income (FY09) 2.0

Bear Case 8
15.8

Base Case 10
19.8

Best Case 12
23.7

50

NAV Approach
Y/E March Square feet completed Operating Cash Flow Less:Administration Costs Interest Costs Contingency Net Cash Flow (Pre-tax)
Less: Taxation Free Cash Flow

2007E 0.4 (2,091) 130 10 53 (2,285)
436 (2,721)

2008E 1.1 (3,137) 243 162 474 (4,015)
1,198 (5,213)

2009E 4.8 (2,195) 457 415 551 (3,617)

2010E 8.8 66,845 724 2,485 464 63,172

2011E 18.6 50,585 1,132 1,248 174 48,031
4,467 43,564

2012E Beyond 2012E 3.1 6,088 1,154 423 63 4,448
3,231 1,217

12.4 22,780 3,533 1,269 188 17,790
466 17,324

1,919 2,176 (5,536) 60,996

Sensitivity Matrix (Rs mn) 12 13 14 15 16 0 817 796 777 758 739 Selling price escalation (%) 3 5 7 1068 1247 1436 1042 1216 1401 1016 1187 1366 991 1158 1333 967 1130 1301

Key Assumptions Variable Escalation in selling price Escalation in construction costs Contingencies considered (% of costs) No of years considered beyond 2012E Assumption 5% 4% 2% 3

10 1738 1695 1654 1613 1574

WACC (%)

Segmental Contribution
Residential 32%

Note: Escalation in construction costs assumed to be constant

Net Cash Flows Discount rate Net Present Value No. of shares (fully diluted) Net Asset Value

109,631 14% 65269 55.0 1187

Hospitality 23%

Retail 5% Commercial 40%

Source: ENAM Research, Pre tax contribution to valuation considered

51

Company Financials
Income statement
Y/E March Net sales Other operating income Total income Cost of goods sold Contribution (%) Advt/Sales/Distrn O/H Operating Profit Other income PBIDT Depreciation Interest Other pretax Pre-tax profit Tax provision (-) Minority Interests Associates Adjusted PAT E/o income / (Expense) Reported PAT 2006 568 0 568 147 2007 2,043 0 2,043 133 2008E 8,090 0 8,090 2,511

(Rs mn)
2009E 15,219 0 15,219 5,692

Key ratios
Y/E March Sales growth OPM Oper. profit growth COGS / Net sales Overheads/Net sales Depreciation / G. block Effective interest rate Net wkg.cap / Net sales Net sales / Gr block (x) Incremental RoCE RoCE Debt / equity (x) Effective tax rate RoE Payout ratio (Div/NP) EPS (Rs.) EPS Growth CEPS (Rs.) DPS (Rs.) 2006 151.7 70.5 1,332.9 25.8 3.7 0.3 4.8 0.1 0.1 4.4 8.5 0.0 23.9 6.6 19.4 8.2 9,885.9 9.0 1.6 2007 259.5 87.1 344.1 6.5 6.4 0.4 0.6 0.1 0.2 23.4 14.7 0.3 25.2 13.0 3.7 38.2 365.8 39.7 1.4 2008E 296.0 66.0 199.9 31.0 3.0 0.7 2.2 0.1 0.5 17.7 21.1 0.5 24.9 21.7 4.3 111.5 191.9 115.0 4.8

(%)
2009E 88.1 59.6 70.0 37.4 3.0 1.1 2.2 0.1 0.7 17.4 19.7 0.9 24.9 24.2 7.0 184.7 65.7 192.1 12.9

0
21 401 9 410 29 12 0 369 88 0 0 281 0 281

0
130 1,779 33 1,812 53 10 0 1,749 440 0 0 1,309 0 1,309

0
243 5,336 33 5,369 121 162 0 5,087 1,265 0 0 3,822 0 3,822

0
457 9,070 33 9,103 252 415 0 8,437 2,104 0 0 6,333 0 6,333

Source: ENAM Research

52

Company Financials
Balance sheet
Y/E March Total assets Gross block Net fixed assets CWIP Investments Wkg. cap. (excl cash) Cash / Bank balance Others/Def tax assets Capital employed Equity capital Reserves Borrowings Others 2006 8,677 8,555 8,301 244 0 103 29 0 8,677 429 7,878 344 26 2007E 15,271 12,968 12,662 1,671 200 117 621 0 15,271 479 11,418 3,344 30 2008E 34,709 17,795 17,367 15,700 100 1,083 459 0 34,709 550 22,718 11,344 97

(Rs mn)
2009E 55,725 23,617 22,938 29,248 0 2,619 920 0 55,725 550 28,549 26,344 282

Cash flow
Y/E March Sources Cash profit (-) Dividends Retained earnings Issue of equity Borrowings Others Applications Capital expenditure Investments Net current assets Change in cash 2006 8,321 326 62 264 7,853 205 0 8,321 8,281 (0) 40 (0) 2007E 6,674 1,366 55 1,311 2,363 3,000 0 6,674 5,840 200 14 620 2008E 19,559 4,010 188 3,822 7,737 8,000 0 19,559 18,855 (100) 966 (163)

(Rs mn)
2009E 21,266 6,770 504 6,266 0 15,000 0 21,266 19,371 (100) 1,536 459

Source: ENAM Research

53

India Research
Stock Data No. of shares Market cap 52 week high/low Avg. daily vol. (1mth) Bloomberg code Reuters code Shareholding (%) Promoters FIIs MFs / UTI Banks / FIs Others : : : : : : 66.7mn : Rs 25bn : Rs 729/ Rs 332 : 404,700 shares : AKNL IN : AKRU.BO Mar-07 90.0 2.3 0.9 0.2 6.7

Akruti Nirman
Relative to Sector:

Rs 360
Target Price: Rs.352
Potential Upside: -2%

Neutral

Relative Performance
120 100 80 60 40 Feb-07 Mar-07 Apr-07 Akruti Nirman

“Slum”bering Ahead
Sensex

Source: ENAM Research, Bloomberg

Financial summary
Y/E March
2006 2007E 2008E 2009E

Sales (Rs mn)
3,036 3,210 10,300 22,966

PAT (Rs mn)
631 735 1,764 3,588

EPS (Rs.)
9.5 11.0 26.4 53.8

Change (YoY %)
358 16 140 103

P/E (x)
0.0 36.8 13.6 6.7

RoE (%)
79.6 23.8 29.4 41.4

RoCE (%)
37.4 20.8 26.0 30.7

EV/EBITDA (x)
1.1 29.1 10.6 6.5

Source: *Consensus broker estimates, Company, ENAM estimates

Lead Analyst: Chirag Negandhi

chirag.negandhi@enam.com (+91 22 6754 7618)

Associate: Nitin Idnani

nitin.idnani@enam.com (+91 22 6754 7655)

June 6, 2007 54

Investment Summary
Company Background Akruti Nirman Limited (ANL), is a Mumbai based real estate developer specializing in projects under the Slum Rehabilitation Scheme (SRS)
Completed ~4.9mn sq. ft. (including rehab component) over the last 10 years under the SRS totaling ~10,000 rehabilitation units Developed ~126,000 sq. ft. through JVs with leading developers

