Omaxe Ltd. Initiating coverage. Enhancing investment decisions

Transcription

1 Omaxe Ltd Initiating coverage Enhancing investment decisions

2 Explanation of CRISIL Fundamental and Valuation (CFV) matrix The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP). CRISIL Fundamental Grade Assessment CRISIL Valuation Grade Assessment 5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP) 4/5 Superior fundamentals 4/5 Upside (1-25% from CMP) 3/5 Good fundamentals 3/5 Align (+-1% from CMP) 2/5 Moderate fundamentals 2/5 Downside (negative 1-25% from CMP) 1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP) Analyst Disclosure Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company. Disclaimer: This Company-commissioned Report (Report) is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / Report are subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assumes the entire risk of any use made of this data / Report. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information only of the authorized recipient in India only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose.

3 Polaris Software Limited Omaxe Limited Business momentum remains intact Getting back on its feet January 1, 211 CFV MATRIX Fair Value Rs 176 CMP Rs 146 Fundamental Grade Valuation Grade Industry 4/5 2/5 (Strong (Moderate fundamentals) fundamentals) 5/5 4/5 (CMP has strong an upside) upside) Information Real Estate Management technology & Development Delhi-based Omaxe Ltd (Omaxe) is a leading real estate developer in North India with a focus on integrated townships, residential housing and commercial projects in tier II and tier III cities. It has so far developed ~11 mn sq.ft. and has a healthy pipeline of ~164 mn sq.ft. over the next seven-eight years. However, high gearing has tightened Omaxe s liquidity. We assign Omaxe a fundamental grade of 2/5, indicating that its fundamentals are Moderate relative to other listed securities in India. Excellent Fundamentals Fundamental Grade Poor Fundamentals First-mover Omaxe homes in on tier II and tier III cities Omaxe has a strong development track record of 11 mn sq.ft. as a real estate developer since 21 and 3 mn sq.ft. as a third party construction contractor since It is known for quality construction and timely delivery. This has enabled it to get positive response for its newly launched projects in tier II and tier III cities. This gives it the first-mover advantage and a competitive edge. Geographic and product diversifications eliminate concentration risk Large development plan of ~164 mn sq.ft. spread across 52 projects, eight product segments and 3 cities in nine states of India reduces the risk of dependence on a particular project or geography. Different product segments provide a hedge against concentration risk, while projects in 3 different cities mitigate the risk of geographical concentration. Slowdown and borrowed funds burden the balance sheet A slowdown in demand coupled with borrowed funds for executing projects has stretched out Omaxe s balance sheet in the past. It needs a large amount of funds to meet its debt obligations, finance the ongoing projects and to acquire land for the proposed hi-tech townships. Omaxe is also evaluating options to raise equity either at the corporate or project level, which may reduce the dependence on borrowed funds and help ease the liquidity situation. If the fund raising plans do not materialize as planned, CRISIL Equities believes that the company s balance sheet will be further strained. Revenues to grow at a three-year CAGR of 33% Revenues (consolidated) are expected to grow at a three-year CAGR of 33% to Rs 23.5 bn by FY13 driven by faster execution of the pre-booked projects. PAT is expected to increase at a CAGR of 66% to Rs 4.1 bn by FY13 due to lower interest burden. EPS is expected to increase to Rs 23.9 in FY13 from Rs 5.2 in FY1. Valuation - the current market price has an upside We have used the sum-of-the-parts method to value Omaxe and arrived at a one-year fair value of Rs 176 per share. We initiate coverage on Omaxe with a valuation grade of 4/5. KEY FORECAST (Rs mn) FY9 FY1 FY11E FY12E FY13E Operating income 8,789 1,46 14,876 18,72 23,46 EBITDA 1,553 2,15 3,196 4,972 6,9 Adj Net income ,547 2,846 4,145 EPS-Rs EPS growth (%) (91.) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x) estimate NM: Not meaningful; CMP: Current Market Price KEY STOCK STATISTICS NIFTY/SENSEX 5796/19224 NSE/BSE ticker OMAXE Face Value (Rs per share) 1 Shares outstanding (mn) Market cap (Rs mn)/(us$ mn) 25,297/562 Enterprise value (Rs mn) /(US$ mn) 37,854/ week range (Rs) (H/L) 156/85 Beta 1.45 Free float (%) 1.9% Avg daily volumes (3-days) 377,3 Avg daily value (3-days) (Rs mn) 49.7 SHAREHOLDING PATTERN 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Strong Downside PERFORMANCE VIS-À-VIS MARKET Returns 1-m 3-m 6-m 12-m OMAXE 5% 1% 56% 46% NIFTY -1% -4% 13% 12% ANALYTICAL CONTACT Sudhir Nair (Head) Amit Murarka Bhaskar Bukrediwala Valuation Grade snair@crisil.com Strong Upside 8.7% 8.6% 8.6% 8.3% 1.8% 1.8% 1.8% 1.8%.4%.4%.4%.7% 89.1% 89.1% 89.1% 89.1% Dec-9 Mar-1 Jun-1 Sep-1 Promoters FII DII Others amurarka@crisil.com bbukrediwala@crisil.com Client servicing desk clientservicing@crisil.com Crisil Equities 1

4 Omaxe: Business environment Parameter Real estate - Development of residential and commercial properties Product / service offering Development of integrated townships, residential, commercial, retail and hotel projects Geographic presence Largely in North India (75% of the future development) in tier II and tier III cities like Noida, Faridabad, Ludhiana, Lucknow, Agra, Patiala, Chandigarh, Allahabad, Bhatinda, Baddi, Sonepat, Palwal and others; small presence in Delhi Has also launched a project in Indore and Jaipur Market position Omaxe is a large player in the competitive North Indian market having developed ~11 mn sq.ft. so far. Primarily focuses on development of integrated townships and has first-mover advantage in cities like Bahadurgarh, Allahabad, Palwal, Bhatinda, Baddi and Vrindavan Access to land bank of ~4,5 acres comprising 164 mn sq.ft. of saleable area across nine states Industry outlook North India outlook Residential market is expected to remain stable; capital values expected to rise by 5% in 211 Sales growth (FY7-FY1 3-yr CAGR) Negative 11% (due to economic downturn in FY9 sales have declined from Rs 22.8 bn in FY8 to Rs 8.8 bn in FY9). However, the five-year CAGR is 2% Sales forecast (FY1-FY13 3-yr 34% (higher growth is on account of lower base and improving economic scenario) CAGR) Demand drivers Strong economic outlook driving the demand for real estate. Low interest rates and improving job prospects to boost demand for residential properties, particularly affordable homes There is acute shortage of houses in India in the mid-income and low-income category. Urban housing needs are expected to increase owing to continuous migration and rise in nuclear families. CRISIL Research expects housing shortage in urban areas to touch 21.7 mn units by the end of 214 from ~19 mn units in 28 Key competitors Parsvnath Developers Ltd, Ansal Housing, DLF and Mahindra Lifespace Developers Ltd Renewed business initiative Omaxe started as a third party construction contractor in 1989 and has executed ~3 mn sq.ft. before moving into the real estate business in 21. The company re-entered the third party contracting business in FY9 given the opportunities in the construction segment and also as a move to diversify into related businesses. The contracting business currently contributes ~2% of company s revenues. However, given low profitability in the contracting business, it contributes a mere 5% to the profits. This business is currently structured as 1% subsidiary and is run by a separate team managed by people having expertise in this business. Crisil Equities 2

