fundamental analysis

FUNDAMENTAL ANALYSIS OF REAL ESTATE SECTOR IN INDIA

OBJECTIVE

To understand the concept of Fundamental Analysis, its various parameters and how it

helps to a normal investor.

Objective for the project has been to identify the right stock to invest for long term wealth

creation. The stocks have been identified on the basis of various situations prevailing in

the country keeping in mind the global scenario.

Another important objective of this project is to explain the risk and return in investment

in real estate sector and the role of volatility in the stock markets.

The Research Analysis at the end of the project gives a real idea about how this sector

works. It helps us to apply these strategies in real life with the help of research analysis.

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METHODOLOGY OF STUDY

Sectoral Analysis refers to the study of the performance of the economy as a whole, the

industry and various companies and analyzing the same. It enables to predict the future

performance of a particular stock based on its past performance, the current status of the

internal as well as the external environment.

The internal environment includes:

The financial performance

The operational performance

The future deals with the clients

The share price trend

The management of the company, i.e. the Board of Directors etc.

The nature of the business

The external environment includes:

The Economy

The global scenario with respect to the business

General economic scenario

Political scenario

Performance of the stock market on the whole

Competitors

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Fundamental Analysis:

Here we look at balance sheet, income statement etc. to determine a company‘s value. In

financial terms it is used to measure a company‘s intrinsic value. It takes a long term

approach to analyze the market as compared to technical analysis. It often looks at data

over a number of years.

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LIMITATIONS

The research that we are doing of the companies and IPOs help us to suggest as to buy,

hold or to sell the particular stock. But these suggestions are based on what we expect,

would happen in the environment, the working of the company, global economies, etc.

This means that whatever value we expect would change as the conditions that are

beyond our control, keep on changing.

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Endurance and Emergence of Indian Real Estate

Real Estate Industry is a capital intensive industry and it thrives on easy availability

of credit. Last year’s subprime crisis brought an ineluctable change and with banks

freezing credit real estate industry was the worst hit as reflected in the stock prices of the

companies which plummeted almost 90% of their all time highs.

The unprecedented recession brought with it lessons for the real estate players and with

the hey days of the boom period ending the real estate players who had gone on a land

acquisition spree at unimaginable prices were left in an abrupt situation.

The banks which some time earlier were willing to provide easy credit to the real estate

companies put as plug on the credit and had it not been for the RBI’s intervention the

liquidity crunch would have left the companies in a precarious situation.

As the markets crawled back out of recession most of the real estate companies took the

opportunity to raise funds through various routes so that they could repay their ever

mounting debt or restructure their business in some way or the other so that

1. They are able to survive

2. They can align themselves in a manner by which they are able to take advantage of the

future growth.

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Sector Overview

•The Indian economy has witnessed substantive changes over the past decade growing at

an average GDP growth rate of 7.06% over the last 9 years. The Real Estate Industry has

been a crucial contributor to the Indian Economy being 2 largest employers after

agriculture and the housing sector alone contributes 5% to the country’s GDP.

•The construction sector has grown at an average of 9.85% since 2000 with growth rates

being as high as 16.2% in 2005 and 2006.

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• The strong economic performance of India provided fresh impetus to the real estate

sector which has been witnessing investments pouring in over the past decade.

•Substantial investor interest, large scale infrastructural activities undertaken by the

government, rapid urbanization are some of the factors that have contributed to the

phenomenal growth rate the sector witnessed over the years.

• The metros mainly Delhi, Mumbai, Bangalore and to an extent Chennai witnessed

heightened activity during the boom period and achieved global recognition and became

top investment destination among the world over the years.

• The strong growth witnessed by the Indian Economy coupled with strong fundamentals

of the companies had a favorable impact on not just residential real estate but all the other

asset classes as well.

• The growth in service sector coupled with growth in manufacturing sector helped

demand for construction related activities in the infrastructure and services sector which

has resulted in an increase in demand for commercial and industrial real estate over the

years.

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Market Classifications

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Growth Driver’s for the industry

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Residential:

•Even in the era of modernization housing still remains a prime need of common man and

this is what has been driving up the need for houses over the years.

•According to the 11th Five Year Plan Document Housing shortage as on 2007 is

estimated to be around 24.71 million. Most of this is from lower income segments which

are the reason why it is not being translated into demand. Thus new concepts like Low

cost housing and small houses are on a rise.

