Initiating Coverage | 18 September 2012
Sector: Real Estate
Jaypee Infratech
The value DNA
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.

Jaypee Infratech
Jaypee Infratech: The value DNA
Page No.
Summary
..............................................................................................................
3
Story in charts
.................................................................................................
4-5
Unique business model with synergistic value unlocking
...........................
6-8
FCF visibility – rare in liquidity strapped sector
.........................................
9-14
Value unlocking partially constrained
.......................................................
15-17
Convincing potential, steady cash, subsiding concerns
...........................
18-20
Annexure
......................................................................................................
21-22
Financials and valuation
.............................................................................
23-24
18 September 2012
2

Initiating Coverage | 18 September 2012
Sector: Real Estate
Jaypee Infratech
BSE SENSEX
S&P CNX
18,496
5,600
CMP: INR49
The value DNA
TP: INR60
Buy
Synergistic benefits, FCF visibility, but some gray areas too
Bloomberg
JPIN IN
Equity Shares (m)
1,388.9
52-Week Range (INR)
66/33
1,6,12 Rel. Perf. (%)
-1/-11/-12
M.Cap. (INR b)
67.7
M.Cap. (USD b)
1.3
JPIN offers a unique synergistic business model of infrastructure development (Yamuna
Expressway) and real estate value unlocking.
Expect free cash flow (FCF) beginning FY13 itself, given (1) expressway going ex-capex,
and (2) strong operating performance in real estate. FCF will be Utilizied for debt
repayment and potential growth in payout.
Value unlocking story is sustainable, though negated by prevailing concerns over (a)
traffic growth at expressway, (b) relative weakness in market mix, and (c) risk of policy
actions. Some of the concerns are easing off.
Valuations are inexpensive; Buy with a target price of INR60 (23% upside).
Financial summary (INR b)
Y/E March
2012 2013E 2014E
Net Sales
31.6 38.1 47.3
EBITDA
16.5 17.5 21.7
NP
12.9
9.3 10.0
EPS (INR)
9.3
6.7
7.2
EPS Gr. (%)
-10.1 -27.6
7.0
BV/Sh. (INR)
41.6 47.2 53.2
P/E (x)
5.3
7.2
6.8
P/BV (x)
1.2
1.0
0.9
EV/EBITDA (x)
8.1
7.6
6.0
EV/ Sales (x)
4.2
3.5
2.7
RoE (%)
24.5 15.2 14.3
RoCE (%)
13.8 12.2 14.0
Unique business model with synergistic value unlocking:
Jaypee Infratech (JPIN)
offers a unique blend of infrastructure and real estate development through (a)
Yamuna Expressway (165km, the longest access-controlled six-lane BOT project
connecting Agra to Greater Noida), and (b) five proposed integrated townships
in surrounding land parcels, with huge development potential of ~6,175 acres
(~530msf). We expect its business model to enjoy strong synergistic benefits,
with the expressway commencing operations in August 2012, aiding robust
connectivity and increasing economic activity in the surrounding areas.
Steady FCF visibility - rare in liquidity-strapped sector:
With capex for Yamuna
Expressway (YE) already over, JPIN is set to generate steady free cash flows
(FCF) beginning FY13 itself. This will be driven by (1) superior operating
performance (strong pre-sales of ~INR151b, INR64b receivable), (2) execution
focus and steady collections (57% of pre-sales), and (3) annuity stream from YE
(expect annualized toll of ~INR2.7b). We estimate net surplus (FCF - interest) of
~INR2.1b/5.2b in FY13/14, which would preferably be utilized for repayment of
YE debt over the next 12-13 years, along with potential growth in payout.
Value unlocking story partially constrained by prevailing uncertainties:
JPIN
offers an excellent play on sustainable value unlocking from huge real estate
potential. However, immediate upside may be constrained by prevailing
concerns over (a) traffic growth at YE, (b) relative weakness in market-mix, and
(c) risk of policy actions by the new government in Uttar Pradesh. Some of the
concerns over YE and market mix are easing off. JPIN being the cash cow of JP
Group, confidence over beneficial usage of cash surplus would be a key positive.
Convincing potential, steady cash, subsiding concerns; Buy:
Post recent
correction, JPIN offers a good entry point. The stock trades at (a) P/E of 7.2x
FY13E and 6.8x FY14E, (b) P/BV of 1x FY13E and 0.9x FY14E vis-à-vis RoE of ~15%.
Valuations are inexpensive and operational outlook is improving. We initiate
coverage with
Buy,
and SOTP-based target price of INR60 (23% upside).
3
Shareholding pattern %
As on
Jun-12 Mar-12 Jun-11
Promoter
83.3
83.3
83.3
Dom. Inst
9.0
9.0
9.7
Foreign
0.9
0.7
0.6
Others
6.8
7.1
6.4
Stock performance (1 year)

Jaypee Infratech
Story in charts Synergistic play; strong operating performance
#1
JPIN's business model offers a unique blend of
infrastructure building and real estate
development through destination creation.
Yamuna Expressway and surrounding land parcels
offer value unlocking story with strong synergistic
bearings.
Expressway commenced operations in August
2012. We expect toll revenue to render ~INR2.7b
of annualized stream in FY14
Jaiprakash Associates Ltd.
83.1%
#4
Real estate projects in Jaypee Greens Wish Town,
(Noida) and Sports City (GB Nagar) have been
enjoying strong pre-sales and collections.
Historically and even during the downturn, JPIN
emerged among the best performers in terms of
sales among real estate players.
Change in debtors as a percentage of revenue
suggests that JPIN enjoys superior cash
collections over peers.
#2
#5
#3
#6
#1 Combination of infrastructure and real estate
#2 Expect synergistic impact in growth of individual verticals
Jaypee Infratech Limited
Expressway
Development of Expressway
on BOOT Basis (165 km
Yamuna Expressway)
Real Estate Development
along Yamuna Expressway
Noida (NCR) - 885 Acres
Jaganpur (NCR) - 1,235 Acres
Mirzapur (NCR) - 1,235 Acres
Tappal - 1,235 Acres
Agra - 1,235 Acres
#3 Yamuna Expressway to render ~INR2.7b of annuity stream
Length (Km)
Existing PCUs
Noida - Greater Noida
NH2
Traffic estimates (FY14 PCUs)
Growth (%)
FY13-15
FY16-25
FY26-48
Toll rate (INR)
Growth (%)
FY14 Toll (INR m)
165
60,000-70,000
50,000
21,000
8
6
4
343
4
2,683
#4 Healthy cash conversion along with steady sales(INR b)
#5 Consistently been the best performer in sales (INR b)
#6 JPIN had better customer collection than peers
Change in debtors as a % of revenue
Source: Company/MOSL
18 September 2012
4