5 Grading Rationale A well-known real estate player in North India Omaxe is a leading real estate developer in North India with a diversified portfolio including integrated townships, residential housing and commercial projects such as complexes, shopping malls and hotels. Most of its residential projects are under the affordable housing scheme (prices ranging from Rs.5 mn to Rs 3. mn), which has recently become a focus area for the central and the state governments. Omaxe has so far developed ~11 mn sq.ft. across 17 projects in less than a decade Strong execution track record with quality construction and timely delivery Omaxe has a strong execution track record of having developed ~11 mn sq.ft. across 17 projects - nine residential, two integrated townships and six commercial - in less than ten years of its foray into real estate development. Omaxe delivered ~7 mn sq.ft. in 1HFY11. In addition to this, the company has executed 12 industrial, institutional, commercial and residential projects covering ~3 mn sq.ft. as a third party contractor since its inception in Figure 1: Segment-wise area delivered till FY1 Figure 2: Execution track record Omaxe fares well Township, 35 % Group Housing, 34% (mn sqft) Commercial Builtup, 7% Residential Plots, 24% Parsvnath Developers Raheja Universal' Omaxe Ltd Ashiana Housing Sobha Developers Prestige Oberoi Realty DB Realty Lodha Developers Township represents Omaxe City, Lucknow Source: CRISIL Equities Omaxe is a brand known in North India for quality construction and timely delivery. Its experience in the third party construction business over the past two decades has enabled it to execute the projects on time. However, the company slowed construction during FY9 due to financial constraints during the global meltdown. The company has an indigenous construction team, which helps control quality, costs, timely delivery and provides execution flexibilities. However, in certain cases it does outsource premium commercial projects to Two decades of experience in third party construction business larger contractors. For example, in case of Omaxe Connaught Place - a shopping-cum-commercial complex in Greater Noida - the construction work has been outsourced to Larsen & Turbo. Also, in case of the Chandigarh Extension township project in Mullanpur near Chandigarh, Jurong International of Singapore has been appointed as an architect. Crisil Equities 3

6 Table1: Key projects executed in the past Project Location Completion Saleable area (mn sq.ft.) Multiple group housing Gurgaon Up to FY6.8 NRI City Greater Noida FY7 3.9 The Forest Noida FY8.5 The Nile Gurgaon FY9.9 Omaxe City Lucknow FY9 3.7 Wedding Mall Gurgaon FY9.2 Omaxe Square New Delhi FY1.1 Building strong competitive position in tier II and tier III cities Almost the entire future development (~164 mn sq.ft.) is being planned in tier II and tier III cities (except.29 mn sq.ft. of shopping mall in New Delhi). The company is building integrated townships in most of these cities and has received good response in the initial phases of the project launches. Entry into Omaxe focusses on tier II and tier III cities and has first-mover advantage in many of these cities these cities will enable Omaxe to have the first-mover advantage and build a strong competitive position over a period of time. Table2: Launched projects have received positive response from the market Project name Location Product segment Total Area (mn sq.ft.) Area sold (mn sq.ft.) Sold (units) Possession offered (units) Omaxe Heights, Lucknow Uttar Pradesh Group Housing Omaxe City, Mayakheri, Indore Madhya Pradesh Residential Plots Omaxe City, Mayakheri, Indore Madhya Pradesh Villas Omaxe City, Mayakheri, Indore Madhya Pradesh Floors Omaxe Riviera, Rudrapur Uttarakhand Villas Omaxe City, Jaipur Rajasthan Residential Plots Omaxe City, Jaipur Rajasthan Villas Omaxe City, Sonepat Haryana Villas Omaxe City, Sonepat Haryana Residential Plots Large diversified project pipeline provides strong revenue visibility Omaxe has a strong development plan of ~164 mn sq.ft. spread across 52 ongoing residential and commercial projects comprising 21 integrated townships, 2 group housing apartments, nine shopping malls and commercial complexes and two hotel projects. Besides this, the company plans to develop three hi-tech townships in Uttar Pradesh, out of which the one in Allahabad has Has a strong project pipeline with a future development plan of ~164 mn sq.ft. already been launched and included in the aforementioned 52 projects. Of the 164 mn sq.ft., Omaxe has already achieved pre-sales booking of ~47 mn sq.ft. by FY1. These projects provide strong revenue visibility for the next decade or so. We expect ~38 mn sq.ft. of delivery between FY11 and FY13. During H1FY11, the company delivered ~7 mn sq.ft. This includes construction of the projects which had slowed during the FY9 downturn. Crisil Equities 4

7 Geographic and product diversifications reduce concentration risk Large development plan spread across various projects, segments and geographies reduces the dependence on a particular project or geography. Omaxe s 52 projects span product segments such as plots, floors, villas, group housing, FSI sales, commercial built-up and hotels. Also, projects are spread across 3 different cities in nine states, which mitigates the risk of geographical concentration. Over the next five years, none of the projects would contribute None of the projects are likely to contribute more than 15% to overall revenues except Omaxe Waterfront, Allahabad in FY15 more than 15% to overall revenues (except FY15 where Omaxe Waterfront, a hi-tech township in Allahabad, would contribute ~17%). Figure 3: Segment-wise break-up of 164 mn sq.ft. Figure 4: State-wise break-up of 164 mn sq.ft. Commercial Plots 13% Floors 18% Haryana, 24 % Uttar Pradesh, 3% Delhi, % Commercial Builtup 6% Himachal Pradesh, 1% FSI 5% Uttarakhand, 1% Villas 3% Hotels 2% Group housing 23% Andhra Pradesh, 2% Rajasthan, 9% EWS 1% Residential Plots 29% Punjab, 18% Madhya Pradesh, 15% Plots, floors and group housing to dominate revenue mix Though the 52 projects would be spread across various product segments, plots (residential, commercial and institutional), floors and group housing would contribute ~ 7% to overall revenues. Floors and group housing together would account for more than 5% of revenues because of the large ticket size compared to plots. However, margins on these projects will be lower (~25-35%) due to lower realisation since these projects are primarily under the affordable Floors and group housing projects to contribute more than 5% to overall revenues housing scheme. Margins in plot sales will be higher (in the range of 45-6%) due to low land and development costs. Crisil Equities 5