• The National Housing & Habitat Policy 1998 was formed to address the shortage and

the objective was to construct 20 million housing unites every year.

• Launch of JNNURM from 2005 which will bring under its purview development of 63

cities will impact Real estate in the region directly as Real Estate prices are directly

linked with development.

Growth Drivers:

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•Urbanization: For any economy urbanization becomes a key factor of overall

development.

• India still has an only 28% person who is urbanized which is way below North

America’s average of 77.2% and even below Asia’s 36%.

• Considering the fact that India is considered one of the fastest growing economies in the

world we expect urbanization to happen at a much faster pace.

•Population Growth: With a population of 1028.17 million (2001 census) and an

average decadal growth rate of 36% over the last 50 years the demands for houses is ever

increasing.

• Development of slums: According to the 2001 census there are 607 towns with

population above 50000 which have a reported slum population 40.06 million

aggregating to 22.76% of the population implying that 1 out of every 4 persons in towns

still live in slums.

• With the country going through a mass transition we expect these slums to be

redeveloped in the coming years offering an opportunity to the real estate companies

(Source: Working Group Meeting on 11 Plans)

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Commercial:

The boom in commercial real estate is attributable to demand from Indian corporates and

MNC’s. Robust demand from sectors such as IT/ITes, Telecom etc have contributed to

the growth in demand for commercial office space.

Growth Drivers:

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• The service sector accounts for more than 50% of India’s GDP and with India expected

to grow at 8- 9% the service sector will be a major contributor which results in demand

for commercial Real Estate.

•The Government is promoting Tier2 & Tier3 cities as future centers of growth and with

a comparative cost advantage against western countries future prospects of growth in

these spaces look bright.

• With demand saturating in Tier1 cities like Delhi and Mumbai future growth prospects

in the rural market is the next growth story.

•With services like Telecom, Banking, FMCG etc treading the rural path land prices will

surely benefit in these areas indirectly benefiting the Real Estate companies operating in

these markets.

• Along with IT services such as Telecom, Banking, and Insurance are witnessing huge

growth ensuing in demand for commercial office space.

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• Growth in FDI over the last decade has been a major focal point in increasing the

demand for commercial office space.

• With the opening up of FDI in various sectors Multi National Companies (MNC’s) have

e started setting up offices which has benefited Real Estate indirectly.

(Source: DIPP, ASSOCHAM)

Retail:

• The retail Industry in India is witnessing morphological changes over the years. Super

markets, Malls, Cash & Carry etc are the new words in shopping

•Development in the retail space has changed the face of retail and malls have taken

over stand alone “kirana” stores

• Malls have demand for high rises and organized model of shopping has led to an

increase in demand for new space to be dev eloped and this has translated into demand

for real estate companies.

•A rise in personal disposable income and changing habits of consumers has led to a

increase in demand for Retail Space.

•Organized retailing is slowly taking over with big domestic players entering the market

like Reliance, Aditya Birla and even international players entering the space like Wal

Mart, Metro etc.

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Growth Drivers:

•The Indian retail market is the top attractive destination in the world followed by Russia

& China (AT Kearney’s Annual Global Retail Development Index 2009)

•The share of retail in India’s GDP is around 12% currently so with India growing at 8-

9% retail is expected to be a major contributor in its growth.

• Currently organized retailing constitutes just 5% of the total market in retail so we

believe this is still a virgin market with a potential to grow exponentially.

• Per Capita GDP is expected to grow exponentially leading to higher demand

resulting in a demand for retail space. The graph shows Per Capita GDP projections up to

2014.

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Hospitality:

Tourism has been growing over the years which have been due to promotion of India as a

holiday destination both for the domestic citizens and foreigners living abroad. According

to the Conde Nast Traveler ranking hotels in India ranks 6th best among 100 best hotels

and resorts in the world and Jaipur ranks 8th amongst the top 50 cities in the world

according to the Conde Nast Traveler which shows why India is considered as an

upcoming tourist hot spot. The hospitality sector is expected to rise to US$ 275 billion in

the next 10 years. The domestic hospitality sector is expected to see investments of over

US$ 11 billion in the next two years with 40 international hotel brands making their

presence in the country in the next few years.

Growth Drivers

• International tourism in India has been growing over the years with promotion of the

country as a tourism hotspot

• Foreign tourist’s arrival in India stood at 5.37 million in 2008 with an annual average

growth rate of 5.6% while forex earnings stood at Rs 50730 crore with an annual growth

rate of 14.4%.

