CMP 90.05

Target Price 102.00

ISIN: INE094I01018

JANUARY 4th

2014

KOLTE-PATIL DEVELOPERS LTD.

Result Update: Q2 FY14

BUYBUYBUYBUY

Index Details

Stock Data

Sector Realty

BSE Code 532924

Face Value 10.00

52wk. High / Low (Rs.) 136.35/49.40

Volume (2wk. Avg.) 319000

Market Cap (Rs. mn.) 6823.54

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY13A FY14E FY15E

Net Sales 7274.80 8540.62 9821.71

EBITDA 2285.89 2831.72 3241.14

Net Profit 1074.41 1333.92 1538.18

EPS 14.18 17.60 20.30

P/E 6.35 5.12 4.44

Shareholding Pattern (%)

1 Year Comparative Graph

KOLTE-PATIL DEVELOPERS LTD. S&P BSE SENSEX

SYNOPSIS

Kolte-Patil Developers Ltd. (KPDL) is among

the top premier league of real estate

developers in India is headquartered in Pune.

The company’s net profit registered 64.37%

increase and stood at a record Rs. 322.24

million from Rs. 196.04 million over the

corresponding quarter last year.

The company has reported an EBITDA of Rs.

655.57 for Q2 FY14 as against Rs. 417.73 in

the corresponding quarter of the previous

year.

KPDL has declared interim dividend of Rs. 1.5

per equity share for financial year 2013-14.

KPDL forayed into Mumbai market with a

redevelopment project on Khar Linking road.

KPDL launches Tuscan Estate Signature

Meadows, Downtown, 24K Glamore and 3rd

Avenue at Life Republic - in Pune, to develop a

total of 1.8 million sq.ft. for these new projects.

Average sales price realization stood at

Rs.5,737 per sq. ft. in 02 FY14 as compared to

Rs.4,783 per sq. ft. in 01 FY14 and Rs.4,072

per sq. ft. in 02 FY13.

Net Sales and PAT of the company are

expected to grow at a CAGR of 58% and 70%

over 2012 to 2015E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Kolte-Patil Developers Ltd. 90.05 6823.54 14.18 6.35 0.95 16.00

National Bldg Const. Corp. Ltd. 160.00 19200.00 18.08 8.86 2.02 37.50

Prestige Estates Projects Ltd. 157.30 55055.00 9.87 15.94 2.03 12.00

GODREJ PROP 168.15 33501.20 5.16 32.59 1.62 30.00

QUARTERLY HIGHLIGHTS (CONSOLIDATED)

Results updates- Q2 FY14,

Months SEP-13 SEP-12 % Change

Net Sales 1886.19 1917.11 -1.61%

PAT 322.24 196.04 64.37%

EPS 4.25 2.59 64.37%

EBITDA 655.57 417.73 56.94%

Kolte-Patil Developers Ltd. achieved a turnover of Rs. 1886.19 million for the 2nd quarter of the current year

2013-14 as against Rs. 1917.11 millions in the corresponding quarter of the previous year. The company has

reported an EBITDA of Rs. 655.57 millions and a net profit of Rs. 322.24 million against Rs. 196.04 million

reported respectively in the corresponding quarter of the previous year. The company has reported an EPS of Rs.

4.25 for the 2nd quarter as against an EPS of Rs. 2.59 in the corresponding quarter of the previous year.

Break up of Expenditure

Break up of Expenditure

Rs. Million

Q2 FY14 Q2 FY13

Cost of Construction 1121.69 1411.30

Administration and General Expenses 62.39 52.32

Employee Cost 53.79 42.47

Selling Expenses 45.34 50.46

Depreciation & Amortization Expense 16.57 10.46

Revenue recognized

Projects (Rs. Million) Q2 FY14 Q1 FY14

Life Republic - Phase I 63 49

Corolla - Phase I 19 22

Tuscan - Phase I & II 11 15

Margosa Heights I & II 23 27

Downtown - Phase I 10 38

Gliteratti I 11 13

City Bay 7 3

Green olive Venture 2 2

Others 43 47

Latest Updates

� Kolte-Patil Developers Ltd has declared interim dividend of Rs. 1.5 per equity share for financial year 2013-

14.