Jaypee Infratech
Story in charts
#7
#8
FCF visibility, inexpensive valuations partially eclipsed by uncertainty
#10
Valuations seem inexpensive at (a) P/E of 7.2x
Ex-capex YE and surplus cash from real estate offer
FCF visibility from FY13.
Operating surplus would primarily be utilized
towards repayment of Yamuna Expressway debt,
along with potential growth in payout
Despite growth in cash earnings, PAT to post
negative 12% CAGR over FY12-14, due to
commencement of depreciation and interest
FY12
30.3
19.6
10.6
-23.8
1.5
-14.6
1.4
-16.0
3.3
-19.3
-17.9
FY13E
33.8
21.4
12.4
-1.0
1.8
9.9
5.4
5
2.4
2.1
7.5
1.4
FY14E
39.0
23.9
15.1
2.3
2.1
15.5
7.8
8
2.6
5.2
13.0
1.7
FY13E and 6.8x FY14E, (b) P/BV of 1x FY13E and
0.9x FY14E vis-à-vis RoE of ~15%.
#11
SOTP value suggests that ongoing land parcels at
Noida and Parcel-3 offer cushion to downside risk.
#12
Some macro and micro indicators have to turn
#9
favorable and encouraging to overcome
prevailing concerns.
#8 Operational surplus to moderate gearings (INR b)
#7 Expect JPIN to generate positive FCF from FY13
Cash based P&L
CF from Real Estate
Construction cost
Net cash from Real Estate
Steady State YE annuity
Operating expense
Gross cash profit
Interest payment
Cash PBT
Tax
Cash PAT
FCF
FCF / Interest (x)
#9 PAT to post de-growth due to depreciation and interest
#10 JPIN's valuations seem inexpensive compared to peers
RoE (%)
#11 Ongoing projects offer cushion to downside
#12 Awaiting re-rating triggers
Comfort on new Government's
development policies
General improvement in
Noida market outlook
Certainty over expressway traffic
Usage of operating cash surplus
Source: Industry, Company, MOSL
18 September 2012
5

Jaypee Infratech
Unique business model with synergistic value unlocking
Creating destinations by building infrastructure, developing real estate
JPIN offers a unique blend of infrastructure building and real estate development through
(a) Yamuna Expressway and (b) five proposed integrated townships in surrounding land
parcels of ~6,175 acres.
The land parcels have the potential to generate ~530msf (~59% in NCR) of real estate
development and almost 98% of these lands is already acquired.
We expect JPIN to enjoy strong synergistic benefits of both the verticals – the expressway
aiding robust connectivity, and in turn, increasing economic activity around Jaypee Sports
City at Gautam Budh Nagar (Formula-1 event, proposed Special Development Zone, etc).
Agra-Noida connectivity to have positive bearing on real estate
Jaypee Infratech (JPIN) offers a unique business model, with synergistic benefits
between infrastructure building and real estate development. Its 165km-long access
controlled six-lane BOT project connecting Agra to Greater Noida, the Yamuna
Expressway (YE) commenced operations in August 2012. JPIN would have the right of
toll collection for 36 years for the YE as well as for the existing 23.8km Noida-Greater
Noida Expressway. YE is likely to reduce travel time by ~50% as compared with NH2
and also passes through future destinations like proposed SDZ, formula-1 track in
peripheral regions, which should aid steady traffic growth, along with economic
interest in surrounding real estate. The potential time saving owing to smooth traffic
JPIN’s proposed townships along Yamuna Expressway are surrounded by existing/upcoming infrastructure developments
Agra:
Possible take
off in FY14. Initial
marketing started
GB Nagar:
Monetization
started in 3QFY12 with
encouraging response
Tappal:
Near term
monetization
plan dimmed
due to scrap of
proposed airport
Noida:
~55% monetization done
with robust pre-sales of ~INR140b.
Execution and delivery from FY13
onwards
Source: Company, MOSL
18 September 2012
6

Jaypee Infratech
movement at the access control expressway would offer strong marketability for the
real estate projects in its integrated sports city (5,000 acres) at Gautam Budh Nagar.
Real estate development: Medium-term value unlocking potential
Rising activity post
expressway
commencement and
peripheral developments
to enhance marketability
of land parcels
JPIN’s real estate projects of over 6,000 acres across the expressway are divided into
five proposed integrated townships projects. The development potential is huge
(~530msf) and ~59% of the area is located in the NCR. Almost 98% of the land has
already been acquired at a very competitive price (implied cost of ~INR30/sf) and is
ready for monetization. With rising economic activity and better connectivity through
expressway, we expect the land parcels to generate meaningful interest among buyers,
investors and various companies (especially IT/ITES) to set up office spaces. This
implies significant value unlocking potential over the medium-to-long term. The
recent success in ongoing projects has been encouraging; further, positive bias on
UP’s growth expectations under the new government should provide additional
momentum.
Superior track record in established market
JPIN has consistently
been among the top
three real estate players
in terms of annual sales,
despite several
challenges in operating
market
JPIN started developing its Noida land parcel – “Jaypee Greens Township” in 2009,
and witnessed strong response over the last 3-4 years with cumulative sales of ~43msf
(~INR141b) of the total area of 78msf. With this, the company has consistently been
among the top three real estate players since FY10 in terms of annual sales (both
volume and value). While the initial momentum in sales (i.e. FY09 to early FY11) can
be attributed to the overall upswing in the Noida market, JPIN has shown
commendable resilience even during the downturn of FY11-12.
JPIN has consistently been the best performer in terms of annual sales
Volume (msf)
Value (INR b)
Source: Company, MOSL
Noida has been a very competitive market with the presence of a large number of
local developers. However, we believe JPIN’s projects enjoy superior saleability
compared to peers due to its (a) balanced product mix, with mid/high-end focus, (b)
superior product proposition, and (c) stronger execution track record. Pricing flexibility
on the back of low cost land (~INR30/sf) offers additional edge.
18 September 2012
7