• India’s share in international tourism receipts stands at just 1.24% which shows the

potential to grow further

• Domestic tourists in 2008 stand at 562.92 million a growth of 6.9% over the previous

year in fact it has grown at an average rate of 11.6% from 1996-2008

• With India joining the bandwagon of countries which host games of the repute of

Commonwealth and also planning to bid for Olympics in the near future it acts as a fillip

for investment in the hospitality sector.

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• With the development of airports and improving connectivity between cities

infrastructure spending by Government is acting as a catalyst for the hospitality industry.

• A new concept viz. medical tourism is gaining importance as India being a low cost

destination offers high quality services which has led to an increase in medical tourism

benefiting the hospitality industry

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SEZ:

In order to promote exports and attract foreign direct investment in the country the

Government formulated the policy of Special Economic Zone (SEZ) in April 2000.

Incentives like duty free import, 100% tax exemption on export income for first 5 years

and 50% for the next 5 years, exemption from Service tax, Central Sales Tax, etc offer

fillip for investors which attracts investments from both domestic as well as foreign

investors.

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Growth Drivers

• SEZ is considered investor friendly because of various incentives offered by

Government to the developers of SEZ’s.

• With a view of improving infrastructure and bring in investment and make India a

global hub for production the Government has recently put a lot of thrust on exports.

• Total value of exports from SEZ’s stood at Rs 66638 crore in 2007-08 an increase of

93% over the previous year showing the growing popularity of SEZ’s over the years.

• SEZ’s are most popular among IT and Pharma industry which constitute a major chunk

of total SEZ’s given approval.

• Currently approval for SEZ’s have witnessed a slowdown due to regulatory hurdles,

land availability and global economic slowdown but SEZ are sure to be a thing for the

future considering its attractive for the industry majors because of the tax concessions

attached with it.

(Source: Ministry of Commerce & Industry)

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Current Scenario

• During the times of recession the Real Estate companies went down like a pack of

cards. We believe the main cause for this was a decline in sales which had them strapped

for liquidity be it in whatever form.

• Highly leveraged companies beared most of the brunt as it became difficult for them to

finance meet their debt obligations.

• We believe that demand will come from two segments of people

Those who do not have proper houses

Those who will still invest in Real Estate as an investment

• Our belief is validated by the fact that what was witnessed in other countries was not

replicated in India.

• None of the assets were put into distress sale like those in the western countries as it

was more a case of sentiments falling rather than demand.

• Companies which had made massive bids to acquire lands faced a crisis because they

had incurred huge costs and hence when sales plummeted they were not able to pay back

the interest on the debts taken.

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Future Outlook

• We believe that the current decline in prices brings us to a situation where we believe

demand will come from two sources:

Those who still do not have proper housing or housing at all

Those who will invest in real estate as an asset class which offers a secured but

sure form of investment as seen over the previous years as the current decline in

prices will offer them a better opportunity.

• With the government putting the thrust on infrastructure and we believe that houses still

remain the basic necessity of the common man and we are not yet developed to

experience an asset bubble like the one witnessed in US

• Thus we believe that demand will stay as Real Estate as a sector has still not peaked like

in the developed countries and the potential for further growth still remains.

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Government Initiatives

The government has introduced many progressive reform measures to unlock the

potential of the sector and also meet increasing demand levels. The stimulus package

announced by the government, coupled with the Reserve Bank of India's (RBI) move

allowing banks to provide special treatment to the real estate sector, is likely to impact

the Indian real estate sector in a positive way. RBI has decided to extend exceptional

concessional treatment to the commercial real estate exposure which is restructured, up to

June 30, 2009.

100 per cent FDI allowed in realty projects through the automatic route.

In case of integrated townships, the minimum area to be developed has been

brought down to 25 acres from 100 acres.

Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed by

increasingly larger number of states.

Minimum capital investment for wholly-owned subsidiaries and joint ventures

stands at US$ 10 million and US$ 5 million, respectively.

Full repatriation of original investment after three years.

51 per cent FDI allowed in single-brand retail outlets and 100 per cent in cash-

and-carry through the automatic route.

The 2009-10 budgets have also given sops to the realty sector. Developers of affordable

housing projects (units of 1,000-1,500 sq ft) have been granted a tax holiday on profits

from projects initiated in the financial year 2007-08. Such projects would have to be

completed before March 1, 2012.