� New sales bookings of 0.45 msf. recorded in Q2 FY14 as compared to 0.45 msf. recorded in 01 FY14 and 0.83

msf. in 02 FY13

� Value of area sold stood at Rs. 2600 mn in 02 FY14 as compared to Rs. 2150 mn in 01 FY14 and Rs.3400 mn

in 02 FY13

� Average sales price realization stood at Rs.5,737 per sq. ft. in 02 FY14 as compared to Rs.4,783 per sq. ft. in

01 FY14 and Rs.4,072 per sq. ft. in 02 FY13.

� Kolte-Patil Developers Ltd. forayed into Mumbai market with a redevelopment project on KharLinking road.

The project Link Palace Premises Co-operative Society Limited at Khar (West) is on a plot of 1594 sq. mts

with a total developable area is about 0.1 mn. sq. ft. With an eye on the redevelopment sector, Kolte-Patil

Developers Ltd. has also identified areas such as Dadar-Chembur belt, Worli, Mulund and Khar-Bandra-

Santacruz as possible locations for their future redevelopment plans.

� Kolte-Patil Developers Ltd has newly launched four projects in Pune to develop a total of 1.8 million sq. ft.

KPDL launches Tuscan Estate Signature Meadows, Downtown, 24K Glamore and 3rd Avenue at Life Republic

- in Pune, to develop a total of 1.8 million sq.ft. for these new projects.

COMPANY PROFILE

Kolte-Patil Developers Ltd. is a leading Pune-based real estate company incorporated in 1991. KPDL has created

a remarkable difference by pioneering new lifestyle concepts, leveraging cutting edge technology and creating

insightful designs. KPDL’s extensive spectrum of creations spans across multiple segments like residential

projects, business and retail properties, IT Parks, Integrated Townships and Hospitality Infrastructure. Its core

business operations feature varied aspects of construction business, such as location identification, acquisition,

project planning, designing and development. The company is a well-reputed, trusted name with a reputation for

high quality standards, design uniqueness, transparency and the delivery of projects in a timely manner. The

company has been accredited in the real estate and construction industry with an ISO 9001 (2008 series)

certification since May 2002.

The company has developed and constructed 42 projects including 30 residential complexes, 8 commercial

complexes, and 4 information technology parks covering a saleable area (KPDL share) of over 7.5 million square

feet across Pune and Bengaluru.

The Company is expanding in the high demand Bengaluru market, leveraging 19 years of presence in this market.

The company has also recently forayed into the Mumbai market where the initial market entry focus will be on

low risk society re-development projects. The Mumbai foray is a long term strategy for the Company which will

facilitate margin expansion going forward and reduce its working capital cycle.

Group Companies

Name of the Subsidiary Companies

� Regenesis Project Management Company

Private Limited

� Sylvan Acres Realty Private Limited

� Yashowardhan Promoters and Developers

Private Limited

� Tuscan Real Estate Private Limited

� Regenesis Facility Management Company

Private Limited

� Oakwoods Hospitality Private Limited

� Olive Realty Private Limited

� Lilac Hospitality Private Limited

� Jasmine Hospitality Private Limited

� Bellflower Properties Private Limited

� PNP Retail Private Limited

� Kolte-Patil Real Estate Private Limited

� Snowflower Properties Private Limited

� PNP Agrotech Pvt. Ltd.

Name of the Entity

� Corolla Realty Limited

� Kolte-Patil I-Ven Townships (Pune) Limited

� Ankit Enterprises

� Kolte-Patil Homes

Associates, Partnership Firms and Joint Ventures

� Green Olive Ventures

� Vibhu KPDL Ventures

� KP-Rachana Real Estate LLP

� Sanjivani Integrated Township LLP

Clients

FINANCIAL HIGHLIGHT (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions)

Annual Profit & Loss Statement for the period of 2012 to 2015E

Value (Rs. mn) FY12 FY13 FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 2492.38 7274.80 8540.62 9821.71

Other Income 104.58 365.33 376.29 392.85

Total Income 2596.96 7640.13 8916.91 10214.55

Expenditure -1815.23 -5354.24 -6085.19 -6973.41

Operating Profit 781.73 2285.89 2831.72 3241.14

Interest -240.83 -363.49 -454.36 -549.78

Gross profit 540.90 1922.40 2377.35 2691.36

Depreciation -21.12 -58.67 -78.62 -95.91

Exceptional Items -21.69 0.00 0.00 0.00

Profit Before Tax 498.09 1863.73 2298.74 2595.45

Tax -140.46 -624.61 -753.99 -825.35

Profit After Tax 357.63 1239.12 1544.75 1770.10

Minority Interest -16.78 -164.71 -210.83 -231.91

Share of Profit & Loss of Asso. 0.00 0.00 0.00 0.00

Net Profit 340.85 1074.41 1333.92 1538.18

Equity capital 757.75 757.75 757.75 757.75

Reserves 6323.61 6414.57 7748.49 9286.68

Face value 10.00 10.00 10.00 10.00

EPS 4.50 14.18 17.60 20.30

Quarterly Profit & Loss Statement for the period of 31 MARCH, 2013 to 31 DEC, 2013E