8 Figure 5: Plots, floors and group housing constitute a large proportion of revenues 12% 1% 8% 6% 4% 2% % -2% 1.4% 1.4% 1.% 1.8% 9.4% 7.5% 12.5% 13.% 13.2% 3.6% 5.1% 2.9% 13.5% 35.9% 2.5% 3.8% 29.2% 28.1% 34.3% 17.2% 21.6% 23.7% 26.8%.9% 3.5% 1.2% 22.2% 1.7% 1.3% 9.% 11.6% 13.6%.6% 34.2% 8.2% 19.9% 14.8% 12.4% 9.4% -.7% FY11 FY12 FY13 FY14 FY15 Hotels Commercial Built Up Villas Group Housing Floors FSI Commercial Plots Residential Plots Integrated townships a new focus area of development Omaxe has plans to develop 21 integrated townships comprising ~117 mn sq.ft. including one ~3 mn sq.ft. hi-tech township in Allahabad. Of the 21, 17 have already been launched and received good response. These townships will have residential, commercial and institutional plots, villas, floors, group housing and commercial built-up spaces. These would be developed either by Omaxe alone Out of 21 township projects, 17 have been launched and received good response or by entering into a joint venture or a joint development agreement with the relevant state development authority or the land owner as the partner. For instance, Omaxe has entered into a public-private partnership agreement with the Punjab Urban Planning & Development Authority to develop an integrated township in Patiala across ~337 acres with a saleable area of 9.8 mn sq.ft. The strategy being followed for developing such townships is to sell residential plots in the intitial stages for developing individual houses, which would generate cash flows for developing villas, floors and group housing within such townships. Since the demand for commercial spaces would be lower in the initial stages, the same would be launched for sale at a later stage once the basic ecosystem is developed. Crisil Equities 6

9 Table 3: List of integrated townships and booking status Project Location Area (mn sq.ft.) Booking up to FY1 (%) Omaxe City, Sonepat Haryana Omaxe City, Jaipur Rajasthan Omaxe City, Patiala Punjab Omaxe City, Rohtak Haryana Omaxe City, Palwal Haryana Omaxe City Bahadurgarh, Jhajjar Road Haryana Omaxe City Bahadurgarh, Delhi Road Haryana Omaxe City Indore, Mayakheri Madhya Pradesh Omaxe City Indore, Mayakheri Extn Madhya Pradesh Omaxe City Indore, Manglia Madhya Pradesh Omaxe City Indore, Nihalpur Madhya Pradesh Omaxe City, Bhatinda Punjab Omaxe City, Chandigarh Extn Punjab Omaxe City, Bhiwadi-I Rajasthan Omaxe City, Bhiwadi-II Rajasthan Omaxe Water front-hitech City Uttar Pradesh Omaxe Heights, Chakkan Himachal Pradesh.3 61 Overall, these townships will enable Omaxe to generate healthy revenues over a period of time. CRISIL Equities expects these townships to generate Rs 117 bn worth of revenues by FY2. The response has been encouraging as can been seen from the booking levels so far which gives the comfort for the incremental bookings in such projects as well as the forthcoming projects. Low-cost land bank to yield better margins Omaxe has an access to large land bank of ~4,5 acres, which it plans to develop over the next 7-8 years. Of this, the future plan of ~164 mn sq.ft. would be executed on ~4,35 acres which have been acquired at a significant low cost of Rs ~33.5 bn translating into Rs 177 per sq.ft. In some of the Future development plan is spread across 4,35 acres of land, which has been acquired at a low cost township projects like Omaxe Waterfront Hitech City in Allahabad, the land cost is as low as Rs 7 per sq.ft. The low-cost land would enable Omaxe to earn high margins in many of its projects. Further, the company does not have any significant liability on such land banks except Rs 3,6 mn which is due to be paid to the government authorities on account of various development charges or obtaining licences to start the development on some of its future projects. Hitech townships massive plan with high execution challenges Omaxe has signed MoUs with the Uttar Pradesh government for the development of three hi-tech townships in Allahabad (1,535 acres), Lucknow (2,7 acres) and Bulandsahar (3,61 acre, Greater Noida) under the hi-tech township policy of the state. Of these three hitech townships, the one in Allahabad has already been launched on ~15 acres of the already acquired 727 acres of land. The intital response has been positive with bookings happening at Omaxe has been awarded three hi-tech township projects in Allahabad, Bulandsahar and Lucknow a fast pace. In case of Lucknow, the MoU for acquiring 4 acres land has been signed and the process has started. The Bulandsahar project is at the finalisation of detailed project report (DPR) stage, after which the land will be acquired. Crisil Equities 7