At the same time, the finance minister allocated US$ 207 million to grant a 1 per cent

interest subsidy on home loans up to US$ 20,691, provided the cost of the home is not

more than US$ 41,382. This subsidy is expected to give a further boost to the housing

sector.

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Key parameters for selecting a real estate stock

For an average investor, size of the 'land bank' remains the sole criterion for investing in

real estate companies. More often than not, their decisions are based on these land banks

with little or no importance attached to the execution time and the margins of the

projects. While land banks definitely give an indication of visibility in growth of the

company's revenues, there are a few other factors that investors need to consider before

investing in stocks from the sector. These include:

Management:

Though management is an important criterion for investment across the sectors, we

believe that the same assumes greater significance in the real estate industry considering

the poor disclosure standards followed by the companies.

Key ratios:

Not giving much importance to the land bank, investors should focus on working capital

to sales (considering high gestation period of projects), debt to equity, operating margins

and return on capital employed ratios. Also, considering the huge amount of funding

required for timely execution of projects, investors should also keep a check on the

possible dilution in equity, going forward.

Valuations:

We believe that 'price to earnings ratio', is an appropriate metric for valuing construction

companies. Besides, investors can also use 'price to sales ratio' for valuation purpose. As

we have explained earlier that 'land bank' should not be 'the' key criteria for looking at

real estate stocks.

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Also, while valuing such companies, one has to practice caution. When valuing a real

estate company, taking the 'best' price per square foot skews the investment decision in

favour of risks. It is therefore, pertinent to value real estate companies based on a

'normalised' square foot price. It is also important to focus not just on the 'price per

square foot' but also the 'profit per square foot'. This is because real estate developers

increase prices also because of higher input costs (including legislative policy changes).

Some pitfalls

With respect to real estate stocks, a new theme has emerged in the Indian equity markets

- 'land banks'. In order to meet the rising demand for homes and commercial spaces in a

fast developing economy, construction activity has reached feverish levels in the country.

Not only real estate companies but companies from other sectors having free land for

development are also witnessing significant appreciation to their market values on the

back of expectations that the free land would eventually be developed and monetised.

While there is nothing wrong with this approach, the fact remained that even loss-making

companies with poor fundamentals are witnessing a sharp run up in their market

capitalization and this kind of euphoria is really uncalled for.

As far as the real estate companies are concerned (companies with real estate

development as their core business), these companies are entirely being valued based on

their land banks i.e. the total land they own and no thought is being given to important

considerations such as track record of the management, execution capabilities and

balance sheet strength.

Further, even the lands are being valued using a high per square feet rate, presumably on

the back of the assumption that they will keep on increasing indefinitely!

The risks with respect to investing in real estate stocks only get amplified considering

that projects have high gestation periods and are highly capital intensive. Add to this the

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fact that there are no clear valuation methods available for valuing land accurately; not to

forget, the highly varied costs of land in different parts of the country.

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DLF LTD.

Snapshot

Chief Executive Name: Mr. T C Goyal

Face Value: 2

Business Group Name: DLF Group

Incorporation Date: 18/06/1980

Industry Name: Construction and Contracting - Real Estate

Registrar of Company: KARVY computer share pvt ltd

Santosh complex, K G Road

Bangalore, Karnataka -560009

Listed on: National Stock Exchange of India Ltd.

The Stock Exchange, Mumbai.

Board of Directors

Name Designation

Mr. G S Talwar Non Executive Director

Mr. K N Memani Non Executive Director

Brig.(Retd) N P Singh Non Executive Director

Ms. Pia Singh Whole Time Director

Mr. Rajiv Singh Vice Chairman

Dr. K P Singh Chairman / Chair Person

Mr. B Bhushan Non Executive Director

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Mr. Kameshwar Swarup Senior Executive Director

Mr. T C Goyal Managing Director

History of Company

YEAR EVENTS 2000 - The Scheme of Merger/Amalgamation of DLF Industries

Limited with M/s. DLF Universal Ltd., which was approved by the Hon'ble High Court

of Delhi at New Delhi and by the Hon'ble High Court of Punjab and Haryana at

Chandigarh came into effect on 09.10.2000.

2007 -The US-based Hilton Hotels Corporation has declared that it will develop 10 hotel

projects in the country in alliance with DLF Ltd.

