DLF Building a revival

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1 COMPANY UPDATE DLF Building a revival India Equity Research Real Estate Our annual report analysis of DLF reveals FY12 was a stressed year for DLF with its operating cash (ex-land sales) at INR15.3bn insufficient to service interest payments of INR30bn. DLF has since stepped up its asset monetization drive to cut debt and ease the interest burden. On the other hand, the company has stepped up launches which will strengthen cash flows. Further, revenues now stand significantly derisked with the devco contributing 63% (of revenues) as against 85% in FY09 and the rentco (along with service and maintenance income) now accounting for 25% of revenues as against 8% in FY09. The stock will continue to be driven by asset sales and expected launch of Magnolias Phase II. We maintain BUY/SP with NAV/TP of INR263. Debt levels stay high, operating cash flow sparse to service interest DLF s net debt increased to ~INR227bn in FY12 as against ~INR214bn in FY11 despite the asset monetization of INR17.74bn. The company s operating cash flow (estimated at INR15.3bn, ex land sales) remained insufficient to service interest and dividends (INR36bn) and capex (estimated at INR8.7bn), leading to higher net debt. Focus on asset divestment to accelerate cash flows Interest payment of ~INR30bn in FY12 has eaten away the operating cash flows (exland sales) of ~INR15.3bn. The company has plans to cut debt by ~INR50bn in FY13 through non-core sales which would then help ease the interest burden. Outlook and valuations: Deleveraging the trigger; maintain BUY DLF s operating cash flows in FY12 were insufficient to service interest payments due to a weak approval cycle between Q1FY11 and Q2FY12. DLF has set out to reduce debt by ~INR50bn in FY13 driven by non-core asset sales which will ease the interest burden. Further, expected launch of Magnolias Phase II in H2FY13 will strengthen its operating cash flows. We value the company at INR263/share, implying that the stock is trading at 18% discount to its fair value. Maintain BUY/Sector Performer. Financials (Consolidated) Year to March FY11 FY12 FY13E FY14E Revenue 95,606 96,294 89,748 94,323 Rev. growth (%) (6.8) 5.1 EBITDA (INR mn) 37,527 39,043 36,090 40,399 Net profit (INR mn) 15,408 11,941 15,970 14,418 Shares outstanding (mn) 1,698 1,702 1,698 1,698 Diluted EPS (INR) EPS growth (%) (4.5) (26.9) 31.9 (9.7) Diluted PE (x) EV/ EBITDA (x) ROCE (%) Edelweiss Research is also available on Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. EDELWEISS 4D RATINGS Absolute Rating Rating Relative to Sector BUY Edelweiss Securities Limited Performer Risk Rating Relative to Sector Medium Sector Relative to Market Overweight MARKET DATA (R: DLF.BO, B: DLFU IN) CMP : INR 214 Target Price : INR week range (INR) : 261 / 170 Share in issue (mn) : 1,698.5 M cap (INR bn/usd mn) : 364/ 6,583 Avg. Daily Vol.BSE/NSE( 000) : 7,654.0 SHARE HOLDING PATTERN (%) Current Q4FY12 Q3FY12 Promoters % MF's, FI's & BK s FII's others * Promoters pledged share (% of share in issue) PRICE PERFORMANCE (%) Stock : NIL Nifty EW Real Estate Index 1 month months months Aashiesh Agarwaal, CFA aashiesh.agarwaal@edelcap.com August 23, 2012