Jaypee Infratech
Propositions attractive in new parcels – initial sales encouraging
Relatively cheaper
option and ease of
commuting should also
bolster demand for IT/
ITES based commercial
offices in the Sport City,
which has witnessed
impressive initial
response
During 3QFY12, JPIN began monetizing GB Nagar parcel-3 as a flagship project
christened “Sports City”. The project is planned to be part of the mega 5,000 acres
township project, combining 2,500 acres of JPIN (parcel 2 & 3) and 2,500 acres of
parent company across 15km frontage stretch of expressway and contiguous to each
other. The Sports City offers attractive marketability due to strong infrastructure and
connectivity to be provided by congestion-free expressway (would take 20 minutes
from Noida parcel which is 20km away) and emerging destinations like Formula 1
track, etc. Relatively cheaper option and ease of commuting should also bolster
demand for IT/ITES based commercial offices.
JPIN has also started preliminary marketing activities for its Agra project, where it
plans to launch plotted sales initially. With this, visibility has emerged for four out of
five land parcels. Parcel-4 (Tappal) is the only one which faces a setback, due to
recent shifting of proposed airport from Jewar.
Execution back-up commendable
JPIN outsources the construction of its projects to its parent, JP Associates, which has
40+ years of experience in the EPC business. Its execution prowess is evident in the
Yamuna Expressway (YE), Fomula-1 race track, etc. Robust execution track record and
slew of deliveries scheduled over FY13-14 should bolster demand for its projects. We
do not see any conflict of interest in outsourcing construction to the parent, as it
operates under cost+mid-teen margin basis, a common industry practice.
18 September 2012
8

Jaypee Infratech
FCF visibility – rare in liquidity strapped sector
Estimate surplus cash flow of INR2.1b/5.2b in FY13/14
JPIN will generate meaningful free cash flows from FY13, with Expressway going ex capex.
This will be driven by (1) superior operating performance (strong pre-sales of ~INR151b,
INR64b receivable), (2) execution focus and steady collections (57% of pre-sales), and (3)
annuity stream from YE (expect annualized toll of ~INR2.7b).
We estimate net surplus (FCF - interest) of ~INR2.1b/5.2b in FY13/14, which would
preferably be utilized towards repayment of YE debt over the next 12-13 years, along
with potential growth in payout.
Expressway commencement has a lot more to offer beyond annuity stream
Yamuna Expressway (YE) has commenced operations in August 2012. It is expected to
generate a steady and growing annualized revenue stream of ~INR2.7b (~12% CAGR
assumed over FY13-15). However toll revenue apart, we expect the expressway to
have a larger synergistic impact on the demand potential and value accretion of
surrounding real estate projects (as discussed in the previous section).
Annuity streams - certainty to emerge over FY13
In the absence of any
true comparables, our
traffic estimates are
largely based on
qualitative assumptions
In the absence of any true comparables, our traffic estimates are largely based on
qualitative assumptions, coupled with associated risks. Key assumptions:
Traffic growth:
We assume ~20,000 equivalent PCUs (passenger car units) for YE in
FY13, with ~8% YoY traffic growth till FY15, moderating to 6% YoY (v/s 50-60,000
PCUs per day for toll-free NH2). Our recent interaction with the management
suggests initial PCUs of ~10,000 in the month of August 2012. Traffic growth, coupled
with ~4% YoY growth in toll rates should result in ~12% CAGR in annuity steam
over FY13-15. As per the concession agreement, JPIN is also allowed to collect toll
from the 23.8km existing Noida-Greater Noida Expressway. However, we have
not assumed any revenue from this due to lack of clarity commuters have been
objecting to the toll.
Toll rates:
Industrial Development Authority had recommended INR2.10 as toll
tax per km for cars and jeeps, INR3.23 for mini buses, INR6.60 for buses and trucks
and INR10.10 for other heavy vehicles. The rates have been given an in-principle
approval by the state government. However, these rates are the ceiling that has
Our assumptions for Yamuna Expressway
Length (Km)
165
Existing PCUs
Noida - Greater Noida
60,000-70,000
NH2
50,000
Traffic estimates (FY14 PCUs)
21,000
Growth (%)
FY13-15
8
FY16-25
6
FY26-44
4
Toll rate (INR)
343
Growth (%)
4
FY14 Toll (INR m)
2,683
9
Key milestones of Yamuna Expressway project
Yamuna Expressway was conceived in 2003, but was stalled for a long period
till 2007, before it revived with a deadline of 2013.
The deadline was advanced to 2010 in view of the Commonwealth Games, but
farmers' agitation in places against allotment of land delayed the project by
a year.
The expressway has six interchanges, 70 vehicular underpasses, 41 minor
bridges, 76 cart track underpasses and 183 culverts. To ensure commuters'
safety, CCTV cameras have been installed at regular intervals.
While there are five proposed inter-junctions, initially, the toll will start at
three out of five plazas at Greater Aligarh, Mathura and Agra.
The concession on the 24km Noida-Greater Noida Expressway could be
delayed/reviewed due to objections from commuters against toll
18 September 2012