10 The hitech township policy The UP Government, in order to improve the infrastructure and fill the housing shortage gap, came out with a hi-tech township policy in November 23 to promote private investment through the development of varying sizes of townships. As per the policy (rolled out in 23 and revised in 27), a private developer is required to develop a township on minimum 1,5 acres of land with an investment of at least Rs 7.5 bn. This hi-tech township should be selfreliant, environment friendly with world class infrastructure to encourage high technology and knowledge base units like infrastructure, education, health, information and biotechnology, outsourcing and banking etc. The townships would be allocated on the basis of application invited by the government and awarded on a merit basis. Under the policy, offer to the buyer for booking of the plots and flats would be permitted after the developer has acquired at least 3 acres of land, which is required for signing the first development agreement with the development authority. A detailed layout plan of the township will be sanctioned at the time of signing of development agreement for which developer has acquired at least 3 acres of land. Besides, 25% of such land would be pledged with the development authority of the town to ensure that all the infrastructure facilities are provided in the township as promised by the builder to the prospective buyers at the time of booking. Government will issue notice u/s 4 of LA Act for entire land but the developer has to purchase 6% of land directly from the farmers while the government will act as a mediator for the remaining 4% and acquire any leftout land by issuing notice u/s 6 of LA Act. No other development shall be allowed within the pre-approved and pre-identified project area by any other person / organisation. Long-gestation projects ability to create employment will decide the fate The hi-tech townships are long-gestation projects, and their success would depend on the creation of employment opportunities since these townships will be located outside the main city and people working in the main city may not Creation of employment in these townships will be a key challenge prefer to stay there. Hence, the government and the developer need to ensure that employment is not a constraint in such townships. Although we believe it is too early to assess the success of these townships, past instances provide some amount of comfort given that of the total 1 hi-tech townships awarded, three are already launched and have received good response. Development would entail large funds and face execution challenges Besides creating sustainable employment, these townships will require substantial funds for development given their size. Apart from the 727 acres of land that has been acquired for the Allahabad project, the company needs to pump in funds for acquiring the remaining land. Also since such townships involve government intervention and there are various regulations that a developer need to comply, putting it all together is a challenging task. Moreover, In our earnings model, the Allahabad project s share in overall revenues is estimated to increase from FY15 onwards to ~17% deployment and channnelising the resources including skilled manpower and Crisil Equities 8

11 management bandwidth given the massive scale of projects will not be an easy task. These townships would be developed in phases and the land acquisition under the joint venture model with the land owner may reduce the funding requirement. Besides, the company is also scouting for a strategic investor in these township projects, which may reduce dependence on borrowed funds. Except the 727 acres of Allahabad Omaxe Waterfront township that has already been acquired, we have not factored in the earnings from others. Besides, we have built in delays in future launches and completion of the proposed projects on 727 acres, keeping in mind the size of these projects, substantial fund requirement and the challenge to create sustainable real estate demand at the location. Though the Allahabad project would start contributing to revenues from FY12 onwards, its share in overall revenues would only increase from FY15 onwards (more than 15%). Figure 6: Revenue profile of Allahabad project (Rs mn) % % 7.9% 5, % 3.% 1,928 1, FY11 FY12 FY13 FY14 FY15 Revenues (LHS) Contribution to overall revenue (%) Source: CRISIL Equities Slowdown and borrowed funds burden the balance sheet Omaxe borrowed large amount of funds during FY6-FY8 which stretched the overall financial situation during the downturn. Besides raising Rs 5.8 bn through an initial public offer in FY8, the company borrowed ~Rs 18 bn between FY6 Higher debt has stretched financials and FY8 to fund its project execution. The real estate market went through a downturn in FY9 due to the global economic recession. As a result, the interest coverage reduced from ~45x in FY6 to ~1.4x in FY9. Though the market revived in FY1, Omaxe s liquidity situation is still under some stress with interest coverage at 1.9x. Crisil Equities 9

12 Figure 7: Higher debt has stretched the liquidity situation (Rs bn) FY6 FY7 FY8 FY9 FY1 (times) Inventory (LHS) Debt (LHS) Interest Coverage (RHS) Future funding requirement may further stretch the balance sheet Omaxe needs a lot of funds to meet its debt obligations, finance its ongoing projects and acquire land for its proposed hi-tech townships. The company is evaluating various options to raise funds - through the sale of certain land Higher debt obligation may lead to equity dilution parcels, by scouting for project level private equity investments or through equity dilution. In case any of these options materialise it would reduce the dependence on borrowed funds and help ease the liquidity situation. If the fund raising plans do not materialize as planned, CRISIL Equities believes that the company s balance sheet will be further strained. Figure 8: Debt repayment schedule Table 4: Land acquisition in future (Rs bn) FY 11 FY 12 FY 13 FY 14 FY 15 Total In To Project land Place Acquire Allahabad Cost (Rs mn/acre) Total Cost Hi-tech 1, Lucknow Hi-tech 2,7-2, Bulandsahar Hi-tech 3,61-3, Chandigarh Extn Total 8, , Source: CRISIL Equities Construction business focus renewed In order to diversify its business and given the Central government s thrust on infrastructure, Omaxe re-entered the third party contracting business in FY9 through its wholly owned subsidiary Omaxe Infrastructure and Construction Pvt Ltd. Omaxe started as a construction company in 1989 and in 21 it entered In order to diversify, the company has re-entered the third party construction business the real estate business. The company received orders worth Rs 6 bn for executing projects for third parties in FY9 and orders worth Rs 5.3 bn in FY11 including an infrastructure related order for constructing the 12-km road in Mullanpur near Chandigarh. The company has a current order book of Rs 12.6 Crisil Equities 1

13 bn. EBITDA margins on such a project would be 8-1%. The company has appointed a separate team for managing this business segment. However, given the low profitability in the third party construction, the overall contribution from The construction business has a current order of Rs 12.6 bn this segment would be lower. Table 5: Third party construction - order book details S. No. Projects Location Total built-up area Contract value (mn sq.ft.) (Rs mn) 1 Medical College & Hospital Saharanpur (Uttar Pradesh) 1.6 2,762 2 Township project from Hindustan Zinc Udaipur (Rajasthan) Convention Centre Sonepat ESI Hospital Bhubaneswar ESI Hospital Cuttack Regional Office Bhubaneswar. 6 7 Modern jail Faridkot (Punjab).8 1,124 8 Modern jail Kapurthala (Punjab) Medical College Complex at AIMS Rishikesh (Uttarakhand) Units at Air Force Naval Housing Board Meerut DG MAP Indore 2,2 12 DG MAP Jammu 1,29 13 Road Project Mullanpur 76 Total ,572 Crisil Equities 11

14 Key risks Slowdown in industry may lead to financial stress Although the outlook for the real estate industry is positive, any downturn in the cycle would significantly impact Omaxe s future. Also, since the company has a large amount of debt, any downturn in the industry could lead to financial stress Downturn in the industry might have an adverse impact on the future as volumes decline significantly in a downturn leading to a tight cash-flow situation. Execution delays in ongoing projects Omaxe has huge plans for the future for which we believe it needs to gear up its team size. Besides, the geography which Omaxe has entered, has its own challenges in terms of sustainable demand creation. Given such a backdrop, we have built in project-level execution delays. However, more-than-anticipated delays could impact our valuations. Real estate industry is exposed to political and legal hindrances The real estate industry is exposed to government rules and regulations which might stall future projects. In addition, delays in project approvals and administrative hindrances may also adversely impact the commencement of projects. Crisil Equities 12