2 Real Estate Balance Sheet Analysis Table 1: DLF Key balance sheet movements in FY12 As on 31st March (INR mn) FY11 FY12 Comments - FY12 over FY11 Equity share capital 3,395 3,397 Preference share capital 18,103 17,992 Reserves & surplus 241, ,970 Shareholders funds 263, ,359 Secured loans 222, ,793 Unsecured loans 17,141 11,865 Borrowings 239, ,658 Excess of interest payments (INR 30bn) over cash flows from operations (26 bn) and dividends was financed by borrowings Minority interest 5,752 4,207 Sources of funds 508, ,223 Gross block 198, , msf of deliveries in rentco; Sale of assets of INR 7.85 bn - IT Park, Noida and IT SEZ, Pune Depreciation 19,556 25,809 Net block 178, ,140 Capital work in progress 102,344 89, msf of deliveries in rentco transferred to Gross Block; capex estimated at INR 8.74 bn Total fixed assets 281, ,069 Goodwill 13,840 16,248 Investments 9,958 11,268 Inventories 150, ,756 Increase on account of addition to land and plots Sundry debtors 15,660 17,659 Cash and bank balance 13,218 15,062 Other current assets 80,751 79,743 Loans and advances 41,664 51,741 Increase in Unsecured advances (INR 4.9bn) and Income Taxes Paid (INR 5.8bn) Total current assets 301, ,961 Current liabilities 92,249 98,639 Increase in other liabilites (INR6.5bn) Provisions 6,950 8,032 Total current liab. & provisions 99, ,671 Net current assets 202, ,290 Net deferred tax 1,633 3,349 Uses of funds 508, ,223 Consolidated net debt/equity (x) Edelweiss Securities Limited

3 DLF Cash Flow Analysis Table 2: DLF Analysis of FY12 Cash flow statement As on 31st March (INR mn) FY11 FY12 Comments Oper. profit before WC changes 39,812 41,381 Changes in working capital (4,585) (4,683) Increase in trade receivables (INR5.6bn)and inventory (INR6.1bn)set off by an increase in current liabilities of INR7.1bn Taxes (7,470) (11,501) Operating cash flow..(i) 27,757 25,198 (Purchase)/Sale of fixed assets (6,864) (419) Incremental construction of assets set off by sale of assets (Purchase)/Sale of investment 44,677 (716) Interest/Dividend income 2,659 3,066 Movement in share/debenture application (187) (254) money paid (net) Movement in fixed deposits with maturity (1,945) (1,912) more than 3 months (net) Investing cash flow..(ii) 38,340 (237) Proceeds/(repayment) of debt 23,157 10,752 Additional rupee loans taken from Banks and Others. Issuance of pref shares (41,096) - Premium on redemption of pref shares (12,379) (111) Increase in share capital/premium 1,322 1,054 Dividend paid (equity + pref) (9,125) (5,952) Interest charges (25,913) (30,125) Operating cash flows of INR 26bn were insufficient to meet interest expenses of INR 30bn. Financing cash flow..(iii) (64,034) (24,382) Net change in cash..(i) + (ii) + (iii) 2, Table 3: Valuation snapshot FY13E INR/share Devco 42, Rentco 113, Total Devco + Rentco 155, Other businesses 70, Land Bank 462, Total GAV 687, Less: Net debt 230, Unpaid land cost 10,500 6 NAV 446, No. of shares 1,698 Source: Edelweiss research 3 Edelweiss Securities Limited

4 Real Estate Table 4: Other businesses valuation (INR mn) Other businesses: FY13 EBITDA EV on 8x EBITDA INR/share Service and maintenance income 4,003 32, Retail chain outlets Food court / restaurant business 165 1,318 1 Hotels 2,537 19, Power generation 1,050 8,402 5 Cinema operations 743 5,945 4 Recreational facility 335 2,683 2 Total 70, Source: Edelweiss research Table 5: Change in estimates FY 2013 FY 2014 New Old % Change New Old % Change Comments Sale of NTC Mills recorded in other income instead of revenues, offset by change in revenue recognition for Sales 89,748 97,404 (7.9) 94, ,061 (7.6) new launch - Magnolias-II EBITDA 36,090 39,369 (8.3) 40,399 49,101 (17.7) EBITDA Margin (0.5) (11.0) PAT 15,792 8, ,219 15,183 (6.3) PAT Margin Capex 7,500 7,500-7,500 7,500 - Profit on sale of NTC Mills taken to other income and partial impact of revenue recognition for Magnolias-II Profit on sale of NTC Mills land (INR 8bn) and 4 hotel plots (INR 0.9 bn) through sale of subsidiaries Jawala Real Estate Pvt. Ltd. and DLF Hotels & Hospitality respectively add to other income in FY13 Source: Edelweiss research 4 Edelweiss Securities Limited