Jaypee Infratech
been fixed by the state government and JPIN can charge less, if it wishes. The
management has guided for an average effective toll rate of INR2/km (for 165km).
Recent channel checks on
YE have revealed positive
feedback on the travel
time and high fuel
efficiency
Channel checks indicate positive feedback on time/ fuel efficiency:
The travel
time from Delhi to Agra through YE is expected to be reduced by ~50% (~2 hours)
compared with NH2, which runs through various congested towns. Post
commencement of the expressway, our interactions with travel agency drivers,
individuals have revealed positive feedback on the travel time and high fuel
efficiency. However, a few indicated that when one includes travel time on
connecting roads to both ends of the expressway, the effective time saving could
be lower than 2 hours.
Rise in economic activities key to migration of commercial vehicles:
We expect
the near-term PCU growth to be driven largely by passenger vehicles, while traffic
migration from commercial vehicles (not so time sensitive) could be slower.
Growth in commercial traffic would also depend on rise in economic activities in
neighboring areas, along with induced demand from (a) real estate development
in Sports City and several other launches along side the expressway by other
developers, and (b) future land parcels, which could emerge as attractive
destination for IT/ITES related offices. Initial success in GB Nagar launches, Formula
1 race track, proposed SDZ (Special Development Zone), etc are some positive
signs, which should incentivize the government to induce further growth
elements.
Certainty on toll revenue to emerge over FY13:
We expect meaningful clarity over
toll income to emerge in its first 6-9months of operations. Any delay or slowdown
in real estate activities in the proposed townships and other infrastructure plans
could have negative bearing on the annuity stream from the toll project.
Encouraging recovery in real estate sales since 2HFY12 …
After a subdued 1HFY12 (quarterly sales run rate down 60-70%), there has been an
impressive recovery in sales volume since 2HFY12. Despite prevailing weakness in
the Noida real estate market, JPIN's 2HFY12/1QFY13 sales momentum was
commendable, with 2.5x jump in bookings run-rate. JPIN achieved sales of 9.5msf/
2.5msf (~INR39b/INR9.3b) in FY12/1QFY13, taking total pre-sales to ~46msf (~INR151b),
Encouraging sales recovery since 2HFY12
Collection run-rate has been impressive as well (INR b)
Source: Company, MOSL
18 September 2012
10

Jaypee Infratech
Strong revenue booking indicates commensurate execution
JPIN had better customer collection than peers
Change in debtors as
as
% of revenue
Change in debtors
a
% revenue
Source: Company, MOSL
JPIN is entering into ex-
capex phase in
Expressway project. This,
coupled with cash
positive real estate
vertical to make the
company FCF generator
FY13 onward
from its Noida and GB Nagar land parcel. In 3QFY12, it started monetizing its GB Nagar
land (parcel-3), with encouraging sales response. Over the past 6 months, it has
achieved encouraging sales of ~INR7b in parcel-3, including (a) Plotted (0.1m sq yards
at INR3.5-4b), and (b) Commercial shops plus office space (~INR2.5b). Stronger sales
and focus on execution have also improved revenue booking run rate.
… augurs well for healthy collections and strong demand
JPIN has maintained a robust collection run-rate - largely commensurate with sales
momentum (collected almost 57% of presales). Steady execution pace in ongoing
construction has been the key attributable factor. The management intends to
prioritize execution over new launches in 1HFY13, before reviving fresh projects in
2HFY13. While the strategy could lead to lower sales during 1HFY13, with meaningful
delivery lined up over FY13-15, JPIN projects are likely to gain significant interest,
going forward. We expect superior connectivity following the commencement of the
expressway to play a strong role in improving the marketability of new parcels. We
estimate sales of ~INR40b/44b (3-4msf of quarterly volume run-rate) in FY13/14 v/s
INR39b in FY12.
Healthy cash conversion to continue, backed by steady
customer collection (INR b)
Expect INR40b+ sales run-rate over FY13-14
Source: Company. MOSL
18 September 2012
11

Jaypee Infratech
Operational concerns are weakening
Our sales expectations for JPIN come with concerns on (1) relative weakness in the
Noida market, (2) untested new land parcels, and (2) high proportion of brokers'
underwriting in NCR markets. However, we believe there are reasonably strong
mitigants as well.
Noida and Gr. Noida among
worst performing markets
Outlook of Noida market improving; JPIN has shown resilience
JPIN's core market, Noida has been impacted with several operational and political
overhangs over the past two years. This has resulted in its severe under-performance
in recent times. The rosy growth story of Noida/ Greater Noida over FY08-11 has been
severely diluted due to (a) oversupply concern and severe execution slippages, (b)
slow and incommensurately low commercial development, and (c) political risks owing
to events like farmers' protest, changing government, etc.
Despite weakness in general sentiment over Noida market, JPIN has managed to
maintain superior sales performance in recent times. This is largely attributable to
the fact that Noida has been a very scattered market, with the presence of a large
number of local developers, which makes the negative impact uneven. The political
risk over land protests had been more chronic in Noida extension villages, while
JPIN's land parcel is located in the less affected expressway zone. Additionally, JPIN's
stronger brand, better products, and execution have been the key to steady
operations.
Moreover, there are signs of broad based recovery for Noida/Greater Noida markets,
with (a) developers (Unitech, Jaypee) posting better sales over the past six months,
and (b) NCR Planning Board (NCRPB) approving the Master Plan-2021 for Greater Noida.
Ongoing projects enjoying decent demand
Project
Launched
Sold
Sold Avg. price
(msf)
(msf)
(%)
(INR)
Aman Apartment I
3.3
3.3
100
3,000
Aman Apartment II
1.3
1.3
100
3,000
Klassic Apartment
5.5
5.2
94
3,400
Kosmos
8.5
8.3
98
3,500
Kensington Park
2.9
2.8
99
3,003
Kensington Boulevard
2.9
2.8
97
3,288
Kingswood Oriental
0.2
0.2
85
3,300
Kasa Isles
2.4
2.3
97
3,413
Kube Appts
1.5
1.4
90
3,413
Krescent Homes
4.3
4.2
97
4,314
Orchard
2.7
2.6
94
4,904
Anant
1.9
0.3
18
3,000
Pebble Beach
0.3
0.3
90
10,785
Garden Isle
4.9
2.7
55
4,131
Sports City (Built-up)
1.1
0.4
35
6,000
Residential Plots
6.0
5.9
98
2,700
Commercial Plots
3.1
3.1
100
2,600
Total
52.8
47.0
* Gross value before price discount; updated till 1QFY13
Value
Delivery
(INR b)
Date
10
2012
4
2012
18
2012
29
2012
8
2013
9
2013
1
2013
8
2013
5
2013
18
2014
13
2014
1
2014
3
2014
11
2015
2
2015
16
8
163*
Source: Company, MOSL
Source: Industry
18 September 2012
12

