Visit http://indiaer.blogspot.com/ for complete details Indiabulls Real Estate
Limited
Operations Gathering Wind,
Power Biz Restructuring
Quick comment – IBREL reported F2Q11 results
ahead of our expectations. Sales were Rs3 bln (up
75% sequentially), thanks to steady construction
progress and new pre-sales in the ongoing projects
(especially Panvel – 50%-plus share). EBITDA margins
expanded 14ppts sequentially to 27% due to better
revenue mix. The company reported Rs509 mln net
profits versus Rs206 mln in F1Q11 (our estimate was
Rs126 mln).
Operational matrices look strong: Most importantly,
IBREL’s pre-sales during the quarter were an impressive
Rs31 bln (1.84 msf; largely Lower Parel projects with
10/90 scheme), taking the overall tally of sold (and under
construction) projects to Rs48 bln. Leasing at Lower
Parel is picking up – 0.11 msf of new leasing took the
cumulative tally to 1.16msf (out of 1.9msf completed area
and overall stock of 3.3 msf). IPIT lease rentals continue
to grow sequentially (Exhibit 6). IBREL maintains its high
F11 sales recognition target (from non Lower Parel
projects) of Rs10.25 bln (Rs4.7 bln achieved in F1H11).
Balance sheet progression was less inspiring – Rs5 bln
spent on current assets (land, construction advances),
machinery, etc.
Management plans power business restructuring
(de-merger) in ~six months: IBREL share holders will
be issued Indiabulls Power (IBP, $1.26 bln market cap)
shares equitably (roughly 3 shares) in lieu of IBREL’s
direct ownership (59%) in IBP. In addition, promoters
will invest Rs12 bln in IBP through warrants. This is
being done to simplify ownership structure and to lessen
IBP’s financial dependence on IBREL.
We reiterate our OW rating on IBREL: We cite the
value in underlying assets. We view the de-merger of
the power business favorably since it will make IBREL a
real estate pure play and unlock value in the power
business (eliminating the holding company discount).
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