5 DLF Continued asset sales to service interest payments Inadequate operating cash flows, capex lead to higher gross debt in FY12 DLF s gross debt increased to ~INR250.7bn in FY12 as compared to ~INR240bn in FY11. While the reported operating cash flow was INR25.2bn, we estimate INR9.9bn from land sales/advances from sale of hotels, implying INR15.3bn from operations (including replenishment of the land bank). Investing activities consumed INR237mn as asset sales (IT Park in Noida and IT SEZ in Pune) was offset by capex on rental assets. Interest and dividend payments amounted to INR36bn, resulting in a higher net debt in FY12. Table 6: Deficient operating cash flows, capex push up gross debt in FY12 Cash flow summary Amount (INR mn) Operating cash flow (ex-land sales) 15,308 Land sales / Advances for sale of fixed assets 9,890 Operating cash flows as reported 25,198 Investing cash flows (ex-asset sales) (8,087) Fixed Asset sales 7,850 Investing cash flows (as reported) (237) Interest payments (30,125) Dividend payments (5,952) Increase in net debt 8,908 INR155bn of long term debt repayments due in FY13E-FY15E An analysis of DLF s annual report reveals that an estimated INR155bn of long term debt repayments would be due over FY13E-FY15E broadly, equally spread payments of ~INR52bn per annum. Besides these, DLF also has short term borrowings amounting to INR34bn which we expect would be rolled over. In FY13E, we expect the company to repay INR30bn out of asset sales (including the sale of NTC Mill Land/four hotel plots, excluding the sale of Aman Resorts and the Wind Power business). Table 7: Debt repayment Schedule Particulars Amount (INR mn) Aggregate debt 250,658 Short term debt 33,987 Long term debt 216,670 Repayment in FY13 48,429 Repayment in FY14 52,754 Repayment in FY15 54,284 5 Edelweiss Securities Limited

6 Real Estate Table 8: Bifurcation of Current and Non-Current Debt FY12 Non Current Long term borrowings current maturities Debt remains skewed towards secured loans Non current FY11 Current maturities Secured loans: From banks 99,752 28, ,930 15,920 From others 45,172 9,951 39,115 4,465 Debentures 14,200 10,000 24,200 3,000 Total secured loans 159,124 48, ,245 23,384 Unsecured loans: Banks Commercial papers Debentures 8,786-8,786 - Others 332-1,045 - Total unsecured loans 9,118-9,831 - Total Long Term Borrowings 168,242 48, ,076 23,384 Table 9: Bifurcation of Current and Non-Current Debt (contd.) FY12 Non Current Short term borrowings current maturities Non current FY11 Current maturities Secured loans: From banks 31,240 26,135 From others Debentures Total secured loans - 31,240-26,135 Unsecured loans: Banks 1,010 4,418 Commercial papers - 2,700 Debentures - 4 Others 1, Total unsecured loans - 2,747-7,310 Total Short Term Borrowings - 33,987-33,445 Nearly 95% of DLF s debt comes under secured loans. Of these, 67% are from banks, 10% from debentures and 23% comes from others. The weighted average maturity of NCDs is 1.5 years while the weighted average maturity for bank loans is 2.3 years. 6 Edelweiss Securities Limited