15 Financial Outlook Revenues to grow at three-year CAGR of 33% to Rs 23.5 bn by FY13 Omaxe s consolidated revenues are expected to grow at a three-year CAGR of 33% to Rs 23.5 bn by FY13 driven by strong bookings achieved in projects like Omaxe City (Sonepat), Omaxe City (Chandigarh Extension), Omaxe Grandwoods (Greater Noida), Omaxe City (Patiala) and Omaxe Heights and The Forest SPA Revenues expected to grow at a three-year CAGR of 33% to Rs 23.5 bn by FY13 Surajkund (Faridabad). The initial response to these projects has been good; as Omaxe scales up construction in these projects, revenues will start getting recognised on achieving 3% completion of construction. Revenues from the construction segment are expected to grow at a three-year CAGR of 17% to Rs 3.2 bn by FY13 mainly driven by the orders received in FY1 and FY11. The downturn in FY9 affected Omaxe severely like any other real estate player and revenues declined from Rs 22.8 bn in FY8 to Rs 8. bn in FY9 before rising to Rs 1 bn in FY1. The construction segment, in FY9 and FY1, registered revenues of Rs 3 mn and Rs 2. bn, respectively. During the first half of FY11, the company s revenues increased 77% y-o-y to Rs 6.1 bn mainly driven by 12% y-o-y growth in the real estate segment to Rs ~5. bn. The company has collected Rs ~9. bn from its customers during the first half. Figure 9: Revenues to register three-year CAGR of 33% (Rs bn) 25 6% 2 25% 49% 26% 3.2 4% % 2% % % FY9 FY1 FY11E FY12E FY13E -2% -4% -6% -8% Real estate revenues (LHS) YoY Growth (%) Construction revenues (LHS) estimate PAT to grow at a three-year CAGR of 66%, EPS expected to increase from Rs 5.2 in FY1 to Rs 23.8 in FY13 Omaxe s consolidated PAT is expected to grow at a three-year CAGR of 66% to Rs 4.1 bn by FY13 primarily on account of strong growth in the top line and the decline in interest expenses due to debt repayment. Net margin is expected to improve to 17.7% in FY13 from 9.% in FY1 due to lower interest burden EPS is expected to increase from Rs 5.2 in FY1 to Rs 23.9 in FY13 including the capitalised portion (as the company would be repaying its debt over the next few years). EPS is expected to increase from Rs 5.2 in FY1 to Rs 23.9 in FY13. During the first half of FY11, PAT margins were 9.6% and EPS was Rs 3.4 Crisil Equities 13

16 Figure 1: PAT and PAT margins (Rs bn) 5 18% 2% 4 15% 15% 3 9% 1% 1% 2 1 5% 5% FY9 FY1 FY11E FY12E FY13E PAT (LHS) PAT Margins (%) % estimate RoE to improve to 19.1% by FY13 We expect RoE to improve from 5.9% in FY1 to 19.1% in FY13 driven by an improvement in net margin. RoCE is expected to increase from 5.7% in FY1 to RoE is expected to improve from 5.9% in FY1 to 19.1% in FY % in FY13. Figure 11: RoE and RoCE 25% 2% 19.1% 15.3% 19.3% 15% 1% 5.9% 9.3% 9.5% 15.2% 5% 3.1% 5.7% % 4.2% FY9 FY1 FY11E FY12E FY13E ROE ROCE estimate Crisil Equities 14

17 Management Overview CRISIL's fundamental grading methodology includes a broad assessment of management quality, apart from other key factors such as industry and business prospects, and financial performance. Overall, we feel that the management team needs to scale up and remain more focused in order to execute future plans and drive overall growth. Well-experienced top management Omaxe has an experienced top management team led by three brothers - Mr Rohtas Goel, Mr Sunil Goel and Mr Jai Bhagwan Goel. Mr Rohtas Goel (chairman and managing director) is a civil engineer and has more than two decades of Experienced top management led by three brothers experience in the field of construction business and real estate. He looks after the entire gamut of activities under the supervision and control of board of directors. He is also a member of CII, FICCI, AIMA and PHD Chamber of Commerce. Mr Sunil Goel (joint managing director) did his Master s in Mathematics and has 15 years of experience in the real estate and construction industry. He is responsible for supervising the day-to-day operations of the company. Mr Jai Bhagwan Goel (whole-time director) is a civil engineer and has around three decades of experience in the construction business. He looks after the commercial operations of the company. He has worked as a civil engineer with various organisations such as Central Public Work Department, International Airport Authority and Delhi Development Authority. Considering the company s historical execution track record, we believe that Omaxe s top management is fairly experienced in the real estate industry. Second line of management experienced but needs to be beefed up further Omaxe has a fairly experienced and well-defined second line of management with an experience of 1-25 years in the construction and real estate industries. For the hi-tech township project, Omaxe has appointed experts to manage the overall operations. However, if we compare the past execution scale with the The second line is fairly experienced but needs to be strengthened future projects, we believe that Omaxe s second line needs to beefed up. Aggressive growth plans led to liquidity problems Debt raised during the peak of the industry cycle to fund the execution plans led to liquidity problems during the downturn. Omaxe again needs significant fund to execute future projects and acquire hi-tech land, which could again put the company in the same tight liquidity situation. Hence, future funding plans too Debt raised during the peak of the industry cycle followed by an economic downturn has led to liquidity problems face high risks. Crisil Equities 15

18 Corporate Governance CRISIL s fundamental grading methodology includes a broad assessment of corporate governance and management quality, apart from other key factors such as industry and business prospects, and financial performance. In this context, CRISIL Equities analyses shareholding structure, board composition, Overall corporate governance practices need to be strengthened typical board processes, disclosure standards and related-party transactions. Any qualifications by regulators or auditors also serve as useful inputs while assessing a company s corporate governance. Omaxe s current board has relevant experience in the industry, but overall corporate governance needs to be strengthened. Board composition Omaxe's board consists of seven members, of whom four are independent, meeting the stipulated SEBI-listing guidelines. Based on our interaction, we believe that independent directors are well aware of the business and take part in major decisions, which speaks well of the company's corporate governance practices. Also, given the background of directors, we believe that the board is fairly diversified. Board s processes The company has various committees audit, remuneration, investor grievance, ESOP grant - in place to support corporate governance practices. All these committees are chaired by an independent director. Based on our interaction with independent directors, we assess that the quality of agenda papers and the level of discussions at the board meetings are good. Fairly good disclosure levels Omaxe s quality of disclosure can be considered fairly good, judged by the level of information and details furnished in annual reports, quarterly disclosure, website and other publicly available data. Complex group structure with numerous subsidiaries Like other real estate companies, Omaxe operates through a number of joint ventures (JVs), SPVs and group companies. The company has 61 subsidiaries, three associates and one JV as on March 31, 21. It has floated a new subsidiary every time it acquired a new land parcel. Also, there are lot of related-party transactions between these entities. Crisil Equities 16

