20 June 2014
Update | Sector: Real Estate
Indiabulls Real Estate
BSE Sensex
25,106
S&P CNX
7,511
CMP: INR93
TP: INR145
Buy
London market entry with INR15.5b acquisition
Mid-teen project IRR; low CoD to aid accretion in equity-IRR
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
IBREL IN
424.9
109/45
-2/18/8
39.3
0.7
Financial Snapshot (INR Million)
Y/E March
2014 2015E 2016E
Net Sales
17,362 19,257 22,505
EBITDA
Adj PAT
EPS (INR)
Growth (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
5,404 5,933 7,378
2,238 3,472 4,163
5.9
28.5
3.3
6.0
15.8
0.5
9.1
55.1
5.0
5.9
10.2
0.5
10.9
19.9
5.8
6.9
8.5
0.5
Indiabulls Real Estate (IBREL) entered the premium central London market with
an acquisition of INR15.5b. Management expects INR18b of PBT over next four to
five years and mid-teen project IRR.
We estimate project IRR at 14%, NAV at INR10/share and equity IRR at ~25% led
by low debt funding cost (as guided by management) of ~3%.
The geographical diversification was stated as rendering resilience to its super
premium portfolio through a stable and mature market, against the volatility of
Mumbai and NCR.
We raise SOTP by ~7% to INR160/share to factor the value of Hanover Square
project. IBREL trades at a discount to peers despite operational outperformance.
Maintain Buy with a target price of INR145.
London entry with INR15.5b investment, guides for ~INR18b PBT
180.2 185.8 192.6
Shareholding pattern (%)
As on
Mar-14 Dec-13 Mar-13
Promoter
Dom. Inst
Foreign
Others
49.3
0.5
27.7
22.5
49.3
0.4
30.4
19.8
44.4
0.8
34.3
20.5
Indiabulls Real Estate (IBREL) made an entry to the premium central London
market by purchasing 22, Hanover Square (87,444sft) in Mayfair area, next
to Hyde Park for £155m (~INR15.5b). Company has already paid INR4b, with
the balance to be paid by 2QFY15.
Acquisition cost translates to INR177,000/sqft v/s INR220,000/sqft for
Lodha’s acquisition of MacDonald House at Grosvenor Square in November
2013.
Management guides for ~INR45b of revenue potential, against INR10-11b of
execution cost, implying ~INR18b of PBT over next five years.
Execution is likely to start by 3QFY16 with 12-15 months of approval and
design timeline. Till then, the property will be under current lease and
generate £5.5m of annual rentals.
Rich market, with strong recent momentum and overseas demand
Stock Performance (1-year)
Mayfair, being the most sought after property destination in London, enjoys
realizations range of £3,000-4,000/sqft, with further increase in pricing
expected due to arrival of several ultra-priced residential projects.
As per Wetherell (major real estate agent of Mayfair), the micro market has
achieved ~£475m of property sales in CY13, along with increase in new
supply.
Overseas buyers have been a key driver in recent times with almost 50%+
demand coming from Russia, Middle East and 15-20% from India.
Based on the initial plan, IBREL is likely to develop mixed sized products
with meaningful proportion of below £5m ticket size.
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.

Indiabulls Real Estate
Estimate ~14% project IRR, ~25% equity-IRR; low CoD value accretive
Assuming average realizations of £4,500/sqft and sales/execution schedule
over FY17-19, we estimate the project to enjoy post tax IRR of ~14% and
NAV of INR10/share.
Management hinted at attractive interest cost of ~3% (fixed), against the
loan to be raised, which has already been tied up. We estimate equity-IRR
at 25% led by cheaper cost of debt.
We estimate peak debt of ~£135m (INR13-14b), on the back of equity
contribution of ~INR7b towards purchase of the project and initial
execution spending, as launch of sales in likely to take place in mid-FY17
with some advancement in construction.
Raise SOTP by ~7% to INR160/share; valuation at discount; Buy
We raise SOTP of IBREL by INR10/share (up by ~7%) to INR160 to factor the
Hanover Square project.
Company has operationally outperformed its regional peers during down-
cycle and accumulated a strong asset base to benefit from demand revival.
It has launched 3.4msf of One Indiabulls (Sector 104, Gurgaon) as a part of
its 6msf of launch plan in FY15. We believe IBREL will aid healthy operating
cash surplus in its Indian operations on the back of revival in demand and
execution.
IBREL trades at 6.7x FY16E cash EBITDA (v/s 10-15x for peers), 0.53x FY16E
P/B (v/s 1.3x of MOSL coverage universe average and IBREL’s historical
average of 0.75x and post FY08 maximum of 1.1x) and 8.5x FY16E EPS.
We value SOTP at INR160/share and target price at 10% discount at
INR145/share (implied 9x FY16E cash EBITDA, 0.85x P/B). Maintain
Buy.
Value IBREL’s SOTP at INR160/share
NAV Calculations
(A) IPIT projects
Residential
Commercial
(-) Net debt
(B) Blu
(C) Other residential
(D) Net debt
(E) HANOVER Square
SoTP [A+B+C-D+E)
(INRm)
19,174
10,495
20,657
11,979
17,308
45,962
24,940
3,899
61,403
NAV/Share
50
28
54
31
45
120
65
10
160
Area under valuation
Total area of 6.3msf in IPIT
Sky, Sky Forest and Sky Suites (3.0msf)
Indiabulls One and IFC (3.3msf)
IPIT net debt
Area of 1.25msf
~58msf area considered
I
Source: Company, MOSL
20 June 2014
2