Our business was founded by the late Mr. Raghvendra Singh and our Promoter, Mr. K P

Singh. Our business has a history of over 6 decades, commencing with the incorporation

of Raisina Cold Storage and Ice Company Private Limited on 16.03.1946 and Delhi

Land and Finance Private Limited on 18.09.1946. Since the inception of our Company,

Mr. K P Singh has been the promoter of the Company.

Pursuant to the order of the Delhi High Court dated 26.10.1970, Delhi Land and Finance

Private Limited and Raisina Cold Storage and Ice Company Private Limited along with

another group company, DLF Housing and Construction Private Limited, merged with

DLF United Private Limited with effect from 30.09.1970.

Thereafter, DLF United Limited merged with our Company, then known as American

Universal Electric (India) Limited, with effect from 1.10.1978, under a scheme of

amalgamation sanctioned by the Delhi High Court and the Punjab and Haryana High

Court.The merged entity was renamed as 'DLF Universal Electric Limited' with effect

from 18.06.1980.

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Key events and milestones

Year Key events, milestones and achievements

1963 Incorporation of American Universal Electric (India) Ltd

1979 DLF United Limited amalgamates with American Universal Electric

(India) Limited to form DLF Universal Electric Limited

1981 DLF Universal Electric Limited changes name to DLF Universal Limited

1981 DLF Universal Limited obtains its first license from the State Government

Of Haryana and commences development of the 'DLF City' in

Gurgaon, Haryana

1985 We initiated plotted developments, self first plot in Gurgaon, Haryana.

Consolidate the development of DLF City for township development.

1991 Construction of our first office complex, 'DLF Centre', at New Delhi

1993 Completion of our first condominium project, 'Silver Oaks', at DLF City,

Gurgaon, Haryana

1996 Construction of 'DLF Corporate Park', our first office complex at DLF City,

Gurgaon, Haryana.

1999 Development of the DLF golf course

2002 We venture into retail development in Gurgaon, Haryana

2002 We offer integrated family entertainment centers with the commencement

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of operation of 'DT Cinemas' at Gurgaon, Haryana

2003-04 Development of 'DLF Cybercity', an integrated IT park measuring

approximately 90 acres at Gurgaon, Haryana.

2005 Acquisition of 16.62 acres (approx) of mill land in Mumbai * Received

'Corporate Buildings Award' instituted by 'Indian Architect and Builder',

a publication of Jasubhai Media Group, Mumbai

Received 'Superbrand' award from Hon'ble Minister for Civil Aviation,

Mr. Praful Patel.

2006 Construction joint venture signed between DLF Universal Limited and

U.K. based Laing O'Rourke Plc to form DLF Laing O'Rourke (India)

Limited

2006 DLF Universal Limited changes name to DLF Limited

2006 Alliance agreement signed between DLF and Hilton International Co.

to incorporate a joint venture company in India to develop, own and

acquire 50 to 75 hotels and services apartments.

2006 DLF enters into a joint venture with WSP Group Plc. for the purposes

of providing engineering and design services, environmental and

infrastructural facilities and also project management services.

2007 DLF enters into a joint venture with Prudential Insurance to establish a

joint venture company to undertake life insurance business in India.

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- DLF launches $2 bn issue.

2008 DLF inked a memorandum of understanding with the infrastructure

company Gayatri Projects Ltd (GPL) to develop roads, highways and

bridges across the country.

- DLF Ltd and the Tamil Nadu Industrial Development Corporation

(TIDCO) have forayed into a alliance agreement for a Rs 1,500-crore

Information technology Special Economic Zone (SEZ).

Fundamentals :

Scrip ID DLFScrip Code 532868Group / Index A / SENSEXIndustry RealtyMarket Capitalization ( Rs cr ) 50,105.65Book Value 72.90Market Price 299.50P/E 32.91P/BV 2.27EPS 9.09BETA 1.5

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Capital Structure

From Year

To Year

Class Of Share

Authorised Capital (Cr.)

Issued Capital (Cr.)

PaidUp Shares

Face Value

PaidUp Capital (Cr.)

