The Varhad Group. AGI Infra Ltd. Company Overview. Industry Overview. Financial Overview CMP: INR Stock data. Stock performance (%)

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1 Realty l SME Research AGI Infra Ltd CMP: INR Stock data BSE code BSE ID AGIIL Face value (INR) 10 No of shares (m) 10.2 Market cap (INRm) 1, m avg. daily vol (No) Free float (INRm) Dividend yield (%) 0.0 Company Overview AGI Infra Ltd., previously known as (GI Builders (P) Ltd. & its subsidiary Aay Jay Builders are merged together), is a name well recognised in the field of construction & delivering state of art residential projects. Company has earned a valuable reputation through its thought of bringing about tangible difference in the lives of people. Company is committed to provide broad spectrum of construction solutions by adopting suitable technologies for ensuring qualitative works and timely delivery of projects, meeting and exceeding customer needs and expectations through continual improvements and contributing to the overall welfare of the society. Industry Overview S&P BSE SME IPO 1,250.3 Stock performance (%) 52week H/L INR115.4/75.0 1M 3M 12M Absolute (%) Relative (%) Shareholding pattern (%) Promoters FIIs DIIs Others 72.54% 0.00% 1.72% 25.74% Relative stock movement The real estate sector is one of the most globally recognised sectors. In India, real estate is the second largest employer after agriculture and is slated to grow at 30 per cent over the next decade. The real estate sector comprises four sub sectors housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semiurban accommodations. Financial Overview Revenue increased by 48.5% YoY from INR407.9m in to INR605.9m in. EBITDA margins decreased from 24.8% in to 20.5% in. In absolute terms, EBITDA increased from INR101.0m in to INR124.2m in. The Company reported a net profit of INR39.0m in compared to a net profit of INR28.4m in. Loans and Advance increased from NIL in to INR31.5m in. Gross debt of the company increased from INR300.0m in to INR40.5.4m in. In IPO, the company offered 2.8m shares of face value of INR10 per share. Table 1: Key financials Source: BSE (Y/e March) Sales (INRm) YoY Growth (%) 4, EBITDA (INRm) EBITDA Margin (%) PAT (INRm) EPS (INR) YoY Growth (%) RoE (%) P / E (x) Source: Company, Varhad Research Jan 2017

2 Industry Overview Industry size: Recent years have seen the Indian real estate sector grow, especially the commercial real estate segment. According to a study by Knight Frank, Mumbai is the best option in India for commercial real estate investment, with returns of 1219 per cent likely in the next five years, followed by Bengaluru and DelhiNational Capital Region (NCR), with returns of 12 per cent and 811 per cent respectively. Sharp growth in organised retailing is likely to drive demand in the commercial real estate sector. The investments in commercial Construction are expected to grow faster than investments in housing mainly due to the spurt in office space construction driven by IT/ITES industry. The residential segment of real estate has also seen tremendous growth in recent years owing to the continuous growth in population, migration towards urban areas, ample job opportunities in service sectors, growing income levels, rise in nuclear families and easy availability of finance. In the residential segment, the number of new launches in the first quarter of 2014 has increased by 43% at 55,000 units across eight major cities. Bengaluru recorded the largest number of units launched, an increase of 22% at 16,838 units, followed by Mumbai and Chennai with new launches at 10,698 units and 7,436 units with a growth rate of 93% and 191% respectively, during the first quarter. The middleclass segment's rising purchasing power and propensity to consume is expected to drive and support a robust growth rate of the economy in the coming years. The middle class along with robust macroeconomic scenario and changing demographic profiles has a major role to play in the growth and emergence of the Construction industry in India. Growth drivers: Indian economy is expected to be the fastest growing economy for the next few decades. The growth could be primarily driven by infrastructure investments and the rising manufacturing and service sector. Within the service sector, the growing IT and banking sectors are expected to significantly add the demand for Commercial Real Estate. About ten million people are moving to Indian cities every year. Urban areas are expected to contribute 7075 per cent to nations GDP by Fiscal About two million houses are required to be developed each year, typically in the affordable segment. Shortterm outlook: Increasing urbanisation, demand for new housing, expanding spread of organised real estate and introduction of new construction technologies are some of the factors that are likely to be a pivot for the growth of real estate construction activity in the country. The annual real estate supply in India is expected to increase from about 3.6bn sq ft in 2013 to about 8.2bn sq ft in About the company AGI Infra Ltd., previously known as (GI Builders (P) Ltd. & its subsidiary Aay Jay Builders are merged together), is a name well recognised in the field of construction & delivering stateoftheart residential projects. Company has earned a valuable reputation through its thought of bringing about tangible difference in the lives of people. Numerous projects have been developed in the last decade. Its strengths lies in the thousands of clients it served and well wishers world over. Company has got inhouse mass construction set up, recently they have delivered / undertaken number of high rise buildings which includes Residential Flats, Hotel, Educational Blocks ( over 1m sq ft area) for a University, 1500 seated auditorium, 300 bedded Hospital, 100 tpd paper mill, commercial buildings, shopping mall, Police stations, Auto show rooms, School, Boiler house, development of residential colonies which includes roads, street lights, sewer/water lines, water tanks, parks etc. They have got entire machinery / equipments required for modern mass construction. Company has a dedicated team of over 1000 persons which includes Technocrats, financials, administrators, consultants, sales team, skilled, semiskilled, unskilled.