Indiabulls Real Estate
The property is located in premium Central London market
IBREL’s 22, Hanover
Square Property
Lodha Property
CY13 sales performance in Mayfair market by price bank and property type
As per Wetherell (major
real estate agent of
Mayfair), the micro-market
has achieved ~£475m of
property sales in CY13,
along with rise in
new supply
Source: Wetherell
20 June 2014
3

Indiabulls Real Estate
Estimate Project NAV of INR10/share
IBREL is expect to start
construction by 3/4QFY16
with two years of
execution timeline
NAV Working for Bharat Mill
Sales Assumption (%)
Area sold (sf)
Base Sale price (£/ sf)
CAGR (%)
Total Accrual (£ m)
Sale Proceed (£ m)
Construction schedule
Construction Cost (£/sf)
CAGR (%)
Construction Cost (£ m)
Other cost (£ m) @ 10%
Land Cost (£ m)
Gross Cash flow (£ m)
GAV (£ m) @ 13% WACC
NAV (£ m)
NAV (INR b)
NAV (INR/sh)
Project IRR - Pre TAX
Project IRR - Post TAX
FY15
FY16
FY17
20%
17,489
4,200
73
15
40%
1040
4
36
4
(25)
FY18
50%
43,722
4,515
7.5
197
99
40%
1082
4
38
4
57
FY19
30%
26,233
4,854
7.5
127
285
10%
1125
4
10
1
274
Total
100%
87,444
Project is likely to get
launch in mid-FY16 with
some advancement in
construction. Hence
customer collection would
be back-end loaded
10%
1000
4
9
1
155
(155)
48
39
4
10
17%
14%
(10)
398
398
100%
93
9
155
141
Our PBT is conservative at
INR14b v/s management
guidance of INR18b
Source: Company, MOSL
We estimate Equity IRR at 25%
£m
Equity inflow
Debt flow
Cumulative debt
Interest cost
Tax
FCFE
Equity IRR
FY15
70
89
89
4
-
(70)
25%
FY16
13
102
4
-
(0)
FY17
30
132
5
-
(0)
FY18
-
86
4
6
0
FY19
-
-
2
16
170
Total
70
132
18
22
233
Source: Company, MOSL
Sensitivity of IRR against realizations and cost of debt
3,000
5%
2%
1%
0%
-2%
Starting realization (£/sf)
3,500
4,200
16%
28%
13%
25%
12%
24%
11%
23%
8%
20%
Avg. realization (£/sf)
3,500
4,200
3,795
4,554
(0.1)
10.2
8%
14%
4,500
32%
30%
28%
27%
25%
5,000
39%
36%
35%
34%
31%
Attractiveness of cost of
debt offers accretion to
Equity IRR
Cost of debt (%)
2%
4%
5%
6%
8%
Avg. Reln (£/sf)
NAV/sh (INR)
Project IRR
3,000
3,253
(7.4)
3%
4,500
4,879
14.6
16%
5,000
5,421
22.0
20%
20 June 2014
4

