The best investment on earth is Earth! Information Memorandum 2014
Table of Contents Topic Page Overview of the Opportunity 3 Overview of the Land 5 Capital Structure and Minimum Investment Size 9 Illustrative Investor Returns 12 FAQ s 29 2
Executive Summary Overview of Opportunity 3
Overview of the Opportunity Transaction 6.15 Acres of land parcel at Hinjewadi, Pune ( Land ) has been acquired in Pune Premises. It is a partnership firm owned by Atul M. Lunkad and Sanjay M. Palesha. Land proposed to be transferred vide Regd. Development Agreement under a Special Purpose Vehicle Forestville Premises Pvt. Ltd. Investors to subscribe to preference shares in the SPV and with Advance/ Loan Business Model of the SPV The SPV shall acquire the land vide Regd. Development Agreement from Pune Premises.. It will hold the land for 7 Years from the date of entering into Regd. Development agreement. After a period of 7 Years the company will have 3 options i.e :- i) Sell the Land at prevailing market value ii) Enter into Joint Venture Agreement with Third Party (Developer); iii) Develop the Plot by the SPV iv) TDR (in case of reservation on the land) Investment Amount Investment amount is Rs. 5,30,588 Lacs equivalent to 1323.97 Sq. Ft of Land Area INR. 1000/- Preference Share and INR. 5,29,588 Lacs as Advance/ Deposit (Advance/ Deposit to ensure tax efficient profit extraction) 0.5% ownership as Preference Share Growth Potential and Returns Significant appreciation in land price expected over the coming years in the Western Corridor of Pune An investment of INR 4,63,390 Lacs for 0.5% in preference to potentially yield an investment multiple of ~ 4x over a 7 year period The SPV has the option to repay its Advance/ Loan facilitating an exit for the investors. 4
Overview of the Land 5
Land Details and Attributes Land area Location Business Model About Hinjewadi 6.15 acres Hinjewadi, Pune Western Corridor Land & Equity Hinjewadi officially is a locality now treated as the IT Village of Pune which is located on the NH4 bypass around the city of Pune. Originally a small village, it is now the location of Rajiv Gandhi InfoTech Park, housing around two hundred software companies Proximity to Industrial hubs Nearby Townships developments The technology park at Hinjawadi houses many software companies. Some of them are: EMERSON Innovation Center Pune, Fulcrum Worldwide, IBM India, Hexaware Technologies, AtoS, Synechron Technologies, Mahindra Engineering (located at the remotest corner of phase 2), Idea Cellular, KPIT Cummins, Tata Technologies, Infosys, Wipro, Credit Suisse (located inside Wipro), Tata Consultancy Services, Geometric Limited, Tech Mahindra,Cognizant Technology Solutions, Persistent Systems, Honeywell, Mindtree, 3DPLM Software Solutions, CECsoft, Compulink, Pesh-Infotech, ANSYS Fluent and Digital Group InfoTech. It also houses product companies such as Compulink and CISCO. The influx of IT professionals to the Rajiv Gandhi InfoTech Park is causing a rapid growth of townships in Hinjawadi. This has led to the development of integrated townships in Hinjewadi, which have schools, health care facilities, restaurants, shopping areas and entertainment areas on their premises. Most of the developers in Pune are developing integrated townships in Hinjawadi. Some of these townships include Megapolis Pune by Pegasus Properties Ltd, Life Republic by Kolte Patil Developers, Blue Ridge by Paranjape Schemes (Construction) Limited and Xrbia by Eiffel Group. Rapidly growing Education hub Two major colleges are also located in Hinjawadi namely International Institute of Information Techonology and Symbiosis Centre for Management and Human Resource Development. These two are located in Phase 1 of the Area. Sharad Pawar international school in Megapolis Township. 6
Land Location and Connectivity 7
Land Location and Connectivity 8
