Visit http://indiaer.blogspot.com/ for complete details Indiabulls Real Estate (IBREL)
Property
Good quarter; power business likely to be de-merged. IBREL reported revenues of
Rs3 bn versus Rs1.7 bn in 1QFY11 on increasing revenue recognition in current
residential projects. Residential sales of Rs31 bn and likely de-merger of the power
business are the other key highlights. We retain our RS rating and target price is under
review. However, we highlight that our NAV remains Rs288/share.
2QFY11 results reflect increasing revenue recognition
IBREL’s 2QFY11 revenues at Rs3 bn are up 75% qoq versus Rs1.7 bn in 1QFY11 as revenue
recognition picks up for residential projects launched in FY2010. Quarterly results for IBREL are
now starting to become more meaningful as (1) 1HFY11 revenues are at 46% of FY2011 company
target of Rs10.3 bn indicating qoq revenue recognition is expected to remain steady and (2) 44%
(5.4 mn sq. ft) of total residential area under construction has been pre-sold (versus 30% as of
end-1QFY11) again indicating that revenue recognition will likely remain strong but follow a
relatively steadier trend. EBITDA margins expanded to 27.1% versus 12.6% in 1QFY11. Net profit
was up 147% qoq to Rs509 mn.
Sales of Rs31 bn is the highlight of the quarter
IBREL has sold Rs31 bn (1.84 mn sq. ft) of residential real estate in 2QFY11 which is higher than its
cumulative sales of Rs17.2 bn to date led by its low upfront payment scheme (10%) for its
Mumbai projects. We believe these sales include sales in its Mumbai projects for around 1 mn sq.
ft at around Rs27,000 per sq. ft. Occupancy for IBREL’s commercial space has inched up to 61%
(additional 110,000 sq. ft leased in 2Q).
Power business likely to be de-merged
Indiabulls Power has sent a notice to the exchanges highlighting an intimation from IBREL to
explore and evaluate a potential restructuring and reorganization. Their investor presentation
mentions that “the company is exploring various options including merger/demerger in order to
augment the net-wroth of the business. The restructuring of Indiabulls Power would not involve
any fund raising. Restructuring will help streamline businesses such that Indiabulls Real Estate
focused on Real Estate business and Indiabulls Power Limited focuses on power business”.
Operationally, Indiabulls Power has 2,700 MW of capacity under construction and is working
towards achieving financial closure of Phase II (2,700 MW) in FY2011E.
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