7 DLF Table 10: DLF Analysis of FY12 debt profile As on 31st March (INR mn) FY11 FY12 Secured loans: From others 43,580 55,123 Debentures 27,200 24,200 Total secured loans 222, ,793 Unsecured loans: Banks 4,418 1,010 Debentures 8,790 8,786 Others 1,233 2,068 Total unsecured loans 17,141 11,865 Total borrowings 239, ,658 Total cash balance 13,218 15,062 Net debt 226, ,596 Other key highlights from DLF s FY12 Annual Report: Revenue share of other businesses increasing DLF s operating revenues were flat in FY12 with revenues increasing across all business segments, indicating a significant de-risking of revenues. Share of rental revenues stood at 16% as against 5% in FY09. Other revenue streams such as maintenance income, insurance and cinema operations have grown 16% YoY in FY12, accounting for 21% of revenues as against 10% in FY09. Table 11: Share of other businesses in DLF s revenues increasing (INR mn) Segment revenues FY09 FY10 FY11 FY12 Y-o-Y (%) Real estate 84,802 55,525 65,785 60,963 (7.3) Lease rentals 5,054 7,246 12,808 15, Service/maintenance 3,178 4,427 7,534 9, Retail (100.0) Food court/restaurant Hotels 2,996 2,271 3,505 3, Power generation 2,573 2,619 2,602 3, Cinema operations , Recreation facility Insurance ,062 1, Others 1, (17.4) Total 100,354 74,229 95,606 96, Edelweiss Securities Limited

8 Real Estate Segment % of revenues FY09 FY10 FY11 FY12 Real estate Lease rentals Service/maintenance Retail Food court/restaurant Hotels Power generation Cinema operations Recreation facility Insurance Others Total Auditors note that translation losses in Silverlink yet to be fully reconciled Auditors of Silverlink Resorts Limited have qualified their report in respect of balances in translation reserve and accumulated losses brought forward from the financial year ended December 31, 2004 as these are yet to be fully reconciled. These reconciliations pertain to prior to acquisition of Silverlink by DLF. Although the company is of the opinion that these reconciliations will not have any material impact on the financial statements, auditors have mentioned that they are unable to independently verify the same. Total unpaid tax demands at INR25.4bn as of date DLF has income tax disputes totaling INR39.9bn as of date predominantly on account of disallowance of SEZ profits. An additional INR0.7bn pertains to service tax dues. Of these, INR 15.2bn has already been paid, leaving INR25.4bn as taxes in dispute. The management is confident that these tax demands will not be sustained on completion of the appellate proceedings hence it has not created any provision and has classified the same as contingent liabilities. Adverse rulings on account of these disputes may lead to additional cash outflows for the company. Table 12: Tax Dues Summary Demand dues (INR mn) Amount paid (INR mn) Liability pending (INR mn) Assessment year Income tax Service tax Income tax Service tax Income tax Service tax Till , ,447-2, A.Y , ,327-11, A.Y , ,411-11, A.Y , ,185-24, Land bank cut to 348 msf due to rationalization, project deliveries DLF s overall land bank was reduced to 348 msf in FY12 from 367 msf in FY11 and 416 msf in FY10. The decline in land bank is largely attributable to project deliveries (~13.1 msf in FY12 and ~7.1 msf in FY11), product mix shift and land bank rationalization. In terms of geographic spread, the mix has remained largely the same with Super Metros at 56%, Metro at 24% and Tier I and II at 13% and 7%. 8 Edelweiss Securities Limited

9 DLF DLF has also added to its land bank in Gurgaon and Greater Chandigarh (Mullanpur) and spent ~INR5.7bn on land acquisition in FY12. However, according to the company, these are yet to impact the land bank profile as conveyance of title is pending. Chart 1: DLF s land bank reduces significantly in FY (Msf) FY09 FY10 FY11 FY12 Chart 2: Land bank development potential - by location - by year 100% 80% 60% 40% 20% 0% Super Metro Metro Tier I Tier II Source: Company IT SEZ / IT Park projects The company and two of its subsidiaries received two judgments from the High Court of Punjab and Haryana cancelling the release/sale deed of land relating to two IT SEZ/IT Park projects in Gurgaon. The company has challenged the orders in the Supreme Court. In one case, the Supreme Court has admitted the matter and stayed the operation of the impugned judgment till further orders. The second case was listed on January 3, 2012 and where the apex court has granted a stay. Based on the advice of the independent legal counsels, the company and 9 Edelweiss Securities Limited