Jaypee Infratech
Untested new parcels - flurry of upcoming projects a step towards market maturity
While JPIN's recent launch at Sports City (GB Nagar) can be termed as entry to a new
market, we believe with improving connectivity and several projects announced
alongside the expressway, these locations moving towards market maturity. Besides
JPIN's Sports City, other ongoing projects include (a) Upcountry and Golf Country
(Supertech): two integrated townships of 100 acres each, (b) Lotus City (3C), (c) NRI
Yamuna Township (SDS), (d) Earth Sapphire (Earth Infrastructure) etc. While the
average rate for plotted development is hovering around ~INR30,000/sq yard,
apartments and commercial spaces are trading at INR3000/sf+ and INR6,000/sf +. A
few projects have already witnessed 25-30% appreciation since launch 1.5-2 years
ago. We expect the JP brand to be preferred and enjoy early mover advantage on
account of the execution credibility it has established in the surroundings.
Broker sale a common practice, but JPIN's steady collection dilutes risk
Higher proportion of broker sales has been a common practice in the NCR. The biggest
impact of such practice is delayed cash conversion, despite strong pre-sales. While
this could raise concerns on the quality of large sales achieved by JPIN, a healthy
collection run-rate should mitigate the risk. The company has collected almost 57% of
its ~INR151b pre-sales, with delivery periods of these projects set for FY13-15.
Commensurate collection
mitigates the concerns
over delayed cash
conversion in a typical
broker sales practice
Rare FCF visibility in stressed sector
We see JPIN as one of the few free cash flow (FCF) generators in the liquidity-strapped
realty sector. Severe cost over-run in the YE project (~INR36b over past 12 months) has
dented FY12 cash flows. However with toll road commencing operations, we expect
ex-capex annualized toll revenue of ~INR2.7b (FY14), coupled with cash-positive real
estate operations (~INR64b receivable from pre-sales) to render visibility to healthy
cash generation. Steady execution and new launches in ongoing projects are likely to
improve cash conversion to INR9b-10b/quarter (v/s INR7.5b-8.5b/quarter currently).
We estimate positive FCF of INR7.5b/13b in FY13/14, which translates into 1.4/1.7x
interest expense.
Expect JPIN to generate positive FCF from FY13
Cash based P&L
Cash flow from Real Estate
Construction cost
Net cash from Real Estate
YE Annuity income
Opex and Capex
Steady State YE annuity
Operating expense
Other income
Gross cash profit
Interest payment
Cash PBT
Tax
Cash PAT
Dividend Payment
Debt repayment
FCF
FCF / Interest (x)
FY12
30.3
19.6
10.6
0.0
23.8
-23.8
1.5
0.1
-14.6
1.4
-16.0
3.3
-19.3
1.6
-7.8
-17.9
FY13E
FY14E
33.8
39.0
21.4
23.9
12.4
15.1
1.2
2.7
2.2
0.4
-1.0
2.3
1.8
2.1
0.2
0.2
9.9
15.5
5.4
7.8
5
8
2.4
2.6
2.1
5.2
1.6
1.6
0.5
3.6
7.5
13.0
1.4
1.7
Source: Company, MOSL
13
Our estimated FCF
translates into 1.4-1.7x
interest expense
18 September 2012

Jaypee Infratech
Operational surplus to moderate gearing
Expectation of a strong dividend payment, led by visibility over operating surplus,
has been an integral part JPIN's story. However, we believe the dividend story could
be deferred and partially diluted owing to the management's preferred plan to de-
leverage. While cost escalations in the YE project have led to a significant increase in
debt-equity to 1.1x (net debt of ~INR65.7b), we expect no major capex commitment
from FY13. This would free up the entire positive surplus from real estate projects to
address de-leveraging, along with potential improvement in dividend payout. JPIN's
infra debt of ~INR60b (for YE) is scheduled to be repaid from the 11th year of concession
period. However, given the visibility of operating surplus, the management plans to
retire the entire debt early (we assume repayment over the next 13 years).
Operational surplus to moderate gearing (INR b)
Focus on debt reduction
could defer dividend
growth expectations
Source: Company, MOSL
18 September 2012
14

Jaypee Infratech
Value unlocking partially constrained
YE traffic risks | Weaker market mix | New UP government policy
JPIN’s integrated business model renders substantial comfort on the potential value
unlocking opportunity over the medium to longer term.
Yet, near-term upside could be constrained by prevailing concerns over (a) traffic growth
at YE, (b) relative weakness in market-mix, and (c) risk of policy actions by the new
government in UP. Some of the concerns over YE and market-mix are easing off.
JPIN, being the cash cow of JP Group, confidence over beneficial usage of cash surplus
would be a key positive.
Growth story partly eclipsed by near-term concerns
While JPIN’s synergistic business model and long-term growth potential offers
meaningful comfort, near-term upside could be curbed by some prevailing concerns.
Downside risks to expressway traffic growth assumptions
Our traffic assumptions for the Yamuna Expressway (YE) are conservative, but they
are qualitatively decided due to the absence of any true comparables. Growth in
traffic is also a factor of economic development in surrounding areas. Any delay or
slowdown in real estate activities in the proposed townships and other infrastructure
plans could have significant negative bearing on the annuity stream from the toll
project. We also understand from discussions that as per the concession agreements,
the government shall not permit any other expressway or road between Noida and
Agra without mutual agreement and in case the competing road facility is provided,
adversely affecting the revenues of the company, then the concession period shall
be increased to compensate for the loss.
Sensitivity of Yamuna Expressway valuation to traffic assumptions
The illustration suggests
strong sensitivity of value
addition by toll project
to traffic growth
assumptions
FY13/14
PCUs assumption
20% Lower
Base case (21,000/day)
20% Higher
Annuity Stream (INR b)
EPS (INR)
FY14E
FY13E
FY14E
2.1
2.7
3.2
6.6
6.7
6.9
6.9
7.2
7.5
FCF - Interest (INR b)
FY13E
FY14E
1.9
2.1
2.3
4.8
5.2
5.6
Yamuna Expressway NPV (INR/share)
PCU Growth over FY16-25
10%
8%
6%
4%
Base Case
10%
-0.1
-5.6
-10.3
-14.4
PCU Growth over FY13-15
8%
6%
-2.5
-4.8
-7.7
-9.7
-12.1
-13.9
-16.0
-17.5
4%
-7.0
-11.6
-15.6
-19.0
Source: MOSL
Recent media report suggests that SP government has scrapped the Greenfield international
airport project at Jewar (near JPIN’s land parcel 4) owing to unavailability of the Center ’s
clearance. The airport is now being proposed between Mathura and Agra (towards the end of
the 165km expressway). While this could have an adverse effect on monetization of land
parcel-4 (although this land parcel has not been under immediate plan), it could as well
impact the medium term traffic growth expectation for Yamuna Expressway. Developments
like this could augment the uncertainty factor to our growth estimates.
18 September 2012
15