Akruti’s Scorecard
(mn sq. ft.) Residential Commercial Retail/ Hospitality Total
Source: Company

SRS Completed Planned 0.53 0.74 0.00 1.27 3.71 3.31 2.48 9.50

Non SRS Completed Planned 0.13 0.00 0.00 0.13 106.40 39.12 1.25 146.77

Investment Argument
Planned development of ~9.5mn sq. ft. of SRS projects & ~7.9mn sq. ft. (excluding Panvel and Baroda projects) of nonSRS projects SRS enables ANL to acquire prime land at low costs, assuring profitability at the initial stage itself Over 2 decades of experience in execution of SRS projects with expertise in clearing encroachments and building consensus among slum dwellers

Business Model
Land Procurement Procured from the government under the Slum Rehabilitation Scheme JV with leading developers to undertake larger projects

Key Risk Factors
High dependence (~50%+ ) on longer gestation SRS projects, fraught with imminent delays of approvals/ clearances and consensus building Multifold increase in its planned projects, implies a certain degree of execution risk, visible from recent delays in project deliveries

Project Sales Saleable area of the project sold on a profitable basis Excess FSI sold in TDR market or utilized elsewhere

Slum Rehabilitation Slum dwellers provided with 225 sq ft tenements each , along with a Rs.20,000 each as a deposit for maintenance

Akruti Nirman Ltd
Project Execution

Valuations
At CMP of Rs.360, the stock trades at a marginal premium to our base case valuation of Rs.352. We believe the stock is fairly valued and initiate coverage with Sector Neutral rating and a price target of Rs.352.

Established expertise in clearing encroachments and building consensus Actual construction outsourced to contractors empanelled with ANL

Source: ENAM Research

55

Business Strategy
Continued focus on SRS projects
Access to prime lands within Mumbai city, providing immediate upside to the project Ability to generate considerable excess Floor Space Index (FSI), which can be sold or used in other projects SRS
Cost of land equal to the cost of constructing rehab buildings Building consensus among slum dwellers very time consuming (~ 18 -24 months)

Balanced Approach
Non SRS
Land Cost
Land parcels in prime city locations are scarce and highly expensive Once land is purchased, construction cycle lasts ~ 24months

Execution outsourced
Outsourcing model enables ANL to supervise the project at every stage, while maintaining an active roll in the land clearance process

Gestation Period

Optimisation & Diversification
Substantial land bank built via JVs with leading developers to ensure a constant revenue stream from non-SRS projects. Enables spreading the financial risk and mitigating any initial cost outlay incurred in purchasing land

Clearance of encroachments & dealing with a large number of people requires a high degree of expertise

Entry Barriers

Construction industry in India is highly unorganized and fragmented

Healthy project portfolio mix of SRS and Non-SRS projects

Undertaking larger projects
Post IPO, 2 large projects added, which are to be developed over longer periods of time
Panvel township of ~100mn sq. ft. across ~2,400 acres to be developed over 10-12 years Biotech SEZ in Gujarat over 708 acres totaling ~33mn sq. ft. in JV with the govt. and The Chaterjee Group to be developed over 6 years

Difficult to replicate business model given slum rehabilitation expertise

Akruti

Well balanced asset cycle risk and overall cash flow

Attractive project pipeline

Diversified revenue stream with nearly 50:50 contribution from residential and commercial assets

Source:ENAM Research

56

Competitive Advantage
Balanced asset cycle risk
SRS projects help lower the asset cycle risk for ANL
SRS projects do not involve substantial, one-off land purchase costs at the beginning of projects Going forward, SRS projects expected to contribute a significant portion of the total revenues

The SRS Advantage
Slum dwellers Rehabilitation free of cost, in 225 sq. ft. tenements Receive Rs.20,000 as a deposit, which is utilized to maintain the premises, making it even more cost effective Government More people brought under the tax net, who were till now evading taxes. Helps fulfill the social obligations of the government, which does not have the execution capabilities to undertake rehabilitation on such a large scale. Developer In a city like Mumbai, where scarcity of land is the prime factor limiting the business development of any real estate player, the SRS is a very lucrative method of acquiring land parcels. The developers are able to procure land in prime locations of the city, which assures the returns the project will generate. In addition, the cost of land for the developer is equal to the cost of constructing the rehab buildings for the slum dwellers reducing the asset cycle risk. The additional FSI of 2.5 times makes the scheme even more attractive.

Being present in SRS & non SRS projects helps to de-risk ANL’s business model from any cyclicality in its cash flows

Land aggregation capability
Ability to identify & aggregate a substantial quantum of development rights to land By participating in the SRS, ANL receives developable, urban land from the Government of Maharashtra (GoM), in prime locations of the city at a very low cost

Source: ENAM Research

ANL’s project execution process
Land identification and acquisition Identification of future market trends Identification of suitable land Due diligence and title searches Analysis of land use & other relevant governmental regulations Obtain consents, authorizations and approvals Siting and planning consents Environmental consents For slum rehabilitation projects, consent from at least 70% of slum dwellers and SRA or MIDC approval Project preparation Cost estimate Project development timetable Identifying potential third party partners Securing finance Carrying out design and architectural work Project management and execution Appointment & mgmt of constructors Procurement of suppliers & raw materials Product quality & control Safety monitoring

Limited competition in SRS projects
High level of expertise & knowledge of the various SRS rules and regulations, has created entry barriers Only a handful of developers currently focusing on SRS projects

Source: ENAM Research

57

Life cycle of a SRS project
Pre Construction Stage Construction Stage

Prime land within central parts of the city Identification of slum land Entails dealing with large no. of stakeholders

Rehabilitation Component

Saleable Component

Shifting slum dwellers to transit housing

Land freed from rehabilitation

Consensus among slum dwellers and legal approvals taken

Construction of rehabilitation buildings

Construction of saleable component

Can be very time consuming resulting in inevitable delays Land cleared of encroachments

Shifting slum dwellers from transit housing to rehabilitated homes

Sales

Land ready for construction

Constructing amenities like Crèche, Community centres,etc

Longer construction cycle than other non SRS projects

Source: ENAM Research

58

Development Snapshot
Planned pipeline of projects
(mn sq. ft.) Akruti Residential Commercial Others Since Inception 1.4 0.6 0.7 0.0 FY07 to FY09E 12.9 3.0 8.8 1.1 Beyond FY09E 143.4 107.1 34.39 1.9
80% 60% 40% 20% 0% -20% Dec-05 Mar-06 Dec-06 Jun-06 Mar-07 Sep-06

Price trend q/q*
Mumbai

Source: Company; Note: Includes Baroda biotech park and Panvel township projects

Location wise break-up
Baroda 22%

Andheri Worli

Pune 5%

Mumbai 73%

100% 80% 60% 40% 20% 0% -20% Dec-05 Mar-06

Bandra Vashi Pune

S Mumbai

Segmental Contribution
Hospitality 4% Residential 38%

Dec-06 Club Rd Kalyani Ngr Viman Ngr

Jun-06

Retail 31% Commercial 27%
Source: Company,ENAM Research, Pre tax contribution to valuation considered