10 Real Estate the subsidiary companies have a reasonably strong likelihood of succeeding before the Supreme Court. Pending the final decision on the above matter, no adjustment has been done for these in consolidated financial statements. The Competition Commission of India (CCI) proceedings The Competition Commission of India (CCI), on a complaint filed by the Belaire/Park Place owners associations, had passed orders dated August 12, 2011 and August 29, 2011 imposing a penalty of INR6.3bn on DLF and restrained it from formulating and imposing allegedly unfair conditions on buyers in Gurgaon. It further ordered it to suitably modify the alleged unfair conditions. The said order of CCI was challenged by the company on several grounds, by filing appeals before the Competition Appellate Tribunal (COMPAT). The tribunal, after the hearing on November 9, 2011, has granted a stay against the orders of CCI imposing penalty and further said that directions of CCI for modifications of terms of the Agreement would remain in abeyance. Pending the final decision, no adjustment has been effected in the financial statements. Advances given to JV partners in retail projects at risk A DLF subsidiary, DLF Universal Limited (formerly DLF Retail Developers Limited) had entered into JVs for the development of certain projects in FY08 and advanced certain amounts (exact figures not available) to JV partners for the same in FY11. These projects have not yet commenced and DLF is continuing discussion with its JV partners besides exploring options to go ahead with projects or to recover outstanding advances. 10 Edelweiss Securities Limited

11 Company Description DLF DLF, incorporated in 1963, is one of the largest real estate development companies in India, with a focus on residential, retail and commercial construction activities. The company is promoted by Mr. K. P. Singh who has four decades of experience in the Indian real estate industry. DLF went public in 2007 with the issue of ~175 mn shares at INR 525/share. Investment Theme Prima Donna of Indian real estate DLF is one of the oldest and largest real estate developers in the country. It boasts a land bank of 348 msf and 50 msf of ongoing projects. It has a strong rental portfolio, generating ~INR16bn of annualised cash flows. The company has an established presence across property development verticals with a balanced project portfolio. Focused operations on plots / luxury and third party execution to strenghen operations We believe that DLF s strategy of focusing on luxury residential projects and plotted developments backed by an execution by the best-in-class third party contractors (as against in-house execution) will result in superior cash flows. Improving cash flows, asset monetisation After successive quarters of weak cash flows and a deteriorating balance sheet, DLF has reported improved cash flows and a reduction in debt albeit marginal, backed by asset sales. Additionally, the management is guiding for asset sales of INR50bn for FY13E which will ease the debt burden and act as a stock trigger. Key Risks Delay in launches due to lack of approvals/adverse macro environment Any delay in launch due to approvals/adverse macro-environment will result in continued pressure on operating cash flows. Inability to monetise non-core assets and deleverage to keep balance sheet stressed DLF has in the past attempted to deleverage its balance sheet without much success due to a combination of weak market conditions and high price expectations. While we believe that the management will deliver on its deleveraging plans, any delay in doing so can strain the cash flows of the company, leading to an erosion in NAV and underperformance of the stock. 11 Edelweiss Securities Limited