19 Valuation Grade: 4/5 We have valued Omaxe using the sum-of-the-parts method. The real estate business has been valued using the net asset value (NAV) method while the non-core construction business has been valued using the price-to-earnings ratio (PER) method. We initiate coverage on Omaxe with a one-year fair value of Rs We initiate coverage on Omaxe with a valuation grade of 4/5 176 per share and assign a valuation grade of 4/5. This grade indicates that the market price has an upside from the current levels. Valuation of the real estate business We have valued the real estate division based on the NAV method and arrived at a project enterprise value of Rs 42. bn which when adjusted for net debt translates into an equity value of Rs 171 per share. We have valued only those projects based on cash flows which have received approvals and there is higher certainty in terms of execution. The following are the key assumptions in our valuation: We have assumed a cost of equity of 19.%. This is higher than what we have taken for other real estate companies because of high leverage; also the higher debt makes the business model of the company more vulnerable to an economic downturn. We have given necessary discounts for projects that have not received the necessary clearances or are in the early stage of development. In case of Real estate business is being valued at Rs 171 per share based on NAV Omaxe Waterfront City (hi-tech township in Allahabad), we have given 25% discount to our base case NAV considering the size and location of the project. Also, we have taken the NAV of Omaxe Hotel, Chandigarh Extension (a 2.5 mn sq.ft. hotel project) at 5% since the project is not yet conceptualised. State-wise, projects in Haryana, Punjab and UP together contribute ~8% to the overall NAV; segment-wise, plots, group housing and floors contribute 84% to the overall NAV. Figure 12: State-wise contribution to NAV Madhya Pradesh, 9% Punjab, 19% Uttar Pradesh, 27% Himachal Pradesh, 1% Figure 13: Segment-wise contribution to NAV Villas, 5.4% Group Housing, 33.7 % Rajasthan, 1 % Source: CRISIL Equities estimate Haryana, 32 % Uttrakhand, 1 % Andhra Pradesh, % New Delhi, 1% Floors, 13.1% Commercial Builtup, 8.3% Commercial Plots, 6.5% Residential Plots, 3.5% Hotels, 1.8% FSI,.7% We have also done a sensitivity of real estate valuation to WACC and capital appreciation (increase in property prices) and cost inflation which is presented below: Crisil Equities 17

20 Table 6: Sensitivity of NAV to WACC and price Price Inflation p.a. WACC -1% -5% 3% 5% 1% 13.5% % % % % Table 7: Sensitivity of NAV to WACC and cost Cost Inflation p.a. WACC -1% -5% 3% 5% 1% 13.5% % % % % Source: CRISIL Equities estimate Table 8: Real estate peer comparison Companies M Cap. EPS (Rs) PER (x) PBV (x) ROE (%) (Rs mn) FY1 FY11E FY12E FY1 FY11E FY12E FY1 FY11E FY12E FY1 FY11E FY12E Omaxe Limited 25, DLF 444, Unitech 151, Parsvnath Developers 24, Ansal Properties 8, Ansal Housing 1, DB Realty 48, Mean Median Source: Industry, CRISIL Equities Valuation of the construction business The construction business has been valued based on the PER method. Since there are no actual comparables available given the small size of Omaxe s contracting business, we have considered mid-tier construction companies valuations which are trading at a one-year forward median PER of 9.5x. Since most of these companies also have BOT projects, the PER of 9.5x is composite and includes valuation of BOT projects, which account for 15-2% of the overall Construction business is being valued at Rs 5 per share based on PER valuation. We have assumed a 5% discount to the median PER since this is a non-core business for the company and the focus is still on real estate development. Based on this, we have assigned a multiple of 5x to Omaxe s FY12 contracting EPS of Re 1 per share and arrived at a fair value of Rs 5 per share. Table 9: Construction peer comparison M Cap. EPS (Rs) PER (x) RoE (%) Companies (Rs mn) FY1 FY11E FY12E FY1 FY11E FY12E FY1 FY11E FY12E Omaxe Infrastructure & Construction Madhucon Projects 8, Gayatri Projects 3, Consolidated Construction Consortium 1, C&C Constructions 4, KNR Constructions 4, na na 6.3 na na 22.5 na na Tantia Construction 1, Sadbhav Engineering 14, Mean Median Source: Industry, CRISIL Equities Crisil Equities 18

21 Like other real estate players, Omaxe too has underperformed the BSE Realty Index and Sensex. Realty index underperformed broader index Omaxe has underperformed both the indexes Jan-7 Mar-7 May-7 Jul-7 Aug-7 Oct-7 Dec-7 Feb-8 Apr-8 Jun-8 Aug-8 Oct-8 Dec-8 Feb-9 Apr-9 Jun-9 Aug-9 Oct-9 Dec-9 Feb-1 Apr-1 Jun-1 Aug-1 Oct-1 Dec-1 Aug-7 Oct-7 Dec-7 Feb-8 Apr-8 Jun-8 Aug-8 Oct-8 Dec-8 Feb-9 Apr-9 Jun-9 Aug-9 Oct-9 Dec-9 Feb-1 Apr-1 Jun-1 Aug-1 Oct-1 Dec-1 BSE Realty Index BSE Sensex DLF trades in line with realty index but underperforms the broader market 25 Omaxe BSE Realty Index BSE Sensex Unitech continues to underperform both indexes Jul-7 Sep-7 Nov-7 Jan-8 Mar-8 Apr-8 Jun-8 Aug-8 Oct-8 Dec-8 Feb-9 Apr-9 Jun-9 Aug-9 Oct-9 Dec-9 Feb-1 Apr-1 Jun-1 Aug-1 Oct-1 Dec-1 Jan-7 Mar-7 May-7 Jul-7 Aug-7 Oct-7 Dec-7 Feb-8 Apr-8 Jun-8 Aug-8 Oct-8 Dec-8 Feb-9 Apr-9 Jun-9 Aug-9 Oct-9 Dec-9 Feb-1 Apr-1 Jun-1 Aug-1 Oct-1 Dec-1 DLF BSE Realty Index BSE Sensex Unitech BSE Realty Index BSE Sensex Parsvnath continues to underperform both indexes Ansal significantly underperforming both indexes Jan-7 Mar-7 May-7 Jul-7 Aug-7 Oct-7 Dec-7 Feb-8 Apr-8 Jun-8 Aug-8 Oct-8 Dec-8 Feb-9 Apr-9 Jun-9 Aug-9 Oct-9 Dec-9 Feb-1 Apr-1 Jun-1 Aug-1 Oct-1 Dec-1 Jan-7 Mar-7 Jun-7 Aug-7 Nov-7 Feb-8 Apr-8 Jul-8 Oct-8 Dec-8 Mar-9 May-9 Aug-9 Nov-9 Jan-1 Apr-1 Jul-1 Sep-1 Dec-1 Parsvnath Developers BSE Realty Index BSE Sensex Source: BSE, CRISIL Equities Ansal BSE Realty Index BSE Sensex Crisil Equities 19

