Indiabulls Real Estate: Quarter of corporate action:Kotak Securities

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Indiabulls Real Estate (IBREL)
Property
Quarter of corporate action. During 3QFY12, IBREL demerged the power business
(allotted 2.95 shares in the demerged entity for every IBREL share held), announced a
buyback for 2-24% of outstanding equity (up to Rs75/share) and had an SPV-level
investment in its Worli project. IBREL announced revenues of Rs3.6 bn (+7% qoq) and
PAT of Rs0.4 bn (+6% qoq) while sales declined to 0.9 mn sq. ft from 1.2 mn sq. ft in
2QFY12.
Financials improve qoq while declining yoy
IBREL reported revenues of Rs3.6 bn (+7% qoq, -11% yoy) and EBITDA of Rs1 bn (+1% qoq, -
16% yoy) with EBITDA margin declining to 28.9% versus 30.9% in 2QFY12 due to higher
construction and development expenses as a proportion of sales (61% in 3QFY12 versus 52% in
2QFY12). PAT came in at Rs0.4 bn (+6% qoq, -45% yoy) and PAT margin remained fairly stable
qoq at 11.7%. Effective tax rate jumped to 41.1% versus 35.7% in 2QFY12 and 40.6% in
3QFY11. (Note: 3QFY12 numbers are post demerger but P&L should be comparable qoq since all
costs in the power entity would have got capitalized.)
Sales drop qoq through average realizations improve
IBREL sold 0.9 mn sq. ft in 3QFY12 at average rate of Rs4,934/sq. ft versus 1.2 mn sq. ft sold in
2QFY12 at an average rate of Rs3,967/sq. ft, indicating that sales are taking place in higher value
projects compared to 2Q. Adjusting for handovers, IBREL has now sold 78% of the residential area
under construction versus 71% at end-2QFY12 and the balance 22% will drive the qoq revenue
recognition growth. The company leased an additional 0.2 mn sq. ft in 3QFY12 (same as in
2QFY12) bringing the total area under lease to 2.2 mn sq. ft at end-3QFY12. The company has
also handed over 0.22 mn sq. ft in the quarter versus 0.1 mn sq. ft in 2QFY12.
Undertakes demerger; approves buyback
The company fixed December 8, 2011 as the record date to carry out the demerger of the power
business by allotting 2.95 shares in the demerged entity for every IBREL share. Post that, the Board
of Directors on December 15, 2011 approved the buyback of IBREL shares from the open market
through the NSE and BSE. IBREL will buy back 5-60 mn equity shares (2-21% of free float) up to
Rs75/share aggregating to not more than Rs4.5 bn.
IL&FS and investor group buy 9.4% stake in Bharat Textile Mills project for Rs2 bn
IL&FS Trust Company Limited and its group of investors have invested Rs2 bn to acquire 9.36%
stake in IBREL’s project on Bharat Textile Mills land in Lower Parel by subscribing to equity in the
SPV developing the project. This implies a valuation of Rs2.6 bn/acre (Rs21.4 bn for the 8.39 acres
land parcel) versus acquisition cost of Rs15.8 bn and versus Rs1.4 bn/acre paid by Oberoi Realty for
its stake in the Worli project.