12 Real Estate Financial Statements Key assumptions Macro - GDP(Y-o-Y %) Inflation (Avg) Repo rate (exit rate) USD/INR (Avg) Company - Development Properties Area Sold (msf) Average Rate (INR/ sf) 5,699 5,585 3,888 5,169 5,863 Rental Income Area (msf) Income statement (INR mn) Income from operations 74,229 95,606 96,294 89,748 94,323 Direct costs 25,669 42,999 39,675 37,839 37,314 Employee costs 4,703 5,721 5,862 5,276 5,539 Other Expenses 8,741 9,358 11,714 10,543 11,070 Total operating expenses 39,113 58,079 57,251 53,657 53,924 EBITDA 35,116 37,527 39,043 36,090 40,399 Depreciation and amortisation 3,249 6,307 6,888 7,584 7,821 EBIT 31,866 31,219 32,155 28,506 32,578 Other income 4,280 5,839 5,945 14,924 6,118 Interest expenses 11,100 17,056 22,465 20,642 18,178 Profit before tax 25,046 20,002 15,635 22,788 20,519 Provision for tax 7,022 4,594 3,693 6,836 6,156 Net profit 18,024 15,408 11,941 15,952 14,363 Minority interest 108 (72) 336 (160) (144) Share in profit of associates 8 88 (15) - - Adjusted PAT 17,198 16,396 12,168 15,792 14,219 Shares outstanding (mn) 1,701 1,698 1,702 1,698 1,698 Diluted EPS (INR) Dividend per share (INR) Dividend payout (%) Common size metrics - as % of net revenues Operating expenses Interest expenditure EBITDA margins Net profit margins Growth ratios (%) Rev. growth (%) (26.0) (6.8) 5.1 EBITDA (37.2) (7.6) 11.9 Net profit (60.1) (14.5) (22.5) 33.6 (10.0) EPS growth (%) (61.5) (4.5) (26.9) 31.8 (10.0) 12 Edelweiss Securities Limited

13 Balance sheet (INR mn) As on 31st March FY10 FY11 FY12 FY13E FY14E Equity capital 3,395 3,395 3,397 3,397 3,397 Pref. Capital 59,199 18,103 17,992 17,992 17,992 Reserves & surplus 241, , , , ,674 Shareholders funds 304, , , , ,063 Minority interest (BS) 6,278 5,752 4,207 4,366 4,510 Secured loans 193, , , , ,793 Unsecured loans 23,751 17,141 11,865 12,365 12,865 Borrowings 216, , , , ,658 Sources of funds 527, , , , ,231 Gross block 178, , , , ,449 Depreciation 13,265 19,556 25,809 33,394 41,214 Net block 165, , , , ,235 Capital work in progress 111, ,120 89,928 85,828 87,328 Total fixed assets 276, , , , ,563 Goodwill 12,680 13,840 16,248 16,248 16,248 Investments 55,052 9,958 11,268 11,168 8,667 Inventories 124, , , , ,803 Sundry debtors 16,190 17,257 17,659 19,344 13,230 Cash and equivalents 9,282 13,461 15,062 6,037 5,253 Loans and advances 75,933 72,712 51,741 59,741 67,741 Other current assets 46,847 78,900 79,743 79,902 79,982 Total current assets 273, , , , ,009 Sundry creditors and others 46,370 92,251 98, , ,750 Provisions 41,402 38,763 8,032 8,433 8,855 Total current liabilities & provisions 87, , , , ,605 Net current assets 185, , , , ,404 Net Deferred tax (2,515) 1,633 3,349 3,349 3,349 Uses of funds 527, , , , ,231 Book value per share (INR) Free cash flow (INR mn) Net profit 18,024 15,408 11,941 15,952 14,363 Depreciation 3,249 6,307 6,888 7,584 7,821 Others 7,537 10,627 11,051 21,209 19,850 Gross cash flow 28,811 32,342 29,880 44,745 42,034 Less: Changes in WC (57,432) 3,771 4,683 (5,892) 2,816 Operating cash flow 86,242 28,571 25,198 50,638 39,218 Less: Capex 144,906 15,161 11,097 7,500 7,500 Free cash flow (58,664) 13,409 14,100 43,138 31,718 Cash flow metrics Operating cash flow 86,242 28,571 25,198 50,638 39,218 Investing cash flow (163,024) 40,570 (237) 10,724 1,119 Financing cash flow 74,175 (64,034) (24,382) (64,642) (41,122) Net cash flow (2,607) 5, (3,280) (785) Capex (144,906) (15,161) (11,097) (7,500) (7,500) Dividends paid (3,833) (3,972) (5,952) (3,759) (3,759) Share issuance/(buyback) (7) 1,322 1, DLF 13 Edelweiss Securities Limited