Aundh Deccan Rd Koregaon Prk

Source: Cushman & Wakefield, Knight Frank India * In Akruti Nirman’s key areas of operation

Mar-07

Sep-06

59

Valuations
Rollout plans Best Case
10 9 8 7 (mn sq. ft.) 6 5 4 3 2 1 0 FY07E FY08E FY09E
FY07E FY08E FY09E Co estimate 0.16 Our estimate 0.34 Industry rate 0.34 3.52 2.10 2.10 9.18 3.14 2.73

Conversion Margin Final Valuations
5 6 7 8 Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 46 55 69 83 55 66 83 99 64 77 96 116 73 88 110 132 Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 16 19 24 28 19 23 28 34 22 26 33 40 25 30 38 45 Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 14 16 21 25 16 20 25 30 19 23 29 34 22 26 33 39 Conversion Margin 66 Land Value 9 Completed Assets 3.7 Total 79 Less: Net debt + Unpaid land cost 10 Best Case target price 1036 Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid land cost Base Case target price Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid land cost Bear Case target price 23 7.5 3.1 33 10 352 20 6 2.5 28 10 276 (Rs bn) Conv. Margin Multiple (x) (Rs bn) 5 6 7 8 Conv. Margin Multiple (x) (Rs bn) 5 6 7 8 Conv. Margin Multiple (x)

Base Case

Bear Case

Co estimate

Our estimate

Industry rate

Land Value (Rs bn) (x) Book Value 6 Bear Case 1 6 Base Case 1.25 7.5 Best Case 1.5 9

Completed Assets (Rs bn) (x) Rental income (FY09) 0.3 Bear Case 8 2.5 Base Case 10 3.1 Best Case 12 3.7

60

NAV Approach
Y/E 2006 Square feet completed Operating Cash Flow Less:Administration Costs Interest Costs Contingency Net Cash Flow (Pre-tax) Less: Taxation Free Cash Flow Sensitivity Matrix (Rs mn) 12 13 14 15 16 0 296 288 280 273 266 Selling price escalation (%) 3 5 7 370 425 482 359 411 467 349 399 452 339 387 438 330 376 425 2007E 0.34 (3574) 219 201 77 (4072) 86 (4158) Key Assumptions Variable Escalation in selling price Escalation in construction costs Contingencies considered (% of costs) No of years considered beyond 2010E Assumption 5% 4% 2% 6 2008E 2.10 2934 282 333 98 2222 442 1780 2009E 3.14 9772 313 639 110 8710 678 8032 2010E 2.77 22518 347 2038 100 20033 354 19679 Beyond 2010E 2.75 44153 2230 15552 580 25791 6564 19226

10 577 557 539 521 505

WACC (%)

Segmental Contribution
Hospitality 4% Retail 31% Residential 38%

Note: Escalation in construction costs assumed to be constant

Net Cash Flows Discount rate Net Present Value No. of shares Net Asset Value per share

44,560 14% 26597 67 399

Commercial 27%

Source: ENAM Research, Pre tax contribution to valuation considered

61

Company Financials
Income statement
Y/E March Sales Closing WIP Rental Income Profit from JV Total income Cost of goods sold Contribution (%) Advt/Sales/Distrn O/H Operating Profit Other income PBIDT Depreciation Interest Other pretax Pre-tax profit Tax provision (-) Minority Interests Associates Adjusted PAT E/o income / (Expense) 2006 1,608 1,042 106 281 3,036 2,231 0 49 755 21 776 48 67 0 661 30 0 0 631 0 2007E 1,610 1,432 169 0 3,210 2,009 0 219 982 105 1,087 65 201 0 821 86 0 0 735 0 2008E 1,945 7,181 297 878 10,300 7,407 0 282 2,611 0 2,611 72 333 0 2,206 442 0 0 1,764 0

(Rs mn)
2009E 2,042 17,899 312 2,714 22,966 17,676 0 313 4,978 0 4,978 74 639 0 4,266 678 0 0 3,588 0

Key ratios
Y/E March Sales growth OPM Oper. profit growth COGS / Net sales Overheads/Net sales Depreciation / G. block Effective interest rate Net wkg.cap / Net sales Net sales / Gr block (x) Incremental RoCE RoCE Debt / equity (x) Effective tax rate RoE Payout ratio (Div/NP) EPS (Rs.) EPS Growth CEPS (Rs.) DPS (Rs.) 2006 62.4 24.9 141.7 73.5 1.6 4.7 5.8 0.3 3.2 (1,218.6) 37.4 0.8 4.6 79.6 0.0 9.5 357.6 10.2 0.0 2007E 5.7 30.6 30.1 62.6 6.8 6.3 11.0 0.6 3.1 9.3 20.8 0.6 10.5 23.8 0.0 11.0 16.4 12.0 0.0 2008E 220.9 25.4 165.9 71.9 2.7 7.0 8.9 0.5 9.9 47.7 26.0 0.7 20.0 29.4 0.0 26.4 140.1 27.5 0.0

(%)
2009E 123.0 21.7 90.6 77.0 1.4 7.0 8.7 0.5 22.0 28.6 30.7 1.0 15.9 41.4 0.0 53.8 103.4 54.9 0.0

Source: ENAM Research

62

Company Financials
Balance sheet
Y/E March Total assets Gross block Net fixed assets CWIP Investments Wkg. cap. (excl cash) Cash / Bank balance Others/Def tax assets Capital employed Equity capital Reserves Borrowings Others 2006 1,919 1,019 858 0 198 811 52 0 1,919 480 588 845 6 2007E 7,931 1,037 856 15 2,698 3,052 1,310 0 7,931 667 4,444 2,819 1 2008E 11,566 1,040 807 0 3,128 6,514 1,117 0 11,567 667 6,208 4,691 1

(Rs mn)
2009E 20,419 1,052 767 0 3,029 14,823 1,799 0 20,418 667 9,796 9,955 1

Cash flow
Y/E March Sources Cash profit (-) Dividends Retained earnings Issue of equity Borrowings Others Applications Capital expenditure Investments Net current assets Change in cash 2006 526 685 0 685 460 (619) 0 526 155 123 (145) 393 2007E 2,955 794 0 794 187 1,974 0 2,955 77 2,500 2,241 (1,863) 2008E 3,708 1,836 0 1,836 0 1,872 0 3,708 9 430 3,462 (193)

(Rs mn)
2009E 8,925 3,661 0 3,661 0 5,264 0 8,925 33 (99) 8,309 682

Source: ENAM Research

63

India Research
Stock Data No. of shares Market cap 52 week high/low Avg. daily vol. (6mth) Bloomberg code Reuters code : 42mn : Rs 21.3bn : Rs 755/ Rs 286 : 96,700 shares : PENL IN : PENL.BO

Peninsula Land
Relative to Sector:

Shareholding (%) Mar-07 QoQ chg Promoters FIIs MFs / UTI Banks / FIs Others : : : : : 65.2 1.5 1.8 9.2 22.4 (0.2) 1.0 (0.1) (0.1) (0.6)