Jaypee Infratech
We require more clarity on the near-term revenue visibility of the YE project, which is
likely to emerge over the next 6-12 months, post commencement.
Subdued Noida market still in recovery stage
Although JPIN has posted strong operating performance and encouraging sales
recovery over 2HFY12, the broader outlook of the Noida market has not yet turned
positive. The market has been impacted by issues like oversupply, several delivery
backlogs, protests by farmers, and other political uncertainties. While there are early
signs indicating resolution of some of these issues, any major delay in the recovery of
market sentiment could negatively impact our sales assumptions for JPIN.
Noida market growth story diluted, with ebbing sales (msf) and rising inventory
Noida and other land
parcels, despite offering
the most affordable
product proposition in
NCR, coupled with
established
infrastructure, fell in prey
of uncertain operational
and political headwinds
However, early signs of
receding overhangs and
improving absorption/
price appreciation are
positives
Source: Prop Equity Data from Industry sources
However, risk perception seems to be improving
Unitech's Noida sales also
improved over past 9months
(msf)
Noida offers attractive mid-segment proposition:
We believe that Noida and other
expressway land parcels of JPIN offer the most attractive value and product
proposition with mid-segment affordability, when compared with competing
markets like Gurgaon. Given a large number of projects with unit ticket sizes of
INR4-5m, we expect demand drive to remain strong. Good road infrastructure and
better connectivity through expressway would further augment attractiveness.
Recent healthy offtake and price rises in JPIN’s own projects substantiate the same.
Higher visibility on resolution of land acquisition issues:
There are visible signs
that some land issues are getting resolved: (1) higher compensation to farmers, (2)
recent news on NCR Planning Board (NCRPB) approving Greater Noida 2012 master
plan, (3) some fast-track steps undertaken by the new government, etc. We believe
any definite development in this regard would boost buyers/investors’ lost
confidence in the Noida market, with spin-off benefits to JPIN.
Expressway, Formula-1 could change the dynamics of YE area:
The success of the
Formula 1 race in GB Nagar, which happens to be an annual event, should boost
interest level in Sports City real estate. The commencement of the expressway has
lot more to offer beyond toll revenue, in terms of improving connectivity and
economic activity in the surrounding regions over medium term. This coupled with
favorable government initiatives would provide the necessary thrust to JPIN’s
growth story.
Source: Company, MOSL
18 September 2012
16

Jaypee Infratech

Policy risk matters, but expect growth agenda to sustain
Change of political equation in UP is a risk, as future government action could have a
strong bearing on real estate potential. However, current dynamics appear to have
had lower-than-expected impact on JPIN, unlike in the past. [The company had faced
significant difficulties in land acquisition for the Yamuna Expressway in 2003 under
the Samajwadi Party (SP) government.] But growth has been the agenda for the success
of newly elected governments in neighboring states. We expect this to hold true in
UP as well, mitigating the political risk for JPIN.
18 September 2012
17

Jaypee Infratech
Convincing potential, steady cash, subsiding concerns
Buy with target price of INR60 (23% upside)
Post recent correction, JPIN trades at inexpensive valuations — FY13/14 P/E of 7.2/6.8x
and P/BV of 1x/0.9x vis-a-vis RoE of 15%.
We are assigning a Buy rating to JPIN (SOTP based target price of INR60), due to its
sustainable value unlocking story, steady operations and inexpensive valuations.
We understand that near-term upside potential is linked with some macro indicators
(comfort over government's policy, Noida market) and micro factors (certainty over toll
revenue, usage of operating cash surplus) turning favorable and encouraging.
Earnings growth to be capped by YE depreciation and interest
We expect JPIN's steady pre-sales, execution and slated delivery to drive ~22%
revenue CAGR over FY12-14. Revenue from GB Nagar projects is likely to cross
recognition threshold partially by 2HFY13. We expect EBITDA margin to stabilize at 45-
46% over FY13/14, translating into ~15% EBITDA CAGR. However, PAT is likely to post a
compounded annual de-growth of ~12% over FY12-14 on account of commencement
of depreciation and interest expense related to the Yamuna Expressway (YE) project.
This would lead to moderation in RoCE/RoE from 13.8%/24.3% to 14%/14.3% in FY14.
Nonetheless, we expect the cash profit and FCFE to improve meaningfully over FY12-
14, with (a) the completion of YE capex, and (b) strong visibility of cash flows from
core real estate operations.
Margins to moderate amidst steady revenue growth
PAT to post de-growth due to depreciation and interest
Source: Company, MOSL
Valuations are inexpensive; SOTP-based target price of INR60/share
JPIN trades at (a) P/E of 7.2x FY13E and 6.8x FY14E, (b) P/BV of 1x FY13E and 0.9x FY14E
vis-à-vis RoE of ~15%. Asset based valuations are inexpensive (20% discount to
medium-term average P/B) when compared to peers, although its earning based
valuations are hovering almost at par with the historical average of 7x. However,
when adjusted for expressway-led depreciation, its cash P/E is at below the historical
average (6.2x FY13E and 5.4x FY14E). We value JPIN at INR60/share based on 20%
discount to our SOTP-based value of INR74, which captures land parcels with near-to-
medium term visibility (parcels 1, 2 & 3 and 5) based on NPV and excludes parcel-4.
18 September 2012
18