2008 2009 Equity Share 499.50 340.97 1704832680 2 340.972007 2008 Equity Share 499.50 340.97 1704832680 2 340.972006 2007 Equity Share 499.50 305.88 1529421080 2 305.882005 2006 Equity Share 39.50 37.88 37767997 10 37.772004 2005 Equity Share 4.50 3.62 3508007 10 3.512003 2004 Equity Share 4.50 3.62 3508007 10 3.512002 2003 Equity Share 4.50 3.62 3508007 10 3.512001 2002 Equity Share 4.50 3.62 3508007 10 3.511999 2001 Equity Share 4.50 3.62 3508007 10 3.511997 1999 Equity Share 4.50 3.62 3508007 10 3.51

Yearly High Lows

Year High Low2007 1,099.00 505.602008 1,225.00 158.002009 490.80 124.15

Investors Returns

Dividend:

Year Dividend / Share Face Value Dividend %2009 / 03 2.00 2 100.002008 / 03 4.00 2 200.002007 / 03 2.00 2 100.002006 / 03 4.00 10 40.002005 / 03 4.00 10 40.00

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Price Movement

Performance Chart

Index Comparison

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Ownership Pattern

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Profit & Loss

Rs. CrPeriod & months 2009/03 2008/03 2007/03 2006/03 2005/03IncomeNet Operating Income 2,827.90 5,496.96 1,101.66 953.46 412.23

Expenses

Material Consumption 0.00 6.06 8.72 2.58 3.07Manufacturing Expenses 778.34 2,141.29 237.75 577.64 256.22Personel Expenses 71.12 103.78 44.82 16.76 33.32Selling Expenses 59.28 45.70 63.42 26.74 23.69Administrative Expenses

156.39 128.16 88.51 23.13 28.81

Capitalised Expenses 0.00 0.00 0.00 0.00 0.00

Cost of Sales 1,065.14 2,424.98 443.22 646.85 345.11

Reported PBDIT 1,762.76 3,071.98 658.44 306.61 67.12

Other Recuring Income 1,006.72 560.74 327.67 191.56 33.07Adjusted PBDIT 2,769.48 3,632.72 986.11 498.17 133.95

Depreciation 114.08 25.68 9.44 3.90 3.40Other Write-offs 37.86 41.79 0.00 0.00 0.00

Adjusted PBIT 2,617.54 3,565.25 976.67 494.27 130.55

Finanical Expenses 809.86 447.65 356.25 146.15 33.07

Adjusted PBT 1,807.69 3,117.59 620.42 348.12 97.48Tax Charges 261.00 543.52 214.56 120.47 29.18

Adjusted PAT 1,546.68 2,574.07 405.86 227.65 68.30Non-recurring Items -2.15 0.16 -0.19 -0.24 -0.62Other Non-cash Adjustments

33.05 0.36 1.24 1.11 0.02

REPORTED PAT 1,547.77 2,574.40 405.77 227.44 67.70

APPROPRIATIONS

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Equity Dividend 339.44 681.93 340.97 1.55 1.40Preference Dividend 0.00 0.00 0.00 0.00 0.00Retained Earnings 2,944.19 2,046.03 531.76 543.76 324.96

Balance Sheet:

Rs. CrPeriod & months

2009/03 2008/03 2007/03 2006/03 2005/03

SOURCES OF FUNDS

Owned Funds

Equity Share Capital 339.44 340.96 305.88 37.77 3.51Share Application Money

0.00 0.00 0.00 0.00 0.00

Preferential Share Capital

0.00 0.00 0.00 0.00 0.00

Reserves & Surplus 12,035.39 10,928.19 346.92 607.16 380.42Loan Funds

Secured Loans 7,979.97 4,945.91 6,242.81 3,010.93 630.15Unsecured Loans 1,635.00 3,440.49 526.48 2.99 2.95TOTAL 21,989.79 19,655.55 7,422.10 3,658.85 1,017.03

USES OF FUNDS

Fixed AssetsGross Block 1,968.40 1,533.72 365.58 108.91 98.80Accumulated Depreciation

152.87 59.34 37.01 29.24 26.79

Less: Revaluation Reserve

0.00 0.00 0.00 0.00 0.00

Net Block 1,815.52 1,474.37 328.57 79.67 72.00Capital Work-in-progress

1,657.73 1,781.79 665.03 456.73 406.63

Investments 2,956.32 1,839.83 769.17 1,397.28 173.82

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Net Current AssetsCurrent Assets, Loans & Advances

18,718.62 18,345.94 9,442.25 3,092.12 1,710.39

Less: Current Liabilities & Provisions

3,158.40 3,786.38 3,782.93 1,366.95 1,345.82

Total Net Current Assets 15,560.22 14,559.56 5,659.32 1,725.17 364.57

Miscellaneous Expenses not written off

0.00 0.00 0.00 0.00 0.00

TOTAL 21,989.79 19,655.55 7,422.10 3,658.85 1,017.03Number of Equity shares outstanding (Cr.)