3 Organisation structure Chart 1: Organisation structure Source: Company Board of Director Table 2: Composition of Board Source: BSE Name Director Type Business Relationship with the Company Sukhdev Singh Director Managing Director Salwinderjit Kaur Director Director Anju Bansal Director Director Atul Mehta Director Director Manjit Singh Director Director Key Strength and growth drivers Urbanisation Growing economy Policy Support Established brand name Growth in tourism Experienced management 3

4 Risk and concerns Lack of suitable developable land Strict and prolonged regulatory process leading to delays Land related issues Shortage of manpower and technology Inadequate Funding Channels. IPO Details In IPO, the company offered 2.8m shares of face value of INR10.0 per share. The IPO proceeds will be used for project for construction of 215 residential flats, repayment of loans and issue expenses. Table 3: Proposed usage of proceeds of IPO Particulars Proposed use (INRm) Project for construction of 215 residential flats Repayment of loans 40.5 Issue Expenses 5.3 Total Source: Company Financial Performance Revenue increased by 48.5% YoY from INR407.9m in to INR605.90m in. EBITDA margins decreased from 24.8% in to 20.5% in. In absolute terms, EBITDA increased from INR101.0m in to INR124.2m in. The Company reported a net profit of INR39.0m in compared to a net profit of INR28.4m in. Sundry debtors decreased from INR42.2m in to INR18.1m in Loans & Advances by the company increased from NIL in to INR31.5m in. Provisions and other current liabilities increased from INR703.4m in to INR715.1m in. 4

5 Competition analysis AGIIL operates in a highly competitive market and the growth in the market is determined by the drivers of domestic economy, government rules and regulations, purchasing power of the customers and interest rate risk. Table 4: Peer comparison Company CMP (INR) Mcap (INRm) Rev (INRm) EBITDA Margin (%) EPS (INR) PE (x) AGI Infra Ltd , DLF Ltd , , TIVOLI Construction Ltd Quantum BuildTech Ltd Source: BSE Valuation On valuation front, preipo basis, the company is trading at 1.8x PE. The EPS is INR3.8, whereas EBITDA margin is 20.5%. 5

6 Financial snapshot Chart 1: Sales trend Chart 2: Margin trend Sales (INRm) Sales (% YoY, RHS) 5,000 4,000 3,000 2,000 1, EBITDA (INRm) EBITDA mgn (%, RHS) Chart 3: EPS trend Chart 4: Working capital profile EPS (INR) EPS Growth(% YoY, RHS) Debtors TO Stock TO Creditors TO ,500 2,000 1,500 1, (500) 1,200 1, Chart 5: Return trend Chart 6: Valuation 40% ROE (%) ROCE (%) 4 PE EV/EBITDA P/B (RHS) % % % 0% 1 0 FY1 4 FY1 5 FY Source: Company, Varhad Research 6

7 Financial Summary Profit and loss (INR m) Balance sheet (INR m) Year ending 31 March Year ending 31 March Revenue Net Block Direct Cost Investments Staff Cost Cash and Banks Balance Other Expenditure Inventory , ,295.8 Total Cost Sundry Debtors EBITDA Loans and Advances EBITDA margin (%) Other Current Assets Depreciation Other EBIT Total Assets 1, , ,522.9 Interest Expenses Gross Debt Nonoperating Income Trade Payables PBT Provisions & other curr lia Provision for Tax Others PAT (Adjusted) Equity Capital Growth % Reserves & Surplus PAT margin (%) Share Application money Minority Interest Minority Interest Extra Ordinary Shareholders' funds PAT (Reported) Total Liabilities 1, , ,522.9 Cash Flow Metrics Ratios, growth and per share analysis YoY % change Profit before Tax Revenue 4, Operating Cash Flow EBITDA Investing Cash Flow Recurring EPS Financing Cash Flow Ratios (%) Net Change in Cash ROE Cash at the beginning ROCE Cash at the end of year EBITDA Margin Ratio Du Pont Analysis Net Debt/Equity (x) Net Debt/ EBITDA (x) Net Profit Margins (%) Inventory days Total Assets Turnover Debtors days Leverage Multiplier Payables day ROAE (%) Total Asset TO ratio Valuation Fixed Asset TO Ratio Per share data (INR) EV/Sales EPS reported (diluted) EV/EBITDA Recurring EPS (diluted) P/E (x) DPS P/B(x) Book Value(basic) Dividend yield (%) Wtd avg ord shares (m) FCF yield (%) Wtd avg dil shares (m) Source: BSE, Company, Varhad research 7

8 DISCLAIMER Varhad Financial Consultancy Services Private Limited (Varhad FCS), an entity of the Varhad Group has taken utmost care to ensure accuracy and objectivity while writing this report based on publicly available information or from reliable sources. However, neither the accuracy nor completeness of information contained in this report is guaranteed. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report can be construed as either investment or any other advice or any solicitation, whatsoever. The subscriber/user assumes the entire risk of any use made of this report or data herein. Varhad FCS specifically states that it or any of its entities or employees do not have any financial liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied for any purpose. DISCLOSURE Each member of the team involved in writing this research report, hereby affirms that there exists no conflict of interest that can bias the research on the company. PUBLISHED BY Varhad Financial Consultancy Services (VFCS) is the research and financial consultancy services entity of the Varhad Group. We have one of the best inhouse research team, which has sound understanding of SMEs through clients across India. We provide project specific, company specific and sector specific consultancy services. We help companies expand businesses through network expansion. We also help in balance sheet strengthening and improvement in both credit and business profile of the company. Regd. Office: Flat No. 1, Harsh Apartment, Near Gore Apartment No. 2, Shastri Nagar, Behind Akashwani, Akola Head Office: #441, Samruddhi, Sector 25, Bhel Chowk, Nigdi, Pune Tel: SEBI Certificate of Registration as Research Analyst Registration No: INH Dated: 25 May