Jaypee Infratech
Estimate JPIN’s SOTP value at INR74/share
NAV Calculations
Ongoing Parcels
Parcel 1 (Noida)
Parcel 3 (Mirzapur)
Parcels with high near-to-medium term visibility
Parcel 2 (Jaganpur)
Parcel 5 (Agra)
NPV based value
Land cost based value
Parcels with less near-to-medium term visibility
Parcel 4 (Tappal)
NPV based value
Land cost based value
GAV from Real estate
Less: Tax
Less: Operating Exp
Less: Ex YE debt
NAV
Yamuna Expressway
SOTP
(INR m)
77,627
38,558
38,508
30,121
30,121
12,875
0
18,041
2,900
184,814
40,659
18,481
5,679
119,395
-16,839
102,555
NAV/Share
56
28
28
22
% of NAV
42
21
21
16
0
0
133
100
29
22
13
10
4
3
86
65
-12
-9
74
55
Source: Company, MOSL
P/E at par with historical average, albeit cash P/E cheaper; appears attractive when compared with peers
Source: Company, MOSL
Initiating with Buy, awaiting re-rating triggers…
We are assigning a
Buy
rating to JPIN (TP of INR60), due to its convincing story, steady
operations and inexpensive valuations. However, we understand that for JPIN's growth
story to gain investor confidence, some macro and micro indicators have to turn
favorable and encouraging.
Key macro indicators:
(1) Comfort on new government's development policies
(2) General improvement in Noida market outlook
Key micro factors:
(1) Certainty over expressway toll revenue
(2) Usage of operating cash surplus FY13 onwards
Easing of above mentioned concerns and faster monetization in remaining land parcels
are the potential re-rating triggers.
18 September 2012
19

Jaypee Infratech
Our asset-based SOTP value suggests that ongoing land parcels at Noida and Parcel-3
offer cushion to downside risk at current market price, while the remaining parcels
aid strong potential value unlocking with economic growth and subsiding overhangs.
Ongoing projects offer cushion to downside
Potential value unlocking from remaining parcels
Source: Company, MOSL
… to steer growth towards true asset valuations
JPIN's long-term outlook is largely dependent on its ability to transform some
unexplored locations into attractive real estate destinations. The initial process has
started encouragingly, with infrastructure developments like expressway connectivity,
F-1 track and various others proposed developments. Therefore, its true asset value
unlocking is likely to play out only with the success in demand creation over medium
term. Demand visibility over Parcel 2/4/5 and steady sales at ongoing parcels could
place the company in a strong position over next 3-5years.
Higher clarity on development potential to unlock significant real estate value (INR/sh)
EV: 173
Ability to transform
some unexplored
locations into attractive
real estate destinations
could place the company
in a strong position over
the next 3-5years
Current EV: 96
EV: 122
Disc Rt 13.6%
Not valued
Disc Rt
16%
Disc Rt 14%
Disc Rt 13.6%
NPV based
Disc Rt 18%
Disc Rt 16%
Disc Rt
14%
Disc Rt 14%
Source: Company, MOSL
18 September 2012
20

Jaypee Infratech
Annexure
REALITY CHECK: Interactions with IPCs on Noida market
Demand supply dynamics improving gradually
Noida has been one of the worst affected realty markets in the recent downturn.
Other than overall sluggishness in the realty space, the pain was further aggravated
by strong farmers’ protests over land acquisition in Noida Extension. The protests
had a strong bearing on sales and execution momentum of several ongoing projects,
and thwarted the quantum upsurge story of this market over FY08-10. We interacted
with real estate consultants and developers to get a sense of the current happenings
and outlook.
Our key takeaways
Uproar over farmers’ agitations significantly impacted the Noida Extension projects
in FY12. Absorption run-rate has declined by 80-90% in Greater Noida region.
Oversupply and execution risk are the biggest concerns in the area. However, the
plummeting sales in remaining locations are more cyclical in nature.
Nonetheless, volumes at Expressway projects have been better and these projects
have seen 8-10% price appreciation also. Prices are expected to remain stagnant
with only a slow volume recovery.
Effects of the Noida Extension agitations are unlikely to flow to other locations.
Spillover demand from Extension projects should benefit locations like Faridabad,
Ghaziabad, etc.
Despite adversities, Noida market offers some of the best affordable propositions
in NCR markets with flurry of projects with average ticket sizes of INR3-6m. This
should revive the buyers' interests once concerns subside.
Success of the formula-1 race as an annual event is likely to improve interest for
township projects across the Yamuna Expressway (YE). Monetization of industrial
land around the YE also offers long-term growth potential.
Flashback: Encouraging growth over 2008-10 …
The Noida real estate growth story has largely been attributed to the emergence
of Noida Extension in 2008-09 as a key supply engine. While projects within the
main city and on Noida Expressway offer higher-end opportunities, the subsidized
land bank that several developers obtained from the government led to a flurry
of launches (30-40 projects/quarter) in the mid-income segments.
This resulted in a massive growth in absorption (~4k/annum in 2007-08 to 35k/
annum in 2010-11) and inventory levels (25-30k in 2008 to 100k in 2010-11). Easy
connectivity with Delhi, good infrastructure and plethora of affordable houses
(wide price difference with Gurgaon) were the major USPs of Noida Extension
projects.
… but sharp slowdown since FY11 thwarted momentum
Launches by numerous local developers with limited track record resulted in
concerns of oversupply and execution risk. The concerns transformed into genuine
sluggishness, with the eruption of farmers’ agitations (on compensation by the
government, land usage, etc) and subsequent unfavorable judgment against the
UP government’s land acquisition.
21
18 September 2012