170.48 170.48 152.94 3.78 0.35

Bonus component in Equity Capital

267.72 267.72 267.65 0.00 0.00

Notes:Book Value of Unquoted Investments

2,956.32 1,808.92 758.98 1,397.28 173.82

Market Value of Quoted Investments

0.00 30.92 10.19 0.00 0.00

Contingent liabilities 4,875.99 3,047.92 3,818.81 1,643.36 502.91

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Key Financial Ratios:

2009/03 2008/03 2007/03 2006/03 2005/03Per Share

EPS 9.08 15.10 2.65 60.22 192.98Cash EPS 9.97 15.50 2.71 61.25 202.66Book Value 72.59 66.10 4.27 170.76 1,094.43Dividend/Share 2.00 4.00 2.00 4.00 4.00Operating Profit / Share 10.34 18.02 4.31 81.18 191.34Net Operating Income / Share

16.59 32.24 7.20 252.45 1,175.12

Profitability Ratios

OPM 62.33 55.88 59.76 32.15 16.28

GPM 58.30 55.41 58.91 31.74 15.45NPM 40.36 42.49 28.38 19.86 14.13RONW 12.49 22.84 62.17 35.29 17.78

Liquidity Ratios

Debt/Equity 0.77 0.74 10.37 4.67 1.65Current Ratio 5.93 4.85 2.50 2.26 1.27Quick Ratio 3.83 3.28 1.36 1.91 0.73Interest Cover 3.42 8.12 2.77 3.41 4.05

Turn Over Ratios

Sales/Total Assets 0.18 0.38 0.19 0.55 1.13Sales/Fixed Assets 0.81 1.69 1.11 1.78 0.86Sales/Current Assets 0.15 0.30 0.12 0.31 0.24

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Research Analysis:

How fast is the company growing?

Companies are judged by their sales and earnings growth rates than on the

absolute value of their sales and earnings.

Year 2009/03 2008/03 2007/03 2006/03 2005/03

Sales 2,827.90 5,496.96 1,101.66 953.46412.23

Var % -48.56 398.97 15.54 131.29

ProfitAfter Tax 1,547.77 2,574.40 405.77 227.44 67.70

How profitable is the company?

Investors prefer companies that increase profit margins, the percentage of sales

that they keep every year. This is accomplished either by lowering expenses or

raising prices.

Year 2009/03 2008/03 2007/03 2006/03 2005/03Profit After Tax

1,547.77 2,574.40 405.77 227.44 67.70

Var % -39.88 534.45 78.41 235.95

Year 2009/03 2008/03 2007/03

OPM (%) 60.86 55.41 60.87

Var% 9.84 -8.97

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How is the company's financial health?

The financial health of a company is dependent on a combination of profitability,

short-term liquidity and long term liquidity. Companies, which are profitable, but

have poor short term or long term liquidity measures, do not survive the troughs

of the trade cycle. Also firms, which are not profitable but are cash rich, do not

survive in the long term either. Such companies are taken over for their cash flow

or by others who believe that they can improve the profitability of the business.

Thus, those companies that do succeed and survive over the long term have a

well-rounded financial profile, and perform well in all aspects of financial

analysis. Profitability ratios reflect the business environment of the time.

The Key Profitability Ratios are:

Return on capital employed (ROCE) 15.5%Net profit margin 40.36%

Short-term liquidity is the ability of the company to meet its short-term financial

commitments. Short-term liquidity ratios measure the relationship between current

liabilities and current assets. Current assets are stocks and work-in-progress, debtors and

cash that would normally be re-circulated to pay current liabilities. The ideal ratio 1:1.

But a very high ratio indicates that the company is unable to manage its cash properly.

The Short-term Liquidity Ratios are:

Current Ratio 5.93Quick Ratio 3.83

Long term liquidity or gearing is concerned with the financial structure of the company.

Long term liquidity ratios measure the extent to which the capital employed in the

business has been financed either by shareholders through share capital and retained

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earnings, or through borrowing and long-term finance. Highly geared companies are

risky. Look for a balance.

The Key Long-term Liquidity Ratios are:

Gearing Ratio 96.59%Interest Cover 1.91

How has the stock performed?