Capital Structure & Investment Size 9
Capital Structure of the SPV Promoters Investors 51% Preference Share Holders 49% Preference Share Holders SPV 100% Land parcel 10
Investment Size 1 Unit of Investment is equivalent to 1323.97 sqft. of land area and 0.5% ownership in the SPV Investment Investment towards: (% of Contribution of Total Capital Raise) Amt. In. Rs. (Rate / Sq ft of total land area per unit of investment i.e 1323.97 sqft.) - Cost of 1 Preference Share - Cost of 1 Unit (Land) - Development Expenses 1000/- - 4,63,390/- Rs. 350/- 66,199/- Rs.50/- TDS (Collected Today) 38,146/- Rs. 29/- Total 568,734/- Rs 430/- Minimum Investment Number Values (Rs) - Through Preference Shares 1 Rs 1000/- - Through Loan - Rs. 5,29,588/- Total Rs 5,30,588/- 11
Illustrative Investor Returns 12
Assumptions and Product Mix 1. Project Duration - Option I (Sell the land) - 7 Years - Option II (Joint Venture with Third Party) 7 Years + 4 Years = 11 Years - Option III (Company itself Develops the Plot) 7 Years + 4 Years = 11 Years 2. The incoming investors will be issued preference shares of Rs. 1000/- each for each unit of investment. 3. Each Investors investment will be linked for arithmetical understanding to an area of 1323.97 Sq. Ft. @ Rs. 350/- per sq. ft. i.e. Rs.5,29,588/- 4. Investor will have to pay Rs. 50/- per sq. ft. towards development expense i.e. Rs.66,199/- 5. Every Investor will have to pay TDS amount (Rs. 29/Sqft.) in advance on the date of investment as an part of investment itself. 6. The balance investment will come into the company in the form of Loan / Advance. 7. Loan/ Advance will be entitled to an interest @ 12% p.a. 8. Interest, will be accumulated every year and corresponding TDS (Tax Deducted at Source) will be credited to the investor (Tax Credit). 9. Investor can exit from the Investment Option at any time and get 12% p.a. interest. Investor will transfer his shares to promoters, if he desires to exit. 10. Investor will get accumulated interest on Loan/Advance and profits (after taxes) will be distributed in the form of dividend, which will be a tax free income at the end of the project. 13
Assumptions and Product Mix 1. Income Tax Rate @ 33.99% 2. Dividend Distribution Tax @ 17% 3. TDS on investment collected today does not form part of the cost of investment as the credit of the same can be claimed by the investor. 4. In case of a reservation on land of any kind, TDR is issued against it. Currently the TDR cost in the market rates are as below Zone A Rs. 4500 / Sqft Zone B Rs. 4000 / Sqft Zone C Rs. 3500 / Sqft Zone D Rs. 2800 / Sqft The returns for the same have been shown in the presentation ahead. 14
Facts & Assumptions : 1. Total Area of land = 2,64,795 Sqft. 2. Sale Rate of Land is considered @ Rs. 2500/Sqft. 3. Project Duration : 7 Years Option 1 : Sale of Land 15
Option 1 : (Option 3 for Investor) RETURN ON INVESTMENT TO INVESTORS SR NO PARTICULARS AMOUNT IN RS. A AREA IN SQ. FT 1323.97 B COST OF INVESTMENT PER SQ. FT 350 C COST OF INVESTMENT (A*B) 463390 D DEVELOPMENT EXPENSE PER SQ. FT 50 E COST OF DEVELOPMENT (A*D) 66199 F TDS ON INVESTMENT COLLECTED TODAY 38146 G TOTAL COST OF INVESTMENT (C+E) 529588 H INTEREST ON INVESTMENT RECEIVED FOR 7 YEARS 381462 I DIVIDEND ON INVESTMENT 1480072 J TOTAL RETURN ON INVESTMENT (H+I) 1861535 K INVESTMENT VALUE AT THE END OF 7 TH YEAR (G+J) 2391123 L INVESTMENT MULTIPLIER (K/G) 4.52 M % RETURN P.A. [(J/G)/7] 50% 16
Computation Of Tax PARTICULARS (Amount in Rs Lakhs) Sale Consideration for Land 6620 6620 Less : Revalued Cost of Acquisition 927 Accumulated Interest on Loans 381 Accumulated Development Expenses 65 1373 Profit Before Tax 5247 Income Tax @33.99% 1783 Profit After Tax 3463 Computation of Tax on Distributable Profits Preference Shareholders Preference Dividend Payable to PSH 3463 Less : Dividend Distribution Tax @ 17% 503 Preference Dividend Payable 2960 17