Value (Rs. mn) 31-Mar-13 30-Jun-13 30-Sep-13 31-Dec-13E

Description 3m 3m 3m 3m

Net Sales 2099.28 2163.41 1886.19 2074.81

Other income 175.97 30.89 52.60 67.33

Total Income 2275.25 2194.30 1938.79 2142.14

Expenditure -1430.96 -1527.38 -1283.22 -1426.43

Operating profit 844.29 666.92 655.57 715.71

Interest -75.84 -103.15 -114.72 -126.19

Gross profit 768.45 563.77 540.85 589.51

Depreciation -25.57 -21.01 -16.57 -20.71

Exceptional Items 0.00 0.00 0.00 0.00

Profit Before Tax 742.88 542.76 524.28 568.80

Tax -237.53 -180.97 -168.92 -182.02

Profit After Tax 505.35 361.79 355.36 386.78

Minority Interest -54.78 -97.79 -33.12 -31.46

Share of Profit & Loss of Asso. 0.00 0.00 0.00 0.00

Net Profit 450.57 264.00 322.24 355.32

Equity capital 757.75 757.75 757.75 757.75

Face value 10.00 10.00 10.00 10.00

EPS 5.95 3.48 4.25 4.69

Ratio Analysis

Particulars FY12 FY13 FY14E FY15E

EPS (Rs.) 4.50 14.18 17.60 20.30

EBITDA Margin (%) 31.36% 31.42% 33.16% 33.00%

PBT Margin (%) 19.98% 25.62% 26.92% 26.43%

PAT Margin (%) 14.35% 17.03% 18.09% 18.02%

P/E Ratio (x) 20.02 6.35 5.12 4.44

ROE (%) 5.05% 17.28% 18.16% 17.62%

ROCE (%) 8.95% 26.91% 29.46% 29.51%

EV/EBITDA (x) 10.55 3.17 2.34 1.89

Book Value (Rs.) 93.45 94.65 112.26 132.56

P/BV 0.96 0.95 0.80 0.68

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs. 90.05, the stock P/E ratio is at 5.12 x FY14E and 4.44 x FY15E respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.17.60 and

Rs.20.30 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 58% and 70% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 2.34 x for FY14E and 1.89 x for FY15E.

� Price to Book Value of the stock is expected to be at 0.80 x and 0.68 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.102.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

Real estate in India continues to be a favoured destination globally for investors, developers and non-resident

Indians (NRIs), driven largely by investor-friendly government policies and increasing globalisation. The second

largest employment generation sector after agriculture, real estate contributes about 6.3 per cent to India’s gross

domestic product (GDP). The foreign direct investment (FDI) in the sector is expected to touch US$ 25 billion in

the next 10 years from its current US$ 4 billion.

The sector’s progress is driven by factors such as rapid urbanisation, a growing trend towards nuclear families,

positive demographics, rural–urban migration, ever-developing infrastructure, higher income levels and housing

demand. The real estate sector, with its growing investment opportunities, is expected to post annual revenues of

US$ 180 billion by 2020.

Market Dynamics

The real estate sector in India is witnessing rapid growth in the residential, commercial and industrial segments.

Real estate development, once restricted to bigger cities, have shown marked progress in smaller cities and

towns owing to availability of banks loans, higher earnings and improved standard of living.

The real estate sector of India is projected to post annual revenues of US$ 180 billion by 2020 against US$ 66.8

billion in 2010–11, a compound annual growth rate (CAGR) of 11.6 per cent. The demand is expected to grow at a

CAGR of 19 per cent in the period 2010–2014, with Tier I metropolitan cities expected to account for about 40

per cent of this growth. As of now, Mumbai, Delhi-National Capital Region (NCR) and Bengaluru cater for 46 per

cent of total office space demand in India. This demand is expected to be rise sharply in Tier II cities such as

Kolkata and Chennai in the period 2010–14.

