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Oberoi Realty (OBER)
Property
First big move post listing, jury out till we see progress. Oberoi Realty has bought
a 50% stake in the entity that owns a 4.2 acre land parcel at Worli from a fund advised
by ICICI Ventures while the balance 50% remains with promoter Mr. Vikas Oberoi. We
think the valuation is fair though not a distressed asset purchase and would await
disclosure of the final purchase consideration. We maintain our BUY recommendation
with a target price of Rs315/share at-par with our March 2013 NAV.
Buys 50% stake for Rs3 bn from India Advantage Fund I in JV owning 4.1 acres at Worli
Oberoi has bought a 50% stake in the JV that owns 4.1 acres of the erstwhile Glaxo Smith Kline
land at Worli. The remaining 50% is owned by Mr. Vikas Oberoi and so the land owning entity is
now effectively under a 50:50 JV between Oberoi Realty and promoter Vikas Oberoi. Though the
company has not disclosed the transaction value, news sources indicate a price of Rs3 bn. This
puts the land value at Rs1,463 mn/acre versus Rs1,838mn/acre for IBREL’s purchase of 10.8 acres
NTC mill land in Central Mumbai.
Details of the transaction
Oberoi has bought (1) 500,000 equity shares of Rs 10 each fully paid up, (2) 362,500, 1% noncumulative,
non-convertible preference shares – Series 1 of Rs 10 each fully paid up and (3) has
invested in optionally convertible debentures issued by I-Ven Realty Ltd from India Advantage Fund
I acting through its investment manager ICICI Venture Funds Management Company.
Concerns - consideration not disclosed as yet, related party transaction
Our concerns with the transaction are (1) the company has not disclosed consideration though
2QFY12E results presentation (due in a little over a month) should carry that data and (2) first land
purchase after March 2009 JDA (being developed as Oasis Realty) is a related party transaction.
Retain BUY with a target price of Rs 315/ share
We find Oberoi relatively better placed in this environment as (1) Oberoi is the only debt free
developer company in operating in the lucrative Mumbai region and could actually take advantage
of declining land prices by adding to its land bank, (2) NAV realization is relatively more frontloaded
than peers, and (3) RoE in the mid-20s is again higher than peers. Key risks are (1) risk of
further delays in the Mulund project as it awaits environmental approval, (2) risk of lower FSI and
hence potential developable area due to adverse car-park and FSI loading regulations and (3) delay
in leasing at Commerz II as Commerz I has an occupancy rate of 76%.
Oberoi’s transaction seems to be at fair value but not distressed
Though the company has not disclosed a transaction price, based on media reports, the
transaction has taken place at Rs1,463mn/acre. In August 2010, IBREL had purchased 10.8
acres of NTC Mill Land in Central Mumbai for Rs10.8 bn which is Rs1,838 mn/acre. Though
the Oberoi land location is definitely better where they can potentially charge 20%-30%
more for projects, the deal was not done at distressed valuation and Oberoi seems to have
paid close to fair value for the land parcel. Another concern is that the issue with BMC could
take up to a year to resolve which means potential development is at least 18-24 months
away.
Potential FSI details are uncertain (CRZ zone, car park norms), while the base FSI is 1.33 and
if car park FSI is allowed, total FSI could go up to 2.5X for the entire land parcel.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oberoi Realty (OBER)
Property
First big move post listing, jury out till we see progress. Oberoi Realty has bought
a 50% stake in the entity that owns a 4.2 acre land parcel at Worli from a fund advised
by ICICI Ventures while the balance 50% remains with promoter Mr. Vikas Oberoi. We
think the valuation is fair though not a distressed asset purchase and would await
disclosure of the final purchase consideration. We maintain our BUY recommendation
with a target price of Rs315/share at-par with our March 2013 NAV.
Buys 50% stake for Rs3 bn from India Advantage Fund I in JV owning 4.1 acres at Worli
Oberoi has bought a 50% stake in the JV that owns 4.1 acres of the erstwhile Glaxo Smith Kline
land at Worli. The remaining 50% is owned by Mr. Vikas Oberoi and so the land owning entity is
now effectively under a 50:50 JV between Oberoi Realty and promoter Vikas Oberoi. Though the
company has not disclosed the transaction value, news sources indicate a price of Rs3 bn. This
puts the land value at Rs1,463 mn/acre versus Rs1,838mn/acre for IBREL’s purchase of 10.8 acres
NTC mill land in Central Mumbai.
Details of the transaction
Oberoi has bought (1) 500,000 equity shares of Rs 10 each fully paid up, (2) 362,500, 1% noncumulative,
non-convertible preference shares – Series 1 of Rs 10 each fully paid up and (3) has
invested in optionally convertible debentures issued by I-Ven Realty Ltd from India Advantage Fund
I acting through its investment manager ICICI Venture Funds Management Company.
Concerns - consideration not disclosed as yet, related party transaction
Our concerns with the transaction are (1) the company has not disclosed consideration though
2QFY12E results presentation (due in a little over a month) should carry that data and (2) first land
purchase after March 2009 JDA (being developed as Oasis Realty) is a related party transaction.
Retain BUY with a target price of Rs 315/ share
We find Oberoi relatively better placed in this environment as (1) Oberoi is the only debt free
developer company in operating in the lucrative Mumbai region and could actually take advantage
of declining land prices by adding to its land bank, (2) NAV realization is relatively more frontloaded
than peers, and (3) RoE in the mid-20s is again higher than peers. Key risks are (1) risk of
further delays in the Mulund project as it awaits environmental approval, (2) risk of lower FSI and
hence potential developable area due to adverse car-park and FSI loading regulations and (3) delay
in leasing at Commerz II as Commerz I has an occupancy rate of 76%.
Oberoi’s transaction seems to be at fair value but not distressed
Though the company has not disclosed a transaction price, based on media reports, the
transaction has taken place at Rs1,463mn/acre. In August 2010, IBREL had purchased 10.8
acres of NTC Mill Land in Central Mumbai for Rs10.8 bn which is Rs1,838 mn/acre. Though
the Oberoi land location is definitely better where they can potentially charge 20%-30%
more for projects, the deal was not done at distressed valuation and Oberoi seems to have
paid close to fair value for the land parcel. Another concern is that the issue with BMC could
take up to a year to resolve which means potential development is at least 18-24 months
away.
Potential FSI details are uncertain (CRZ zone, car park norms), while the base FSI is 1.33 and
if car park FSI is allowed, total FSI could go up to 2.5X for the entire land parcel.
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