BSE NSE

Period close price Change Period close price Change3 Months 355.60 -15.24 3 Months 355.60 -15.23 6 Months 423.65 -28.86 6 Months 423.60 -28.84 12 Months 171.10 76.15 12 Months 171.50 75.77

Where is the stock's support and resistance?

BSE NSE

Close Price Rs.301.40 Close PriceRs.301.45

52 Week Low Rs.160.40 52 Week Low Rs.160.30

50-day Moving Average Rs.326.44 50-day Moving Average Rs.326.44

How does the company stack up against it peers?

Company Sales (rs cr.) PAT (rs cr.)Market Cap (rs cr.)

DLF Ltd. 2,827.90 1,547.7751,158.01

Housing Development & Infrastructure Ltd.

1,719.29 754.87 9,751.03

Indiabulls Real Estate Ltd. 45.03 16.56 6,003.01Anant Raj Industries Ltd. 32.01 365.84 3,879.04

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Peer Analysis

Company ROCE OPM Debt/Equity EPS P/EDLF 15.5% 62.33 0.77 9.09 32.91UNITECH 13.87% 56.73 2.69 4.56 15.88HDIL 8.76% 75.73 0.92 30.14 9.49

Source: www.bseindia.com

Return On Capital Employed (ROCE): It indicates the percentage of return on

the total capital employed in the business.

ROCE of DLF is 15.5% which is satisfactory as compared to Peer Company.

ROCE of HDIL is 8.76% which is unfavorable for Company’s image as it may

result in decrease in the confidence among the investor’s about the company’s

performance, as investors invest in those companies which more often have a

constant ROCE or whose ROCE keeps on increasing.

The company should take measures to improve its Return on Capital Employed,

so that the investors and the shareholders regain the confidence in the company.

Operating Profit Margin (OPM): It indicates net margin earned on a sale of

Rs.100. This ratio helps in determining the efficiency with which affaires of the

business are being managed.

There is no Standard norm. However, constant increase in the above ratio year

after year is a definite indication of improving conditions of the business.

Debt – Equity Ratio: The debt-equity ratio is determined to ascertain the

soundness of the long term financial policies of the company. It is also known as

External-Internal equity ratio. The term external equities refer to total outside

liabilities & the term Internal equities refer to shareholders funds.

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The D/E ratio of DLF is 0.77 implies sufficient safety margin whereas D/E ratio

of HDIL is satisfactory. The D/E ratio of UNITECH i.e. 2.69 is quite high which

means owners are putting up relatively less money of their own. It is danger

signal for creditors. A high D/E ratio has equally serious implications from the

firm’s point of view also.

The shareholders of the firm would, however stand to gain in two ways:

(1) With a limited stake, they would be able to retain control of the firm and

(2) The return to them would be magnified.

With the larger proportion of debt in the financial structure, the earnings

available to the owners would increase more than proportionately with an

increase in the operating profits of the firm. This is because the debt carries a

fixed rate of return and if the firm is able to earn on the borrowed funds a rate

higher than the fixed-charge on loans, the benefits will go to the shareholders.

Earnings Per Share (EPS): EPS measures the profit available to the equity

shareholders on a per share basis, that is the amount they can get on every share

held.

EPS of HDIL is 30.14 which is very high compared with Peer Company. It is due

to HDIL is new company which got listed in 2007.EPS of DLF is 9.09 which

denote that company is able to give as returns only Rs.9.09 for the face value of

the share of Rs.2. EPS of UNITECH is 4.56 which is quite less & company

should try to increase the EPS by increasing the profits.

From point of view of shareholders the steep decline in EPS will not make the

companies share attractive to a potential investor.

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Price Earnings (P/E) ratio: The P/E ratio reflects the price currently being paid by

the market for each rupee of currently reported EPS. P/E ratio measures investors’

expectations & the market appraisal of the performance of a firm.

The P/E ratio of HDIL is very low i.e.9.49 which is due to company got listed in

2007, it is new to investors. The P/E of UNITECH is 15.88 which is quite

satisfactory on investors point of view. P/E ratio of DLF is 32.91 which is higher

in this sector that implies investors confidence is larger in firm’s future.

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Bibliography

www.google.com

www.money.rediff.com

www.bseindia.com

www.nseindia.com

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http://www.nseindia.com/

http://www.bseindia.com/

http://www.money.rediff.com/

http://www.google.com/

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