14 Real Estate Profitability & efficiency ratios ROAE (%) ROACE (%) Inventory day 1,664 1,168 1,436 1,510 1,512 Debtors days Payable days Cash conversion cycle (days) 1, Current ratio Debt/EBITDA Debt/Equity Adjusted debt/equity Operating ratios Total asset turnover Fixed asset turnover Equity turnover Valuation parameters Diluted EPS (INR) Y-o-Y growth (%) (61.5) (4.5) (26.9) 31.8 (10.0) CEPS (INR) Diluted PE (x) Price/BV (x) EV/Sales (x) EV/EBITDA (x) Dividend yield (%) Market Capitalisation 363, , , , ,699 Peer comparison valuation Reco/ Market Cap Price/Earnings (x) Price/Book (x) RoE (%) Company Rating CMP (INR) (INR mn) FY13E FY14E FY13E FY14E FY13E FY14E Coverage Universe: Brigade Enterprises Buy/SP 48 5, DLF Buy/SP , Godrej Properties Reduce/SU , Jaypee Infratech Buy/SP 49 68, MLIFE Buy/SP , Oberoi Realty Buy/SO , Coverage Source: Edelweiss research 14 Edelweiss Securities Limited

15 RATING & INTERPRETATION Company Absolute reco Relative reco Relative risk Company Absolute reco Relative reco Relative Risk Brigade Enterprises BUY SP M DLF BUY SP M Godrej Properties REDUCE SU L Jaypee Infratech BUY SP M Mahindra Lifespace Developers BUY SP M Oberoi Realty BUY SP L The Phoenix Mills BUY SP M ABSOLUTE RATING Ratings Expected absolute returns over 12 months Buy More than 15% Hold Between 15% and - 5% Reduce Less than -5% RELATIVE RETURNS RATING Ratings Sector Outperformer (SO) Sector Performer (SP) Criteria Stock return > 1.25 x Sector return Stock return > 0.75 x Sector return Stock return < 1.25 x Sector return Sector Underperformer (SU) Stock return < 0.75 x Sector return Sector return is market cap weighted average return for the coverage universe within the sector RELATIVE RISK RATING Ratings Low (L) Medium (M) High (H) Criteria Bottom 1/3rd percentile in the sector Middle 1/3rd percentile in the sector Top 1/3rd percentile in the sector Risk ratings are based on Edelweiss risk model SECTOR RATING Ratings Overweight (OW) Equalweight (EW) Criteria Sector return > 1.25 x Nifty return Sector return > 0.75 x Nifty return Sector return < 1.25 x Nifty return Underweight (UW) Sector return < 0.75 x Nifty return 15 Edelweiss Securities Limited

16 Real Estate Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai Board: (91-22) , Vikas Khemani Head Institutional Equities Nischal Maheshwari Co-Head Institutional Equities & Head Research Nirav Sheth Head Sales Coverage group(s) of stocks by primary analyst(s): Real Estate Brigade Enterprises, DLF, Godrej Properties, Jaypee Infratech, Mahindra Lifespace Developers, Oberoi Realty, The Phoenix Mills Recent Research Date Company Title Price (INR) Recos 13-Aug-12 DLF Lower Parel land sale: A key milestone; EdelFlash 210 Buy 09-Aug-12 Jaypee Infratech Curtains up on Yamuna Expressway; EdelFlash 56 Buy 08-Aug-12 Brigade Enterprises Steady quarter; Result Update 52 Buy Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Buy Hold Reduce Total Rating Interpretation Rating Expected to Rating Distribution* * 1 stocks under review > 50bn Between 10bn and 50 bn < 10bn Market Cap (INR) Buy Hold Reduce appreciate more than 15% over a 12-month period appreciate up to 15% over a 12-month period depreciate more than 5% over a 12-month period 16 Edelweiss Securities Limited

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