Rs 540
Potential Upside: -13%

Underperformer

Target Price: Rs 472

Relative Performance
160 140 120 100 80 60 40 Apr-06 Sensex

Banking on lineage
Oct-06 Apr-07 Peninsula

Source: ENAM Research, Bloomberg

Financial summary
Y/E March 2006 2007 2008E 2009E Sales (Rs mn) 2,748 2,994 6,184 9,768 PAT (Rs mn) 1,387 1,218 1,907 3,202 EPS (Rs.) 32.9 28.9 45.3 76.1 Change (YoY %) 733 (12) 57 68 P/E (x) 11.3 18.6 11.9 7.1 RoE (%) (502.6) 76.7 55.9 51.3 RoCE (%) 40.9 28.8 34.0 36.2 EV/EBITDA (x) 14.1 13.8 7.9 5.0

Source: *Consensus broker estimates, Company, ENAM estimates

Lead Analyst: Chirag Negandhi

chirag.negandhi@enam.com (+91 22 6754 7618)

Associate: Nitin Idnani

nitin.idnani@enam.com (+91 22 6754 7655)

June 6, 2007 64

Investment Summary
Company background
Strong Promoter Pedigree
THE ASHOK PIRAMAL GROUP

Part of the ‘Ashok Piramal’ group, PLL enjoys a strong brand equity for its real estate projects PLL has developed ~2.36mn sq. ft. of real estate projects across the commercial (Peninsula), residential (Ashok), and retail (Crossroads) space Project portfolio consists of ~80mn sq. ft. of space over a land area of ~1,738 acres in western India High quality land bank acquired at lower costs ensures the profitability of PLL’s projects early on Lower asset cycle risk as PLL strategies to acquire land only for its immediate development needs (3-5 years) PLL also plans to launch 2 real estate funds to increase its project portfolio, while spreading the risk

TEXTILES

ENGINEERING

REAL ESTATE DEVELOPMENT Peninsula Land Ltd

RETAIL

Investment argument

Morarjee Textiles Ltd

Piramyd Retail Ltd

Integra Apparels & Textiles Pvt Ltd

Morarjee Internation al S R L

PMP Components Pvt Ltd

G. P. Electronics Ltd

Lifestyle Retail Piramyd Megastore)

Food, Home & Personal Care (Trumart)

Just Textiles Limited

Miranda Tools

Source: Company

Key risk factors

PLL carries an execution risk given its planned multifold increase in projects in newer markets Going forward, major revenue to come from SEZ projects, which are still to be notified At CMP of Rs.540, the stock trades at a significant premium to our base case valuation of Rs.472. We believe the stock is currently overvalued and initiate coverage with Sector Underperformer rating and a price target of Rs.472

Milestones
Year 1934 2001 2003 Event The Piramal family acquired the textiles business of Morarjee Goculdas Spinning and Weaving (MGSW) The company entered the real-estate market using its two land parcels in Mumbai Textiles business demerged and property business renamed to Morarjee Realties (MRL). Peninsula Corporate Park completed. Launched 1st residential project Ashok Towers on former MGSW land Piramal Holdings (PHL) merged into MRL and its name changed to Peninsula Land. PHL developed Crossroads - a well known retail mall in Mumbai Dawn Mills merges into Peninsula Land - taking the fully diluted number of shares to 44.5 million. Entered the Goa and Pune The company plans to launch 2 real-estate funds, domestically and internationally. Entry into Nasik.

Valuation

2005 2006 2007

Source: Company

65

Business Strategy
Strategic Partnerships: Effective land acquisition
Collaborating strategically with landowners to reduce its capital investment Revenue sharing model in return for providing execution skills resulting in higher RoEs

Segmental Breakup
Segment Developed Area (mn sq.ft) Residential IT SEZ Commercial Township Retail Total
Source: Company

Under Development Land Area (Acres) 49.07 17.22 303.00 14.88 1,354.00 1,738.17 Area (mn sq.ft) 2.14 0.75 17.41 0.67 59.08 80.05

Foray into Special Economic Zones (SEZs)
JV with Goa government to develop 3 SEZs
2 Biotech / Pharma SEZ (5.2mn sq. ft. / 2.18mn sq. ft.) 1 Gems & Jewelry SEZ (1.4mn sq. ft.).

0.86 1.1 0.4 2.36

Over ~200 acres of land has already been acquired, located strategically near the Airport

Real estate funds – Multiple benefits
Plans for 2 real estate venture funds, with a corpus of Rs.45bn (domestic) and USD 350mn (foreign) Access to funds to increase its project portfolio thereby spreading its risk Additional revenue source in the form of fees
Management fee - 2% of the fund size Carry - 20% above a hurdle rate

Vertical Strategy
Segment Commercial Residential Strategy Development of corporate office complexes in Tier I cities High end segment development in select locations in India Mid to high end segment development to be focused in Mumbai and Pune Development of world class retail space in and around IT Parks and townships Developments of IT Parks in western India Develop integrated townships around major cities Execution on existing SEZ projects

Retail IT Parks Townships SEZs

Development profits from projects invested in

Other Initiatives
Facilities management services
Maintenance and management services for properties developed by PLL as well as third parties

Source: Company; ENAM Research

66

Competitive Advantage
Strong Promoter Pedigree Asset Light

Part of the ‘Ashok Piramal’ group established in 1934, with a formidable presence in textiles and retail Brand association resulting in higher pre-sales of its real estate projects Also provides PLL with a pricing power as compared to its peers

Carrying land stock for immediate requirement of 3 to 5 years Strategy to recover project cost via presales at initial stage itself

Peninsula’s Competitive Advantages

Focus on becoming a developer and not a speculator in land parcels

Innovative deal structuring
Large scale JVs involving project management, sales and marketing agreements, cost and revenue sharing Unique deal structuring by way of merger of Dawn Mills & by way of a Joint Development Agreement with Swan Mills keeping the company assets light
Source: ENAM Research

Project Execution
In house Project Mgmt. capabilities Experience in large scale development Contracting and tendering experience – works with the most reputed and technically qualified contractors Only developer with expertise in development of pvt. textile mill land

67

Development Snapshot
Planned pipeline of projects
(mn sq. ft.) Peninsula Land Residential Commercial Others Since Inception 2.4 0.9 1.1 0.4 FY07 to FY09E 2.3 1.5 0.6 0.2 Beyond FY09E 8.5 3.8 3.4 1.3
80% 60% 40% 20% 0% -20% M a r-06 M a r-07
Deccan Rd Viman Ngr

Price trend q/q*
Mumbai

Source: Company: Note: Does not incl SEZ plans

Location wise break-up
Nashik 30% Pune 53%

J un-06

Se p-06

De c-05

Andheri Worli

Bandra Vashi
Pune

Mumbai 17%

100% 80% 60% 40% 20% 0% Mar-06 Mar-07 Jun-06 Sep-06 Dec-05 Dec-06
Residential 47%