Indiabulls Real Estate
Financials and valuations
Income statement
Y/E March
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Min. Int. & Assoc. Share
Adj Cons PAT
2011
14,325
1,007.4
3,230
22.5
184
3,046
609
631
0
3,067
1,293
42.2
1,774
1,774
2,525.2
176
1,951
2012
13,916
-2.9
3,867
27.8
209
3,657
2,286
951
0
2,323
641
27.6
1,682
1,682
-5.2
-24
1,658
2013
13,006
-6.5
4,686
36.0
204
4,482
2,269
457
0
2,671
916
34.3
1,755
1,755
4.3
-13
1,742
2014
17,362
33.5
5,404
31.1
210
5,194
2,213
637
0
3,619
1,315
36.3
2,304
2,304
31.3
-65
2,238
(INR Million)
2015E
19,257
10.9
5,933
30.8
220
5,713
2,817
350
0
3,246
1,169
36.0
2,078
2,078
-9.8
1,395
3,472
2016E
22,505
16.9
7,378
32.8
220
7,158
3,550
400
0
4,008
1,443
36.0
2,565
2,565
23.5
1,598
4,163
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2011
804
93,970
94,775
39,574
-9
157,943
5,267
465
4,802
18,577
66,698
91,724
47,220
5,840
5,135
33,529
23,866
22,789
1,077
67,858
157,943
2012
948
70,827
71,775
25,630
-231
106,896
3,453
209
3,243
1
49,294
69,072
51,108
9,303
1,605
7,057
14,945
14,305
640
54,127
106,896
2013
848
66,941
67,789
25,028
-730
97,752
3,582
413
3,169
716
52,624
71,105
49,782
7,228
4,134
9,961
30,592
28,590
2,002
40,513
97,753
2014
848
67,891
68,739
28,789
-1,202
97,627
4,000
623
3,377
730
55,665
73,895
46,927
10,163
3,002
13,803
37,060
35,026
2,034
36,835
97,627
(INR Million)
2015E
2016E
848
848
70,025
72,625
70,873
73,473
37,689
37,202
-1,202
-1,202
108,660 110,773
4,000
4,000
843
1,063
3,157
2,937
730
730
55,665
55,665
91,270
99,803
64,774
68,974
10,671
11,204
1,358
3,761
14,467
15,864
43,364
49,564
41,330
47,530
2,034
2,034
47,906
50,239
108,660 110,773
E: MOSL Estimates
20 June 2014
5

Indiabulls Real Estate
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Debt/Equity (x)
2011
4.8
5.3
235.6
0.0
7.2
19.1
17.4
0.4
5.2
23.2
3.5
2.1
2.6
0.1
148.8
1203.1
749.7
0.4
2012
3.5
3.9
151.4
0.0
0.0
26.4
23.5
0.6
5.1
18.2
0.0
2.0
3.5
0.1
244.0
1340.5
519.6
0.4
2013
4.6
5.1
177.7
0.0
51.2
20.3
18.1
0.5
4.5
12.5
2.2
2.5
4.8
0.1
202.9
1397.1
1254.3
0.4
2014
5.9
6.4
180.2
0.0
59.8
15.8
14.4
0.5
3.5
11.3
3.2
3.3
6.0
0.2
213.6
986.5
1069.1
0.4
2015E
9.1
9.7
185.8
0.0
38.6
10.2
9.6
0.5
3.7
12.1
3.2
5.0
5.9
0.2
202.3
1227.8
1132.2
0.5
2016E
10.9
11.5
192.6
0.0
37.5
8.5
8.1
0.5
3.1
9.3
4.3
5.8
6.9
0.2
181.7
1118.7
1146.9
0.5
Cash flow statement
Y/E March
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2011
3,067
184
0
609
1,293
23,825
-17,702
-15,475
5,776
7
-9,692
-996
23,998
609
141
22,074
-5,319
10,454
5,135
2012
2,323
209
0
2,286
641
-10,200
12,670
20,180
2,888
222
23,291
-25,205
-12,000
2,286
0
-39,491
-3,530
5,135
1,605
2013
2,671
204
0
2,269
916
-16,144
14,311
-1,048
-3,331
499
-3,880
-3,956
-602
2,269
893
-7,902
2,529
1,605
4,134
2014
3,619
210
0
2,213
1,315
-2,546
3,333
-642
-3,041
472
-3,210
-1,252
3,762
2,213
1,339
-1,255
-1,132
4,134
3,002
(INR Million)
2015E
2016E
3,246
4,008
220
220
0
0
2,817
3,550
1,169
1,443
12,715
-69
-8,689
5,274
-220
-220
0
0
0
0
-220
-220
2,734
3,160
8,900
-487
2,817
3,550
1,339
1,562
7,265
-2,653
-1,644
2,402
3,002
1,358
1,358
3,760
E: MOSL Estimates
20 June 2014
6

Indiabulls Real Estate
NOTES
20 June 2014
7

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1. Analyst ownership of the stock
2. Group/Directors ownership of the stock
3. Broking relationship with company covered
4. Investment Banking relationship with company covered
INDIABULLS REAL ESTATE LTD
No
No
No
No
Indiabulls Real Estate
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20 June 2014
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8