22 One-year forward P/E band (Rs) One-year forward EV/EBITDA band (Rs mn) Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Omaxe 1x 2x 3x 4x 5x EV 8x 1x 12x 14x P/E premium / discount to NIFTY 3% 25% P/E movement 1 8 2% 15% 1% 5% std dev % -5% -1 std dev -1% -2 Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Premium/Discount to NIFTY Median 1yr Fwd PE (x) Median PE Crisil Equities 2

23 Company Overview Incorporated in March 1989, Omaxe started as a construction and contracting company. In 21, it diversified into real estate development with a focus on residential and commercial segments. Having delivered ~41 mn sq.ft. (~3 mn Omaxe has delivered ~41 mn sq.ft. in the last two decades sq.ft. as a third party contractor and ~11 mn sq.ft. as real estate developer) since conception, the company enjoys a good execution track record with its operations spread over 3 cities and nine states in India. The company is led by Mr Rohtas Goel, the founder and CMD, who has received awards like Svedala, Udyog Ratna, Pride of the Country, Arya Vaidya Sala and Industrial Award for Omaxe s excellence in concept and construction quality. Table 1: Key milestones Year Events 1989 Incorporated as Omaxe Builders Private Limited as a third party construction contractor 21 Diversified into real estate development 23 Launched first integrated township project NRI City in Greater Noida 24 Launched first theme mall - Omaxe Wedding Mall - in Gurgaon 26 Received ISO 91:2 rating from Det Norske Veritas 26 Received 5A2 rating from D&B rating for financial strength and composite appraisal 26 Received PR1 rating from CARE for strong capacity for timely payment of short-term debt obligations 26 Received rating of A(ind) from Fitch Ratings India in relation to Rs 3, mn long-term debt 27 Achieved completion of 5.6 mn sq.ft. of built-up/developed area 29 Achieved landmark of crossing 5 projects Crisil Equities 21

24 Table 11: Location assessment of some of the projects Area Project Location Nature (mn sq.ft.) Assessment Omaxe City, Jaipur Rajasthan Integrated township Located on the Jaipur Ajmer Expressway, connected with the renowned M.I Road' of Jaipur, a mere 2- minute drive Omaxe City, Patiala Punjab Integrated township 9.82 Strategically located at Sirhind Road, Baran which will be a four-lane highway, connecting G.T. Road with Ludhiana and Amritsar Authority (PDA) Omaxe City Bahadurgarh, Jhajjar Road Haryana Integrated township 3.28 On Delhi-Rohtak Road; ~3 km from Delhi, formerly known as Sharafabad. Innumerable industries are located in this area Omaxe City Indore, Mayakheri Madhya Pradesh Integrated township Is on NH-3, Agra-Bombay bypass, Mayakheri is considered to be modern suburb Omaxe City, Chandigarh Extn Punjab Integrated township 8.72 ~3 km from Chandigarh and good connectivity with Baddi, Nalagarh and Mohali Omaxe City, Bhiwadi-I Rajasthan Integrated township 3.36 Located at the East end of Rajasthan in Tijara Tehsil of Alwar district, 55 km away from the Indira Gandhi International Airport, New Delhi and 2 km from Jaipur Omaxe Water front-hitech City Uttar Pradesh Hi-tech township 3.19 India's first ever hi-tech city to be developed on the banks of river Sangam Omaxe Hills Indore, Nihalpur Mundi Extn. Madhya Pradesh Integrated township 5.96 Strategically located on the AB bypass 15 km away from the railway station, 18 km from the airport, 16 km from the Indore City Center Omaxe Grandwoods, Noida Uttar Pradesh Group housing 3.3 Located near the six-lane Greater Noida Expressway, 5 km from Amity Chowk. Easy access to South Delhi through Kalindi Kunj and Faridabad. Many high-end projects of Jaypee Infra, Unitech and others are coming up in this area Omaxe North Avenue-II (3 B/R) Haryana Group housing 1.22 Located in Bahadurgarh at a distance of about 8 km from the Delhi border, it is about 2 km from Peeragarhi. With NH-1 and Delhi-Rohtak Road running through the city its distance from Gurgaon and Sonepat are 3 km and 4 km respectively Omaxe Connaught Place Uttar Pradesh Commercial built-up 1.4 Ultra premium shopping-cum-multiplex and commercial complex located in Greater Noida near the Expressway. Omaxe NRI City, Omaxe Arcade, Biotech City, Medi City, IT City all are located nearby House - 2 Home Haryana Commercial built-up.14 Located in Gurgaon, 3 km from Rajiv Chowk and 3- minute drive from Indragandhi International Airport. Omaxe Plaza, Wedding Mall, House 2 Home Mall are renowned malls in Gurgaon Omaxe Mall (Wedding Mall), Patiala Punjab Commercial built-up.38 The mall is surrounded by thriving townships in the neighbourhood, surrounded by Baradari Park Crisil Equities 22