Profitability Statement YEAR PROJECTIONS (Amt. in Lacs) 1 2 3 4 5 6 7 8 INCOME: Sale of Land at Sr. No. 451,Godambewadi - - - - - - 6619.85 - Closing WIP 990.76 1054.52 1118.29 1182.05 1245.81 1309.57 - - TOTAL (A) 990.76 1054.52 1118.29 1182.05 1245.81 1309.57 6619.85 - EXPENSES Opening Work - In - Progress - 990.76 1054.52 1118.29 1182.05 1245.81 1309.57 - Land at Sr.No. 451,Godambewadi 927.00 - - - - - - - Estimated Development Expenses each year (For Details Kindly Refer Statement of Development Expenses) 9.27 9.27 9.27 9.27 9.27 9.27 9.27 - Interest on Unsecured Loan 54.49 54.49 54.49 54.49 54.49 54.49 54.49 - TOTAL (B) 990.76 1054.52 1118.29 1182.05 1245.81 1309.57 1373.34 - Net Profit Before Tax - - - - - - 5246.51 - Preference Dividend - - - - - - 2960.14 - Income Tax @ 33.99% - - - - - - 1783.36 - Dividend Distribution Tax @ 17% - - - - - - 503.22 - Profit After Tax 2286.37-18
Facts & Assumptions : 1. Total Area of land - 2,64,795 Sqft. 2. Joint Venture considered in Ratio 30% (Land Owners) : 70% (Developer) 3. Total Saleable Area 4,23,974 Sqft. 4. Sale Rate of Flat is considered @ Rs. 7000/Sqft. 5. Project Duration : 7 + 4 Years Years Option 2 : Joint Venture 19
Option 2 : (Option 2 for Investor) SR NO PARTICULARS AMOUNT IN RS. A AREA IN SQ. FT 1323.97 B COST OF INVESTMENT PER SQ. FT 350 C COST OF INVESTMENT (A*B) 463390 D DEVELOPMENT EXPENSE PER SQ. FT 50 E COST OF DEVELOPMENT (A*D) 66199 F TDS ON INVESTMENT COLLECTED TODAY 59944 G TOTAL COST OF INVESTMENT (C+E) 529588 H INTEREST ON INVESTMENT RECD. FOR 11 YEARS 599441 I DIVIDEND ON INVESTMENT 2043663 J TOTAL RETURN ON INVESTMENT (H+I) 2643104 K INVESTMENT VALUE AT THE END OF 11th YEAR (G+J) 3172692 L INVESTMENT MULTIPLIER 5.99 M % RETURN P.A. [(J/G)/11] 45% 20
Computation Of Tax PARTICULARS (Amount in Lacs) 8903 Sale Consideration 8903 Less : Expenses 1659 Profit Before Tax 7245 Income Tax @33.99% 2462 Profit After Tax 4782 Computation of Tax on Distributable Profits Preference Shareholders Preference Dividend Payable to PSH 4782 Less : Dividend Distribution Tax @ 17% 695 Preference Dividend Payable 4087 21
Profitability Statement PROJECTIONS YEAR 1 2 3 4 5 6 7 8 9 10 11 12 INCOME: Consideration for JV - - - - - - - - - - 8903.45 - Closing WIP 1000.41 1073.82 1147.23 1220.63 1294.04 1367.45 1440.86 1495.35 1549.85 1604.34 - - TOTAL (A) 1000.41 1073.82 1147.23 1220.63 1294.04 1367.45 1440.86 1495.35 1549.85 1604.34 8903.45 - EXPENSES Opening Work - In - Progress - 1000.41 1073.82 1147.23 1220.63 1294.04 1367.45 1440.86 1495.35 1549.85 1604.34 - Land at Sr.No. 451,Godambewadi 927.00 - - - - - - - - - - - Estimated Development Expenses each year (For Details Kindly Refer Statement of Development Expenses) 18.91 18.91 18.91 18.91 18.91 18.91 18.91 - - - - - Interest on Unsecured Loan 54.49 54.49 54.49 54.49 54.49 54.49 54.49 54.49 54.49 54.49 54.49 - TOTAL (B) 1000.41 1073.82 1147.23 1220.63 1294.04 1367.45 1440.86 1495.35 1549.85 1604.34 1658.84 - Net Profit Before Tax - - - - - - - - - - 7244.62 - Preference Dividend - - - - - - - - - - 4087.33 - Income Tax @ 33.99% - - - - - - - - - - 2462.45 - Dividend Distribution Tax @ 17% - - - - - - - - - - 694.85 - Profit After Tax - - - - - - - - - - 3157.29-22
Facts & Assumptions : 1. Total Area of land - 2,64,795 Sqft. 2. Total Saleable Area 4,23,974 Sqft. 3. Sale Rate of Flat is considered @ Rs. 7000/Sqft. 4. Construction Cost considered as Rs. 3500/- Sqft. 5. Project Loan is considered for Rs. 25Cr. @ 14% p.a. 6. Project Duration : 7 + 4 Years Years Option 3 : Self Development (7 + 4 Years) 23
Option 3 : Option 1 for Investor SR NO PARTICULARS AMOUNT IN RS. A AREA IN SQ. FT 1323.97 B COST OF INVESTMENT PER SQ. FT 350 C COST OF INVESTMENT (A*B) 463390 D DEVELOPMENT EXPENSE PER SQ. FT 50 E COST OF DEVELOPMENT (A*D) 66199 F TDS ON INVESTMENT COLLECTED TODAY 59944 G TOTAL COST OF INVESTMENT (C+E) 529588 H INTEREST ON INVESTMENT RECEIVED FOR 11 YEARS 599441 I DIVIDEND ON INVESTMENT 4894769 J TOTAL RETURN ON INVESTMENT (H+I) 5494210 K INVESTMENT VALUE AT THE END OF 11th YEAR (G+J) 6023798 L INVESTMENT MULTIPLIER 11.37 M % RETURN P.A. [(J/G)/11] 94% 24