Source: Company

Segmental Contribution
Others 16%

-20%

Aundh Kalyani Ngr
Commercial 37%

Club Rd Koregaon Prk

Source: ENAM Research, Pre tax contribution to valuation considered

Source: Cushman & Wakefield; Knight Frank India * In Peninsula Land’s key areas of operations

De c-06

S Mumbai

68

Valuations
Rollout plans Best Case Conversion Margin Final Valuations
7 8 9 10 Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 11 13 17 20 13 15 19 23 14 17 22 26 16 19 24 29 Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt + Unpaid land cost Best Case target price 15 7 4 6 32 7 600 (Rs mn)
FY07E FY08E FY09E Co estimate 0.49 Our estimate 0.49 Industry rate 0.49 0.70 0.57 0.55 1.60 1.38 0.97

1.8 1.6 1.4 1.2 (mn sq. ft.) 1.0 0.8 0.6 0.4 0.2 0.0 FY07E Co. estimates

Base Case
(Rs mn) 7 8 9 10 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 10 12 14 17 11 13 17 20 12 15 19 22 14 17 21 25 Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt + Unpaid land cost Base Case target price 13 5 3 5 26 7 472

Bear Case
(Rs mn) 7 8 9 10 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 1,000 1,200 1,500 1,800 10 12 14 17 11 9 17 20 12 15 19 22 14 17 21 25

Conv. Margin Multiple (x)

FY08E Our estimates

FY09E Industry rate

Conversion Margin Land Value Asset Management Completed Assets Total Less: Net debt + Unpaid land cost Bear Case target price

9 3 2 4 19 7 299

Land Value (Rs bn) (x) Book Value 3.4 Bear Case 1 Base Case 1.5 Best Case 2

Asset Management (Rs bn) (x) Fee income (FY09) 0.3 Bear Case 8 Base Case 10 Best Case 12

Completed Assets (Rs bn) (x) Rental income (FY09) 0.5 Bear Case 8 Base Case 10 Best Case 12

3.4

5.1

6.8

2.4

3

3.6

4

5

6

69

NAV Approach
Y/E 2006 Square feet completed Operating Cash Flow Less:Administration Costs Interest Costs Contingency Net Cash Flow (Pre-tax) Less: Taxation Free Cash Flow Sensitivity Matrix (Rs mn) 12 13 14 15 16 0 417 404 391 380 368 Selling price escalation (%) 3 5 7 485 535 588 470 519 571 456 504 555 443 490 539 431 476 525 2007E 0.39 1286 236 360 64 626 260 366 2008E 0.57 4664 260 529 128 3747 1124 2623 2009E 1.38 7597 285 978 115 6219 1810 4408 2010E 1.94 5249 314 1073 68 3794 2315 1478 2011E 1.66 1301 345 1095 58 (196) 94 (291) 2012E 1.67 5637 380 1117 47 4094 0 4094 Beyond 2012E 2.15 26076 1383 3486 140 21066 3476 17590

Key Assumptions Variable Escalation in selling price Escalation in construction costs Contingencies considered (% of costs) No of years considered beyond 2010E Assumption 5% 4% 2% 1

10 676 657 639 621 605

WACC (%)

Segmental Contribution
Commercial 33%

Note: Escalation in construction costs assumed to be constant

Net Cash Flows Discount rate Net Present Value No. of shares Net Asset Value per share

30,269 14% 21,162 42 504

Residential 52%

Retail 13% Others 2%

Source: ENAM Research, In terms of square footage

70

Company Financials
Income statement
Y/E March Net sales Other operating income Total income Cost of goods sold Contribution (%) Advt/Sales/Distrn O/H Operating Profit Other income PBIDT Depreciation Interest Other pretax Pre-tax profit Tax provision (-) Minority Interests Associates Adjusted PAT E/o income / (Expense) Reported PAT 2006 2,748 0 2,748 1,131 2007 2,994 0 2,994 970 2008E 6,184 0 6,184 2,404

(Rs mn)
2009E 9,768 0 9,768 3,519

Key ratios
Y/E March Sales growth OPM Oper. profit growth COGS / Net sales Overheads/Net sales Depreciation / G. block Effective interest rate Net wkg.cap / Net sales Net sales / Gr block (x) Incremental RoCE RoCE Debt / equity (x) Effective tax rate RoE Payout ratio (Div/NP) EPS (Rs.) EPS Growth CEPS (Rs.) DPS (Rs.) 2006 341.6 52.6 862.8 41.1 6.3 19.1 4.8 1.3 14.3 37.5 40.9 5.7 0.3 (502.6) 0.0 32.9 732.8 34.4 0.0 2007 8.9 59.7 23.7 32.4 7.9 5.0 7.5 1.5 7.2 (28.3) 28.8 2.1 17.6 76.7 0.0 28.9 (12.2) 29.5 0.0 2008E 106.5 56.9 96.8 38.9 4.2 5.2 7.5 1.0 10.4 32.9 34.0 2.1 37.1 55.9 0.0 45.3 56.5 46.1 0.0

(%)
2009E 58.0 61.0 69.4 36.0 2.9 5.3 9.5 1.2 12.3 44.7 36.2 1.4 36.1 51.3 0.0 76.1 67.9 77.2 0.0

0
172 1,446 210 1,656 63 202 0 1,390 4 0 1 1,387 55 1,442

0
236 1,788 75 1,863 25 360 0 1,478 260 0 0 1,218 0 1,218

0
260 3,520 75 3,595 36 529 0 3,031 1,124 0 0 1,907 0 1,907

0
285 5,963 75 6,038 48 978 0 5,012 1,810 0 0 3,202 0 3,202

Source: Company , ENAM Research

71

Company Financials
Balance sheet
Y/E March Total assets Gross block Net fixed assets CWIP Investments Wkg. cap. (excl cash) Cash / Bank balance Others/Def tax assets Capital employed Equity capital Reserves Borrowings Others 2006 5,647 330 242 0 135 5,182 88 0 5,647 395 452 4,799 0 2007 7,127 505 392 0 135 3,688 2,912 0 7,126 421 1,906 4,799 0 2008E 13,793 680 531 0 135 8,782 4,345 0 13,792 421 4,072 9,299 0

(Rs mn)
2009E 19,280 905 709 0 135 14,040 4,396 0 19,280 421 7,559 11,299 0

Cash flow
Y/E March Sources Cash profit (-) Dividends Retained earnings Issue of equity Borrowings Others Applications Capital expenditure Investments Net current assets Change in cash 2006 2,704 1,449 0 1,449 (5) 1,259 1 2,704 265 135 3,088 (785) 2007 1,268 1,243 0 1,243 25 0 0 1,268 175 0 (1,494) 2,588 2008E 6,442 1,942 0 1,942 0 4,500 0 6,442 175 0 5,094 1,173

(Rs mn)
2009E 5,250 3,250 0 3,250 0 2,000 0 5,250 225 0 5,259 (234)

Source: Company , ENAM Research

72

India Research
Stock Data No. of shares Market cap^ :1,705mn : Rs 938bn

DLF
Relative to Sector:

Rs 550^
Underperformer
Potential Upside: -27%

Target Price: Rs 404

Concrete Edifice

Financial summary
Y/E March 2006 2007 2008E 2009E Sales (Rs mn) 11,699 26,172 138,260 229,780 PAT (Rs mn) 1,917 19,413 75,666 136,266 EPS (Rs.) 1.1 11.4 44.4 79.9 Change (YoY %) 122 913 290 80 P/E (x) 489.1 48.3 12.4 6.9 RoE (%) 22.5 78.7 76.5 62.4 RoCE (%) 15.5 30.1 49.9 57.2 EV/EBITDA (x) 198.6 69.0 10.7 6.0

Source: *Consensus broker estimates, Source: Company, Industry estimates ; ^ Assumed at upper price band

Lead Analyst: Chirag Negandhi

chirag.negandhi@enam.com (+91 22 6754 7618)

Associate: Nitin Idnani

nitin.idnani@enam.com (+91 22 6754 7655)

June 6, 2007 73

Investment Summary
Company background
DLF is among India’s largest developers having completed ~29mn sq. ft. (built up area) since 1946 Credited with developing India’s largest integrated township, DLF City over ~3,000 acres in Gurgaon, NCR

Breakup of land reserves
Category Aggregate agreement value (Rs Cr) % of developable mn sq ft area 116 217 201 13 27 574 171 403 20.2 37.9 35.1 2.2 4.7 100 30 70

Investment argument

Developable area of ~574mn sq. ft. across ~10,255 acres (avg cost of Rs.247/- per sq ft) of which ~44mn sq. ft. is under development In addition to the above, DLF has locked in an additional ~574 acres as on 30th April, 2007 To enter related businesses in JVs with reputed partners One of the strongest brand names in Indian realty, backed by a credible reputation, built over last 6 decades Large balance sheet size and considerable leveraging strength gives it credible holding power to sit out cycles
Nakheel – SEZ development; Hilton – Hospitality; Prudential Insurers of America – Insurance Residential –7mn, Commercial –27mn, Retail – 10mn

Land Owned 1,160 Sole development rights 4,575 MOU/Agreement to acquire/letters of acceptance 3,685 Joint Development Agreements 248 Joint Ventures 587 Total 10,255 Fully developable urban land Urban Land included in master plan -

Source: Company; Note: Does not include 554 acres which has been recently acquired

Pan India presence
Jallandhar Amritsar Ludhiana Sonlpat Nolda New Delhi Jaipur Ahmedabad Vadodara Indore Mumbai Pune Goa Chandigarh, Panchkula Ambala Shimla Panipat Gurgaon Faridabad Lucknow

Key risk factors

Execution plans (especially in the next 3-4 years) well above currently proven abilities ~35% of land locked in via MoUs/ letters of acceptance, exposing DLF to a certain amount of title risk Geographical risk with ~72% of land bank in Gurgaon and Kolkata Business assumptions of sustainable demand AND prices to be tested by cyclical hiccups

Kolkata Bhuwaneshwar Nagpur Hydrabad Bangalore Chennai Colmbatore

Valuation

At a price band of Rs.500-Rs,550, the implied valuation of the company lies between ~USD 20.7 to 22.8bn At the upper band of Rs.550, the stock trades at a significant premium to our base case valuation of Rs.404. We believe the stock is currently overvalued and initiate coverage with Sector Underperformer rating and a price target of Rs.404

Vytilla

Source: Company

Kochin, Kokkanad

74

Business Strategy
Balanced approach to development Development Plan Summary
(mn sq ft) Plots Residential Commercial Retail Total Completed 195 19 7 3 224 Under construction 7 27 10 44 Planned 46 375 60 44 526 Near term value creation expected from large premium lands acquired in city centers and downtown areas to be developed over the next 2-3 years Low project risk with shorter exposure to asset cyclicality Long-term value creation via integrated townships and SEZs developed in a phased manner High project risk with longer project tenures – Asset cyclicality low due to lower cost of land acquisition

Planned development till FY09E
Segment Residential Commercial Retail Total
Source: DLF Prospectus

Segmental strategy

Residential: Remains the main focus Continued focus on high end & premium segment with mid segment to be targeted in the future Commercial: Integral part of business Targeting a mix of corporate offices and IT/ITeS Retail: Recent foray Mostly one-off standalone projects with a focus on middle/ high end segment across 60 cities

FY08E 25 21.6 12.2 58.8

FY09E 38.7 13.9 11.1 63.7

DLF’s business model
Central Districts (CBDs) Horizon I: 2006-2009 Super Luxury properties in City Centres Land cost to sales very high High Asset Risk, low turnaround time Properties acquired / identified Horizon II: 2008-2012 Townships for aspiring consumers Land cost to sales relatively low Low asset risk, high turnaround time Properties partly acquired / identified Horizon III: 2010 and Beyond Create parallel cities / economic zones to encourage migration Land cost negligible, low asset risk High turnaround time, low success ratio Properties identified

JVs with strategic partners

DLF plans to enter other land related businesses in partnership with reputed players Infrastructure: JV with Laing O’Rourke Plc SEZ Development: JV with Nakheel, U.A.E Hospitality: Hilton & Bharat Hotels Entertainment: DT Cinemas (Own multiplex chain) Asset Management: Prudential Intl Investments Corp Property Management: DLF Services Captive power: DDLF Power

Townships / Suburbs

DLF Assets Pvt Ltd

Strategy includes sale of completed assets to a promoter group company, DLF Assets Ltd (DAL) In future, DAL to bid for the projects as any other participant Source: ENAM Research

Satellite Cities

75

Competitive Advantage
Established brand name
DLF is India’s largest real estate developer in terms of completed space (Source: AC Nielson Report)
DLF City recognized as the largest integrated private township in Asia, positioning DLF as an end-to-end solutions provider Resulting in superior margins, especially in the segments such as super-luxury housing and retail projects

Projects under construction
Residential DLF Park Place The Belaire The Magnolias The Summit Total Commercial Silokhera, Gurgaon Cybercity Projects Kolkata (25 acres) Pune Hyderabad Chennai Bangalore Noida Total Retail Area (mn sq ft) 2.2 1.3 2.5 0.7 6.7 Area (mn sq. ft.) 4.9 4.5 2.8 1.8 3.8 6.6 1.5 1.2 27.1 Area (mn sq. ft.) 3.9 0.51 0.5 0.32 1.5 0.3 0.84 0.2 1.7 9.77 Start Year 2007 2007 2006 2003 End Value Year (Rs mn) 2010 2010 2009 2008 873.8 744.1 1159.2 319.8

Strong balance sheet size
Ability to create significant land bank, buy large tracts of land, create value through aggregation, and subsequently develop in phases, to maximize value
DLF’s holding power further helps it acquire land during downturns and hold inventory during cyclicality

Start Year 2007 2007 2008 2006 2006 2006 2007 2007

End Year 2010 2008/09 2010 2009 2010 2010 2010 2009

High quality land reserves
Geographically diversified land bank of ~10,255 acres (574mn sq. ft.) acquired at an avg. cost of Rs.247/psf
Sufficient for planned projects over next 10 years

