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					India Equity Research | Real Estate

 HDIL                                                                      INR:233

                                                                                         Price Target (INR): 369
Company Introduction:                                                                    Market Data                                                                         4 June , 2010
HDIL is established as one of India’s premier real estate development companies,
with significant operations in the Mumbai. HDIL group has completed more than 100         Shares outs (Cr)                                                                                                     35.88

mn sq ft of construction in all verticals of real estate and has rehabilitated ~30,000    Equity Cap (Rs. Cr)                                                                                             358.84
families in last one decade. HDIL has operation in all segments from residential,         Mkt Cap (Rs. Cr)                                                                                                     8,319
commercial and retail projects, to slum rehabilitation to land development.               52 Wk H/L (Rs)                                                                                             411 / 179

Key Investment Rationale:                                                                 Avg Vol (1yr avg)                                                                                 13,666,795
Revenue driven by TDR sales – HDIL registered revenue of Rs. 434.1 crore, up              Face Value (Rs)                                                                                                         10
6.2% q-o-q and 21.3% y-o-y. The company sold 1.48 mn sq ft of TDR in Q4FY10,              Bloomberg Code                                                                                               HDIL IN
marginally lower than 1.5 mn sq ft it sold in Q3FY10. The average realizations of
TDR sales were steady at Rs. 2,700/sq ft. Most of the TDR sales have been from the
Mumbai Airport Slum Rehabilitation Project (MIAL) project. The management                Price Performance
indicated that there is robust demand in the residential segment especially in the
suburban areas of Mumbai, while the commercial segment is showing signs of
revival. The company plans to launch about 5-6 mn sq ft in FY11 in the residential        200

space.                                                                                    150

Profitability improves due to higher TDR sales – EBITDA margin improved to
52.3% as compared to 46.2% in Q3FY10, mainly on account of higher sale and

realization of TDRs and revival in the residential prices. New bookings across most        0










of its ongoing residential projects are taking place at significantly higher prices as
compared to the launch prices. We expect the residential and TDR prices to remain                                                            HDIL                SENSEX

steady in the coming quarters, which would help sustain the margins.

Leverage is easing off – At the end of Q4FY10 HDIL’s debt stood at Rs 3,264              Market Info:
crore as compared to Rs 3,351.2 crore at the end of Q3FY10. The company had              SENSEX                                                                                   17,117
raised Rs 1,688 crore via QIP route in July 2009, which helped the company reduce
its debt from Rs 4,143.3 crore at the beginning of this fiscal to Rs. 3,264 crore at     NIFTY                                                                                          5,135
the end of Q3FY10. Reduction in the leverage along with increase in the equity base
(as a result of the QIP) lead to a decline in the net debt-to-equity from 0.9x at the    Share Holding pattern (%)
beginning of this fiscal to 0.45x at the end of Q4FY10. The average cost of debt of       Particulars                               Mar-10                         Dec-09                               Chg
the company is below 13%. HDIL is looking at restricting its capital base, it recently
                                                                                          Promoter                                           50.15                       48.31                                 3.8%
restructured it loans in order to match working capital requirements
                                                                                          FII                                                27.94                       28.36                            -1.5%

Our View – HDIL is one of the leading SRA players in India. It has ~85% of its land       DII                                                 1.42                           2.08                     -31.7%
bank in Mumbai which is least impacted by slowdown due to huge demand. The                Others                                             20.49                       21.25                            -3.6%
company is presently focusing on developing the MIAL project and the Phase I of the       Total                                               100                                 100                          0.0%
project is close to its completion, which would generate additional TDR for the
company. A major portion of land reserves is obtained as a result of participation in
slum rehabilitation program and hence have a very low land cost. Further land
portion / TDR received from SRA projects are ready for development hence there’s
no significant risk of delay in projects. We expect the profitability to remain stable
                                                                                         Analyst :
due to its Mumbai operations and firming up of residential and TDR prices. At the
CMP of Rs 233, the company is trading at a P/E of 9.2x its FY11E EPS of Rs 24.6. We      Niyati Jhaveri
recommend a BUY to the company’s stock with a target price of Rs 369, which    
represents a potential upside of 58%.
                                                                                         ℡ 91-22-6696 5570

                                                                                         ℡ 91-22-6696 5555
                                                                                            91-22-6691 9569

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