Computation Of Tax PARTICULARS 29678 Sale Consideration 29678 Less : Expenses 12327 Profit Before Tax 17352 Income Tax @33.99% 5898 Profit After Tax 11454 Computation of Tax on Distributable Profits Preference Shareholders Preference Dividend Payable to PSH 11454 Less : Dividend Distribution Tax @ 17% 1664 Preference Dividend Payable 9790 25
Profitability Statement PROJECTIONS YEAR 1 2 3 4 5 6 7 8 9 10 11 12 INCOME: Sale of Flats - - - - - - - - - - 29678.18 - Closing WIP 1000.41 1073.82 1147.23 1220.63 1294.04 1367.45 1440.86 4934.62 8428.38 11922.13 - - TOTAL (A) 1000.41 1073.82 1147.23 1220.63 1294.04 1367.45 1440.86 4934.62 8428.38 11922.13 29678.18 - EXPENSES Opening Work - In - Progress - 1000.41 1073.82 1147.23 1220.63 1294.04 1367.45 1440.86 4934.62 8428.38 11922.13 - Land at Sr.No. 451,Godambewadi 927.00 - - - - - - - - - - - Estimated Development Expenses each year (For Details Kindly Refer Statement of Development Expenses) 18.91 18.91 18.91 18.91 18.91 18.91 18.91 3089.26 3089.26 3089.26 - - Interest on Unsecured Loan 54.49 54.49 54.49 54.49 54.49 54.49 54.49 54.49 54.49 54.49 54.49 - Interest on Bank Finance - - - - - - - 350.00 350.00 350.00 350.00 - TOTAL (B) 1000.41 1073.82 1147.23 1220.63 1294.04 1367.45 1440.86 4934.62 8428.38 11922.13 12326.63 - Net Profit Before Tax - - - - - - - - - - 17351.55 - Preference Dividend - - - - - - - - - - 9789.54 - Income Tax @ 33.99% - - - - - - - - - - 5897.79 - Dividend Distribution Tax @ 17% - - - - - - - - - - 1664.22 - Profit After Tax - - - - - - - - - - 7562.01-26
Investor Return Sr. No. Particulars SALE OF LAND JV @ 25% JV @30% JV @ 35% DEVELOP SALE OF TDR A Cost of Investment 5.30 5.30 5.30 5.30 5.30 5.30 Bi Interest on Investment 3.81 5.99 5.99 5.99 5.99 3.81 Bii Dividend on Investment 14.80 16.25 20.44 24.62 48.95 16.85 Total Returns (Post Tax) 18.62 22.25 26.43 30.62 54.94 20.67 C Investment Value 23.91 27.54 31.73 35.91 60.24 25.96 D % Returns per annum 50% 38% 45% 53% 94% 56% E Investment Multiplier (times) 4.52 5.20 5.99 6.78 11.37 4.90 27
Frequently Asked Questions 28
Land FAQ s 1. What is the location of the land? Land is located at 3 mins. away from Phase 3 in Hinjewadi, Pune. 2. In whose name is the 7/12 Extract on? The land is currently on the name of M/S Pune Premises 3. Then why are the cheques being taken in the name of Forestville Premises Pvt. Ltd.? There has been a development agreement between Pune Premises & Forestville Premises Pvt. Ltd. Thus transferring all the development rights in the name of Forestville Premises Pvt. Ltd. Thus now the land is being held under this SPV 4. What is the status of the land? The land currently is in Proposed Residential zone. 5. What is the existing plot rate in Hinjewadi? Currently agricultural land rates in Hinjewadi is from Rs. 500-700/Sqft. 6. Is the title of the property clear? Yes the title of the property is a 100% clear. You will get to see all the supporting documents at our office. If required, a CD with our legal documents will be provided by our Sales representative. 7. Who will service the land for the next 7 years? The company will service the land for the next 7 years. 29