25 Annexure: Financials Income statement Balance Sheet (Rs mn) FY9 FY1 FY11E FY12E FY13E (Rs mn) FY9 FY1 FY11E FY12E FY13E Operating income 8,789 1,46 14,876 18,72 23,46 Liabilities EBITDA 1,553 2,15 3,196 4,972 6,9 Equity share capital 1,736 1,736 1,736 1,736 1,736 EBITDA margin 17.7% 2.1% 21.5% 26.6% 29.4% Reserves 13,45 14,85 15,537 18,78 21,816 Depreciation Minorities EBIT 1,489 1,954 3,115 4,888 6,785 Net worth 14,781 15,821 17,273 19,813 23,552 Interest 1,84 1, Convertible debt Operating PBT ,28 4,114 6,15 Other debt 2,4 18,94 14,15 13,68 14,28 Other income Total debt 2,4 18,94 14,15 13,68 14,28 Exceptional inc/(exp) Deferred tax liability (net) (12) (112) (11) (12) (12) PBT 532 1,258 2,35 4,25 6,179 Total liabilities 34,719 33,82 31,268 32,78 37,478 Tax provision ,44 2,34 Assets Minority interest Net fixed assets PAT (Reported) 474 1,125 1,547 2,846 4,145 Capital WIP Less: Exceptionals Total fixed assets Adjusted PAT ,547 2,846 4,145 Investments Current assets Ratios Inventory 3,869 32,143 3,2 32,486 37,9 FY9 FY1 FY11E FY12E FY13E Sundry debtors 656 1,244 2,138 1,666 1,87 Growth Loans and advances 7,956 7,12 6,933 7,691 8,562 Operating income (%) (61.6) Cash & bank balance 1,43 1,757 1,548 3,97 2,491 EBITDA (%) (76.5) Marketable securities Adj PAT (%) (91.) Total current assets 4,884 42,157 4,621 44,94 49,869 Adj EPS (%) (91.) Total current liabilities 7,26 9,23 1,478 13,239 13,662 Net current assets 33,859 32,926 3,144 31,71 36,27 Profitability Intangibles/Misc. expenditure EBITDA margin (%) Total assets 34,719 33,82 31,268 32,78 37,478 Adj PAT Margin (%) RoE (%) Cash flow RoCE (%) (Rs Mn) FY9 FY1 FY11E FY12E FY13E RoIC (%) Pre-tax profit 52 1,34 2,35 4,25 6,179 Total tax paid (35) (142) (755) (1,396) (2,34) Valuations Depreciation Price-earnings (x) Working capital changes (1,325) 1,287 2,574 (9) (5,113) Price-book (x) Net cash from operations (794) 2,239 4,24 2,929 (853) EV/EBITDA (x) Cash from investments EV/Sales (x) Capital expenditure 15 (77) (329) (39) (37) Dividend payout ratio (%) Investments and others 94 () Dividend yield (%) Net cash from investments 1,9 (77) (329) (39) (37) Cash from financing B/S ratios Equity raised/(repaid) Inventory days 1,665 1, Debt raised/(repaid) (2,268) (1,946) (3,989) (1,37) 96 Creditors days Dividend (incl. tax) - - (174) (35) (46) Debtor days Others (incl extraordinaries) Working capital days 1,32 1, Net cash from financing (2,78) (1,88) (4,84) (1,341) 554 Gross asset turnover (x) Change in cash position (1,863) 354 (28) 1,549 (66) Net asset turnover (x) Closing cash 1,43 1,757 1,548 3,97 2,491 Sales/operating assets (x) C urrent ratio (x) Quarterly financials Debt-equity (x) (Rs Mn) Q2FY1 Q3FY1 Q4FY1 Q1FY11 Q2FY11 Net debt/equity (x) Net Sales 1,189 2,82 3,782 2,529 3,544 Interest coverage Change (q-o-q) 98% 136% 35% -33% 4% EBITDA Per share Change (q-o-q) nm 54% -6% 81% 65% FY9 FY1 FY11E FY12E FY13E EBITDA margin 36.8% 24.% 7.1% 19.2% 22.5% Adj EPS (Rs) PAT CEPS Adj PAT Book value Change (q-o-q) nm 9% 59% -52% 69% Dividend (Rs) Adj PAT margin 12.6% 1.2% 11.9% 8.6% 1.4% Actual o/s shares (mn) Adj EPS estimate Crisil Equities 23

26 Focus Charts Revenue to grow at a three-year CAGR of 33% RoCE and RoE (Rs bn) 25 6% 49% 3.2 4% 2 25% 26% 2% % 15 % 2.8-2% % 5-65% -6% % FY9 FY1 FY11E FY12E FY13E Real estate revenues (LHS) Construction revenues (LHS) YoY Growth (%) 25% 2% 15% 1% 5% % 19.1% 15.3% 19.3% 15.2% 9.3% 5.9% 9.5% 3.1% 5.7% 4.2% FY9 FY1 FY11E FY12E FY13E ROE ROCE Source: BSE, CRISIL Equities Source: NSE, CRISIL Equities Segment wise break up of 164 mn sqft Segment wise contribution to valuation Commercial Plots 13% Floors 18% Villas, 5.4% Group Housing, 33.7 % Commercial Builtup 6% Floors, 13.1% Hotels, 1.8% FSI 5% FSI,.7% Villas 3% Hotels 2% EWS 1% Residential Plots 29% Group housing 23% Commercial Builtup, 8.3% Commercial Plots, 6.5% Residential Plots, 3.5% Omaxe has underperformed both the indices Shareholding pattern % 9% 8% 7% 6% 5% 4% 3% 2% 1% 8.7% 8.6% 8.6% 8.3% 1.8% 1.8% 1.8% 1.8%.4%.4%.4%.7% 89.1% 89.1% 89.1% 89.1% Aug-7 Oct-7 Dec-7 Feb-8 Apr-8 Jun-8 Aug-8 Oct-8 Dec-8 Feb-9 Apr-9 Jun-9 Aug-9 Oct-9 Dec-9 Feb-1 Apr-1 Jun-1 Aug-1 Oct-1 Dec-1 % Dec-9 Mar-1 Jun-1 Sep-1 Omaxe BSE Realty Index BSE Sensex Promoters FII DII Others estimate Crisil Equities 24

27 CRISIL Independent Equity Research Team Mukesh Agarwal Director +91 (22) Tarun Bhatia Director, Capital Markets +91 (22) Chetan Majithia Head, Equities +91 (22) Sudhir Nair Head, Equities +91 (22) Nagarajan Narasimhan Director, Research +91 (22) Ajay D'Souza Head, Research +91 (22) Manoj Mohta Head, Research +91 (22) Sachin Mathur Head, Research +91 (22) Sridhar C Head, Research +91 (22) sridharc@crisil.com CRISIL s Equity Offerings The Equity Group at CRISIL Research provides a wide range of services including: Independent Equity Research IPO Grading White Labelled Research Valuation on companies for use of Institutional Investors, Asset Managers, Corporate Other Services by the Research group include CRISINFAC Industry research on over 6 industries and Economic Analysis Customised Research on Market sizing, Demand modelling and Entry strategies Customised research content for Information Memorandum and Offer documents

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