Start Year 2007 2006 2006 2006 2006 2006 2006 2006 2006

End Year 2010 2008 2008 2008 2009 2009 2008 2009 2010

Land banks developed in phases to maximize value further enhancing its brand and pricing power

Partnering for execution scale up
Recognizing the challenge ahead, DLF has entered into collaborations with leading firms for ensuring timely completion of its projects
SEZ Development – Nakheel LLC; Construction: Laing O’Rourke; Designing – WSP Group Plc; Planning & execution – Feedback Ventures

Mall of India Courtyard Promenade (DLF Place) Emporio (DLF Place) Townsquare DLF South Court Jasola Mall Sikenderpur Mall NTC Mills Total
Source: Company

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Development Snapshot
Planned pipeline of projects
(mn sq. ft.) DLF Plots -Residential Commercial Retail Since Inception 224 195 19 7 3 FY07 to FY09E 149.7 69.8* 48.2 31.7 Beyond FY09E 419.3 358.2* 38.8 22.3
60% 50% 40% 30% 20% 10% 0% -10% -20% Mar-06 Dec-05

Price Change q/q*
Kolkata

South of Prk

Alipore

Location wise breakup
Others 22% Kolkata 23%

Segmental wise breakup
Retail 10%

NCR
150% 100% 50% 0% -50% -100% Mar-07 E Delhi Gurgaon Sep-06 Dec-06

Commercial 15%

Chandigarh 4% Residential 75%

NCR 51%

Source: Company

Def. Col Ghaziabad Faridabad

Green Prk G. Noida Noida

Source: Cushman & Wakefield; Knight Frank India * In DLF’s key areas of operations

Mar-07

Jun-06

Sep-06

Dec-06

Source: ENAM Research; * Note: Includes plot sales

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Valuations
Rollout plans Best Case Conversion Margin Final Valuations
9 10 11 12 Conversion Margin (Rs./psf) 1,200 1,500 1,800 2,000 688 860 1032 1147 764 956 1147 1274 841 1051 1261 1401 917 1147 1376 1529 Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid la Best Case target price 956 210 156 1322 107 712 (Rs bn) Conv. Margin Multiple (x) (Rs bn) 9 10 11 12 Conv. Margin Multiple (x)

80 70 60
Mn. sq. ft.

FY07E FY08E FY09E Co estimate 10.50 Our estimate 10.50 Industry rate 10.50 58.80 20.00 20.00 63.70 35.00 26.00

Base Case

50 40 30 20 10 0 FY07E
Best Case

Conversion Margin (Rs./psf) 1,200 1,500 1,800 2,000 378 473 567 630 420 525 630 700 462 578 693 770 504 630 756 840

Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid la Base Case target price

525 140 130 795 107 404

Best Case
(Rs bn) 9 10 11 12 Conv. Margin Multiple (x) Conversion Margin (Rs./psf) 1,200 1,500 1,800 2,000 281 351 421 468 312 390 468 520 343 429 515 572 374 468 562 624 Conversion Margin Land Value Completed Assets Total Less: Net debt + Unpaid la Bear Case target price 390 105 104 599 107 289

FY08E
Base Case

FY09E
Bear Case

Land Value (Rs bn) (x) Book Value 70 Bear Case 1.5 105 Base Case 2 140 Best Case 3 210

Completed Assets (Rs bn) (x) Rental income 13 (FY09) Bear Case 8 104 Base Case 10 130 Best Case 12 156

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Company Financials
Income statement
Y/E March Net sales Other operating income Total income Cost of goods sold Contribution (%) Advt/Sales/Distrn O/H Operating Profit Other income PBIDT Depreciation Interest Other pretax Pre-tax profit Tax provision (-) Minority Interests Associates Adjusted PAT E/o income / (Expense) Reported PAT 2006 11,699 0 11,699 5,243 2007 26,172 0 26,172 7,090

(Rs mn)
2008E 138,260 0 138,260 40,057 2009E 229,780 0 229,780 62,295

Key ratios
Y/E March Sales growth OPM Oper. profit growth COGS / Net sales Overheads/Net sales Depreciation / G. block Effective interest rate Net wkg.cap / Net sales Net sales / Gr block (x) Incremental RoCE RoCE Debt / equity (x) Effective tax rate RoE Payout ratio (Div/NP) EPS (Rs.) EPS Growth CEPS (Rs.) DPS (Rs.) 2006 92.4 42.1 192.5 44.8 13.1 2.8 6.6 0.9 1.1 20.8 15.5 4.3 46.4 22.5 0.0 1.1 121.6 1.3 0.0 2007 123.7 57.2 204.3 27.1 15.7 3.2 4.4 1.9 1.7 10.7 30.1 2.5 23.8 78.7 0.0 11.4 912.7 11.7 0.0 2008E 428.3 68.8 535.3 29.0 2.2 1.2 4.5 0.6 2.7 132.6 49.9 0.6 17.9 76.5 0.0 44.4 289.8 45.0 0.0

(%)
2009E 66.2 71.0 71.5 27.1 1.9 1.3 5.8 0.5 2.1 87.3 57.2 0.2 15.1 62.4 0.0 79.9 80.1 81.0 0.0

0
1,536 4,920 721 5,641 361 1,685 0 3,595 1,668 10 0 1,917 0 1,917

0
4,109 14,973 14,169 29,142 571 3,076 0 25,495 6,058 11 (13) 19,413 0 19,413

0
3,076 95,127 2,332 97,459 1,040 4,281 0 92,139 16,473 0 0 75,666 0 75,666

0
4,326 163,159 3,033 166,192 1,741 3,990 0 160,462 24,196 0 0 136,266 0 136,266

Source: Company, Industry estimates

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Company Financials
Balance sheet
Y/E March Total assets Gross block Net fixed assets CWIP Investments Wkg. cap. (excl cash) Cash / Bank balance Others/Def tax assets Capital employed Equity capital Reserves Borrowings Others 2006 50,967 13,023 11,132 5,911 8,300 15,185 1,950 8,489 50,967 378 9,177 41,320 92 2007 139,279 17,787 15,375 26,497 2,107 82,210 4,155 8,935 139,279 12,557 27,207 99,328 187 2008E 247,066 86,087 30,922 64,486 46,437 88,777 7,509 8,935 247,066 12,907 145,031 89,128 0

(Rs mn)
2009E 327,977 129,307 53,231 85,423 42,177 122,675 15,537 8,935 327,977 12,907 266,041 49,029 0

Cash flow
Y/E March Sources Cash profit (-) Dividends Retained earnings Issue of equity Borrowings Others Applications Capital expenditure Investments Net current assets Change in cash 2006 25,439 1,418 0 1,418 344 31,644 (7,967) 25,439 7,194 7,900 8,589 1,756 2007 89,858 20,103 0 20,103 12,206 58,008 (459) 89,858 25,400 (6,193) 67,025 3,626 2008E 66,668 76,518 0 76,518 350 (10,200) 0 66,668 54,575 44,330 6,567 (38,804)

(Rs mn)
2009E 97,908 138,007 0 138,007 0 (40,099) 0 97,908 44,987 (4,260) 33,898 23,284