FAQ s 1. As an investor, after 7 years what is the best option for me? As an investor the highest returns will be in the following order : A. The company itself develops the land B. Give the land in JV C. Sell of the land 2. Why cannot I put all my money as preference share and divide it between preference & loan? Company has framed such a policy considering all the preference shareholders and taxation both in the hands of the company and investor. From Company s point of view i) Interest can be claimed as expenditure ii) Tax on Interest saved. From Investors point of view- i) Every year some amount of income is getting accrued of which taxation benefit can be claimed by the investor. ii) At the end of the 7 th year tax burden will be less. dividend income received by the investor will be tax free. 3. If want to opt out of the scheme before the 7 year term, who will buy my shares? The investor has the option to exit from the scheme at any given point of time with ROI of 12% Simple interest. 4. What is my security against the investment Scheme? Every Investor investing in our scheme will get a Preference Share Certificate & Share holders Agreement. 5. Are there any additional charges for documentation? No, there are no additional charges for documentation. 6. Why is the TDS amount collected from me today itself? As there would be on transaction in the company for 7 years there would be no funds in the company s accounts, therefore investors being the only source of TDS, the same is collected in advance rather than every year. The credit of which can be taken by the investor. 30
FAQ s 7. Can NRI s invest in this investment scheme? No NRI s are not eligible for investing in this investment scheme. 8. Who will be deciding the valuation of the land after 7 years The company will have the land valuated from top real estate companies like JLL, CBRE & Knight Frank. 9. What are the facilities being provided for which Rs. 50/Sqft is being charged? Rs. 50/Sqft. Is being charged for the following purposes A. Fencing / Compound Wall F. Waterline / Drip Irrigation B. Leveling G. Landscaping & Tree Plantation C. Demarcation H. Electric Meter D. Internal Roads I. Security E. Staff / Admin Expenses J. Liasoning 10. Key distances from our plot: Phase 3 3 mins Hotel Lemon Tree 10 mins Phase 2 7 mins Pune Mumbai Highway 15 mins Phase 1 10 mins Symbiosis Infotech Campus 10 mins Pirangut 15 mins Balewadi Stadium 20 mins 31
Disclaimer This presentation does not constitute offer to the Public to subscribe to the Securities of the Company. This Investor Presentation has been prepared for investors, solely for informational purposes. The information contained herein has been prepared to assist prospective investors in making their own evaluation of the Company and does not purport to be all-inclusive or to contain all of the information a prospective or existing investor may desire. In all cases, interested parties should conduct their own investigation and analysis of the Company and the Transaction and the data set forth in this information. We makes no representation or warranty as to the accuracy or completeness of this information and shall not have any liability for any representations (expressed or implied) regarding information contained in, or for any omissions from, this information or any other written or oral communications transmitted to the recipient in the course of its evaluation of the Transaction. The Investments is only suitable for sophisticated investors who are able to bear the risk and who have sought professional advice concerning the possible tax consequences, legal requirements relevant to the investment and relevant generally to the making of investments in such projects. This Information includes certain statements and estimates provided by the Company with respect to the projected future performance of the Company. Such statements, estimates and projections reflect various assumptions by promoters concerning possible anticipated results, which assumptions may or may not be correct. No representations are made as to the accuracy of such statements, estimates or projections. Prospective investors will be expected to have conducted their own due diligence investigation regarding these and all other matters pertinent to investment in the Company. 32