Jaypee Infratech
While the court’s decision to de-notify land or award higher compensation led to
uncertainty among buyers and developers, it also stalled the progress of under-
construction projects.
Is the problem contagious to other parts of Noida? Unlikely
Overall sales in Noida/Greater Noida slowed down in FY12 and the deterioration
is mainly attributable to continuing decline in the high volume Noida Extension
market. With limited clarity and confidence among buyers, only a few sales have
opened up (barring a few developers like Amrapali, Supertech, etc).
Land acquisition-linked agitation has also erupted on a smaller scale in other
micro-markets of Noida. However, they haven’t been as vocal and contemporary
as Noida Extension. Structurally also, the issues in Noida extension were different
due to the typicality of land acquisition process followed over there. Thus, the
contagious effect of litigation/protests is unlikely to play havoc in other parts of
Noida. Projects at Noida Expressway have seen comparatively better absorption,
with even price appreciation of 8-10%.
Can spillover demand from Extension area benefit rest of Noida?
The spillover demand from Noida Extension is unlikely to significantly benefit
Noida Expressway projects due to difference in price points in these two micro-
markets. The actual demand would flow down to tier-III cities, viz. Ghaziabad and
Faridabad.
After the success of the formula-1 race as an annual event, even land parcels
across the Yamuna Expressway have been witnessing improvement in interest
and activity.
Summing up…
Gradual recovery expected:
The oversupply concern likely to subside gradually
due to new launches over past 12months. The market momentum has started
turning positive over past 2-3quarters with developers like Jaypee, Unitech
posting improvement in Noida-market sales. Overall prices are likely to remain
unaltered in the near-term, albeit prices may increase in Noida extension
because of factors such as hike in compensation to farmers and rising input
cost.
Some structural challenges:
Despite being an affordable market, recent pricing
uptick in Expressway projects suggests growing investor participation.
Incommensurately slower commercial growth (unlike Gurgaon) remains a key
concern for Noida market, which is a critical factors behind residential demand
growth on a sustainable basis.
Some positive flavor:
Commencement of expressway, and rising economic
activity around formula-1 location should uplift interest level for both
residential, and industrial demand. Approval of Greater Noida Master Plan by
NCR authorities is a key positive development, which is expected to revive the
stalled execution and new launches.
18 September 2012
22

Jaypee Infratech
Financials and Valuation
Income Statement
Y/E March
Net Sales
Change (%)
Construction expenses
Staff Cost
Selling & Adminstrative exp
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Reported PAT
Adjusted PAT
Change (%)
2009
5,546
-43.1
1,722
39
626
3,159
57.0
140
0
17
3,036
369
12.1
2,667
2,667
304.6
2010
6,407
15.5
367
69
49
5,921
92.4
162
8
122
5,874
999
17.0
4,875
4,875
82.8
2011
27,787
333.7
9,215
86
352
18,134
65.3
86
101
199
18,146
3,796
20.9
14,351
14,351
194.4
2012
31,559
13.6
14,598
127
343
16,492
52.3
16
632
130
15,974
3,077
19.3
12,897
12,897
-10.1
2013E
38,097
20.7
20,125
139
377
17,456
45.8
1,550
4,373
219
11,753
2,409
20.5
9,343
9,343
-27.6
(INR Million)
2014E
47,293
24.1
25,059
153
415
21,666
45.8
2,583
6,721
214
12,575
2,578
20.5
9,997
9,997
7.0
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Curr. Assets
Inventory
Debtors
Cash & Bank Balance
Loans & Advances
Other current asset
Current Liab. & Prov.
Creditors
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates
2009
9,660
2,794
12,454
18,675
31,129
588
235
353
25,363
10,402
5,501
0
1,909
2,976
15
4,989
4,616
373
5,413
31,129
2010
12,260
7,669
19,929
57,210
77,139
628
396
232
51,883
44,858
19,100
1,026
17,830
6,869
34
20,123
18,746
1,377
24,735
77,139
2011
13,889
33,740
47,629
63,321
110,951
645
481
164
68,306
73,785
33,378
5,379
18,509
16,151
369
31,304
25,065
6,239
42,481
110,951
2012
13,890
43,887
57,777
71,096
128,873
769
497
272
92,026
75,447
45,284
4,096
5,417
20,349
303
38,873
28,778
10,095
36,574
128,873
(INR Million)
2013E
13,890
51,605
65,495
70,596
136,091
93,769
2,047
91,722
0
87,234
49,477
6,342
5,536
25,577
303
42,865
31,760
11,105
44,369
136,091
2014E
13,890
59,978
73,867
66,596
140,463
93,769
4,630
89,139
0
96,565
54,360
7,911
5,149
28,843
303
45,240
33,025
12,215
51,324
140,463
18 September 2012
23

Jaypee Infratech
Financials and Valuation
Ratios
Y/E March
Basic (INR)
Adjusted EPS
Growth (%)
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors. (Days)
Asset Turnover (x)
Leverage Ratio
Net Debt/Equity (x)
2009
2.8
2.9
12.9
1.0
42.4
2010
4.0
44.0
4.1
16.3
1.0
29.4
2011
10.3
159.8
10.4
34.3
1.3
14.2
2012
9.3
-10.1
9.3
41.6
1.0
12.6
2013E
6.7
-27.6
7.8
47.2
1.0
17.4
2014E
7.2
7.0
9.1
53.2
1.0
16.3
5.3
5.2
8.1
4.2
1.2
2.1
7.2
6.2
7.6
3.5
1.0
2.1
6.8
5.4
6.0
2.7
0.9
2.1
21.4
9.8
30.1
10.9
42.5
19.4
24.5
13.8
15.2
12.2
14.3
14.0
0
0
706
0.0
63
750
2,969
0.1
68
560
1,577
0.2
58
484
795
0.2
55
497
619
0.3
61
444
511
0.3
1.3
2.0
0.9
1.1
1.0
0.8
Cash Flow Statement
Y/E March
2009
PBT before Extraordinary Items 3,036
Add: Depreciation
140
Interest
0
Less : Direct Taxes Paid
369
(Inc)/Dec in WC
3,504
CF from Operations
-777
(Inc)/Dec in FA
(Pur)/Sale of Investments
CF from Investments
(Inc)/Dec in Net Worth
(Inc)/Dec in Debt
Less: Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
-25,856
0
-25,856
10,916
18,675
0
1,130
28,462
1,829
80
1,909
2010
5,874
162
8
999
3,402
1,643
-26,561
0
-26,561
3,746
38,535
8
1,434
40,838
15,920
1,909
17,830
2011
18,146
86
101
3,796
17,067
-2,528
-16,441
0
-16,441
15,670
6,111
101
2,031
19,649
680
17,830
18,510
2012
15,974
16
632
3,077
7,185
6,361
-23,845
0
-23,845
-1,124
7,775
632
1,625
4,393
-13,091
18,509
5,417
(INR Million)
2013E
11,753
1,550
4,373
2,409
7,675
7,590
-974
0
-974
0
-500
4,373
1,625
-6,498
118
5,417
5,535
2014E
12,575
2,583
6,721
2,578
7,343
11,959
0
0
0
0
-4,000
6,721
1,625
-12,346
-388
5,536
5,149
18 September 2012
24

Jaypee Infratech
N O T E S
18 September 2012
25

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