Source: Company, Industry estimates

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Appendix

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Industry Characteristics
Real Estate Industry Structure
Fragmented with Low Entry Barrier Difficult Market Conditions Large Shifts in Business Conditions

Highly fragmented, with limited entry barriers
A large number of regional developers, in many cases even city/ suburb focused developers Most players began as home builders, now executing projects across all verticals Very few developers have established/ are establishing a presence on a pan-India basis

Complex regulatory conditions, high transaction costs
Varying state, city and municipal land laws - Land Ceiling Act Limited access to formal funding, hence dependence on high cost informal sources Large transaction costs – stamp duty, capital gains

Land Titles
Disorganized land registries – compounded by judicial delays making ownerships/titles a nightmare A significant number of plots may not have clear title - Possession is 90% ownership Most of the land is held by individuals/ families Caveat Emptor rules! 82

Industry Characteristics…contd.
Corporate Governance issues
High transaction costs + high cost informal funding = tax avoidance + large use of cash Inefficient business structuring to enhance tax efficiency Complex regulatory conditions + unclear land titles = power games

Recent government initiatives providing the required impetus
Opening up of FDI bringing in capital Global developers/ investors bringing in best practices + higher governance standards Simplification of regulations initiated, computerized land records, all this will help the industry

Hence, large expansion plans, growth of even 10x – 15x planned
Execution will be important - most developers depending on external contactors for execution, some building internal teams to take care of large growth planned

Challenges remain – but the long term fundamentals are clearly robust

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Foreign Investment Regulations

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Govt. Facilitating increased investments
Liberalizing FDI norms
Development Criteria Investment Conditions Other conditions

Minimum 10 hectares/ 25 acres area to be developed for serviced housing plots For construction-development projects, minimum built-up area of 50,000 sq mts prescribed In case of a combination project, any one of above two conditions would suffice

Min capitalization of USD 10 mn for wholly owned subsidiaries & USD 5 mn for JV with Indian partners Funds to be brought in within 6 months of commencement of business Original investment cannot be repatriated before a period of 3 yrs from completion of min capitalization. Investor may be permitted to exit earlier with prior Government approval

50% of project must be developed within of 5 years from date of obtaining all statutory clearances Investor not permitted to sell undeveloped plots** Project to conform to norms & standards laid down by respective State authorities Investor responsible for obtaining all necessary approvals as prescribed under applicable rules/byeIaws/regulations of the State Concerned Authority to monitor compliance

Source: Department of Promotion and Policy

Large amounts committed to the India real estate sector by overseas investors
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Opportunities for Foreign Investors
Direct Asset Acquisitions Can purchase construction development projects under construction over approximately 50,000 sq. m. or plotted residential developments with a min size of 10 hectares Can purchase equity stake in an unlisted real estate company and partner in its growth plans across asset classes and cities, minimum 3 year holding is required Most investments currently routed into designated SPVs that hold the assets under development, with investors subscribing for shares in the SPV Foreign Venture Capital Investors may invest in real estate assets within the framework of Securities and Exchange Board of India (“SEBI”) and FDI guidelines Recent changes in the Income Tax Act dissuade formation of domestic venture capital pools and therefore foreign venture capital funds will come in directly Foreign portfolio investments are permitted at developer level both at the IPO and at the secondary post listing stages Foreign portfolio investments at the pre IPO stage are considered equivalent to FDI New investment products and options are emerging; foreign investor participation is encouraging more innovative transaction structures REITs are absent due to the current legal structure; Proposed REITs would likely further improve liquidity, open up opportunities for small investors, pave the way for institutional investments and provide asset management companies with opportunities to diversify

Equity Investment

Venture Capital Funds

Foreign Portfolio Investments

New Investment Vehicles

Source: ENAM Research

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SEZs: A longer term opportunity
SEZ Policy: An internationally competitive hassle-free business regime:
Fiscal incentives: All direct & indirect taxes/ duties exempt for 10 yrs, with some variations for unit-holder vs developer Clearances: Single-window Investment: 100% FDI in manufacturing. Developer can lease, but not sell land Usage: 25% min for manufacturing, with some variations. Minimum area specified Labour policy: State Government to frame apt law for SEZ Location of SEZs & support infrastructure
Reliance Unitech DLF

Adani Reliance Essar Essar MIDC GIDC Nandgaon MIDC Reliance APIIC Nagpur Kakinada Brandix FAB City Pondicherry ONGC

Status: 234 formally approved SEZs
151 for IT/ITES related projects 9 for multi-product SEZs 4 for port based SEZs Largest ones are by Kakinada SEZ Pvt. Ltd. (AP), Adani (Guj) & AP Industrial Infrastructure Corporation (AP). Construction expected to start within next 2 years, to be operational in ~5 years

Major SEZs Major Sea Ports National Highways

Indian SEZs: Share of Indian Exports
7 6 5 4 3 2 2001 2003 2004 2005 2006 2007 4.2 4.4 3.9 5.1 4.7 5.0 (%)

Macro benefits :
Substantial ancillary and hinterland development Employment generation (5 lakh in the next 3 years) FDI : ~USD22bn

Source: SEZ India

Loss of sheen as an investment theme currently, but the future looks bright
Source: ENAM Research

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ENAM Securities Pvt. Ltd.
109-112, Dalamal Tower, Free Press Journal Marg, Nariman Point, Mumbai - 400 021, India. Tel:- Board +91-22 6754 7500; Dealing +91-22 2280 0167; Fax:- Research +91-22 6754 7579; Dealing +91-22 6754 7575
CONFLICT OF INTEREST DISCLOSURE We, at ENAM, are committed to providing the most honest and transparent advice to our clients. However, given the nature of the capital markets, from time to time we are faced with situations that could give rise to potential conflict of interest. In order to provide complete transparency to our clients, before we make any recommendations, we are committed to making a disclosure of our interest and any potential conflict IN ADVANCE so that the interests of our clients are safe- guarded at all times. In light of this policy, we have instituted what we believe to be the most comprehensive disclosure policy among leading investment banks/brokerages in the world so that our clients may make an informed judgment about our recommendations. The following disclosures are intended to keep you informed before you make any decision- in addition, we will be happy to provide information in response to specific queries that our clients may seek from us. Disclosure of interest statement (As of May 28, 2007) 1. Analyst ownership of the stock 2. Firm ownership of the stock 3. Directors ownership of the stock 4. Investment Banking mandate 5. Broking relationship Akruti Nirman No No No No No Anant Raj Industries No No No No No Parsvnath Developers No No No No No Peninsula Land No No No No No Sobha Devlopers No No No No No United Ltd No No No No No

We are committed to providing completely independent and transparent recommendations to help our clients reach a better decision.

This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document. The intent of this document is not in recommendary nature Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors Enam Securities Private Limited has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval Enam securities Private Limited, its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of ENAM Securities Private Limited. The views expressed are those of analyst and the Company may or may not subscribe to all the views expressed therein This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Copyright in this document vests exclusively with ENAM Securities Private Limited.

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