Today, Delhi-NCR accounts for about 30 per cent of the total mall supply in India. About 53 per cent of demand

for total mall space is projected to come from the country’s top seven cities, namely Delhi-NCR, Bengaluru,

Mumbai, Kolkata, Pune, Hyderabad, and Chennai, in the period 2010–2014.

Investment Opportunities

The Indian retail realty sector is projected to grow at around 15 per cent year-on-year over the next 3–5 years as

against a 12–13 per cent nominal growth of India’s GDP estimated by the International Monetary Fund (IMF). If

the sector does indeed manage the aforementioned growth, it will touch Rs 34 trillion (US$ 544.73 billion) by

2016.

India’s office space stock is estimated to rise by 40 per cent to 642.2 million sq ft by 2017, according to a report

by real estate consultancy Knight Frank India. The current Indian market offers some of the most competitive

rates in the Asia-Pacific region, according to a report by property services firm DTZ. The report also states that

Indian cities will have some of the fastest rental growths in the region over the period 2013–17, but will remain

among the most competitive.

The share of luxury retail space in India will be 1.4 per cent by 2015, according to a report by real estate services

firm Cushman & Wakefield. NCR and Mumbai, areas that have embraced the mall culture, are the two most

favoured destinations for luxury retailers.

The construction development sector, including townships, housing and built-up infrastructure garnered total

FDI worth US$ 22,671.95 million in the period April 2000–August 2013. Construction (infrastructure) activities

during the period received FDI worth US$ 2,280.95 million, according to the Department of Industrial Policy and

Promotion (DIPP).

The following are some of the major investments in the Indian real estate sector:

• Godrej Properties Ltd plans to invest Rs 9,000 crore (US$ 1.44 billion) in 15 new real estate projects in India

over the next 10 years.

• Unitech Ltd has signed a Rs 800 crore (US$ 128.17 million) deal to lease an 800,000 sq ft space at one of its IT

Special Economic Zones (SEZ) in Gurgaon, to multinational human resource firm, Aon Hewitt.

• NRI billionaire Mr Ravi Pillai plans to purchase stake worth about US$ 100 in a special purpose vehicle

floated by Pune-based realtor, Panchshil Realty. The investment will go into the construction of Trump

Towers and World Trade Centre in Pune, Maharashtra.

• French luxury hotel chain Sofitel, which is managed by Accor Group, is targeting 10 properties in India,

mainly in major luxury destinations, in the next few years.

• Infrastructure Leasing & Financial Services (IL&FS) Ltd has claimed a project worth Rs 244.46 crore (US$

39.17 million) from realty firm Emaar MGF for construction work at the latter’s residential project at

Gurgaon, Haryana.

• One of the world’s top manufacturers of elevators, US-based Otis, is setting its sights on the Indian real estate

market. The pace of construction in India makes the country an attractive proposition for such an investment.

The company will be working with the Delhi and Hyderabad Metro projects. The former has placed an order

for 222 escalators for its Phase III project, according to Otis.

Government Initiatives

According to the existing FDI policy, 100 per cent FDI in the construction development sector is permitted

through the automatic route. DIPP is looking at relaxing FDI norms further to encourage investment. It has also

proposed a reduction in the minimum capitalisation for wholly-owned subsidiaries from US$ 10 million to US$ 5

million, and from US$ 5 million to US$ 2.5 million for joint ventures with Indian partners.

One of the major initiatives of the Ministry of Housing and Urban Poverty Alleviation (MHUPA) is to provide

affordable housing for poor people living in urban areas. The Jawaharlal Nehru National Urban Renewal Mission

(JNNURM) is one its flagship schemes, a reform driven investment programme which started with the objective

of creating economically productive, efficient, responsive and inclusive cities.

The Real Estate (Regulation and Development) Bill, 2013, as approved by the Union Cabinet is a pioneering

initiative aimed at delivering a uniform regulatory environment to protect the consumer, help in quick verdicts of

disputes and ensure systematic growth of the sector.

Road Ahead

India needs to invest US$ 1.2 trillion over next 20 years to modernise urban infrastructure and keep pace with

the burgeoning urbanisation, as per a report (India's urban awakening) released by McKinsey Global Institute

(MGI).

Demand for space from sectors such as education and healthcare has opened up opportunities in the real estate

sector. Also, growth in the number of tourists has led to demand for service apartments. This demand in the

tourism sector is expected to generate 50,000 new hotel rooms over the next four to five years, across India’s

major cities.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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