1QFY2013 Result Update | Real Estate

August 16, 2012

HDIL
Performance Highlights
Y/E March (` cr) Revenue EBIDTA OPM margin (%) PAT
Source: Company, Angel Research

BUY
CMP Target Price
1QFY12 502 265 52.9% 209 (49.6) % yoy (59.9) (40.7) 4QFY12 625 264 42% 315 (66.6) % qoq (67.8) (40.4)

`84 `115
12 Months

1QFY13 201 158 78.4% 105

Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

Real Estate 3,515 4,282 1.7 135/52 24,184,490 10 17,657 5,363 HDIL.BO HDIL@IN

Housing Development Infrastructure Ltd (HDIL)s 1QFY2013 results were below our expectations on account of no transferable development rights (TDR) sales due to low inventory and all the sales coming in from the high margin floor space index (FSI) sale in Vasai- Virar (realization of `1200/sqft). There were no FSI sales from the Guru Ashish project during the quarter. The management expects 1.5-2mn sqft of FSI sales per quarter going forward. The debt was reduced by 66cr during the quarter taking the debt to equity to 0.36x, down slightly qoq. The management highlighted focus on debt reduction by monetization of existing land and no new land purchase for the time being. The management also indicated towards the launch of its project in Pantnagar in Ghatkopar in a couple of months. We maintain a Buy on the stock. Performance below expectations: Revenues decreased 60% yoy and 68% qoq to `201cr (vs our estimate of `552cr) on account of no TDR sales and all the sales coming in from the high margin FSI sale in Vasai- Virar. The EBITDA margin came in at 78.4%, up from 53% yoy owing to higher margin FSI sales. Consequently, the operating profit stood at `158cr, down 40.7% yoy and 40.4% qoq. The tax rate for 1QFY2013 stood at 16.0% (26.6%); the PAT de-grew 50% yoy and 67% qoq to `105cr. Outlook and valuation: We believe that HDIL could outperform on the back of an improving approval scenario in the city and successful new launches which are expected over the coming months, which would further improve its balance sheet. At `84, HDIL is trading at 0.3x and 0.28x on our FY2013E and FY2014E book value estimates, which seems cheap given the RoE profile of the company (FY2013E- 8.8%, FY2014E-9.4%). We maintain Buy on HDIL, with a target price of `115.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 37.4 0.6 35.6 26.5

Abs. (%) Sensex DLF

3m 9.3 35.4

1yr 5.5

3yr 14.6

(19.0) (71.6)

Key Financials (Consolidated)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011
1,869 22.7 822 44.8 60.1 19.8 4.2 0.4 9.9 8.4 4.1 6.8

FY2012
2,006 7.4 741 (9.9) 52.8 17.9 4.7 0.3 7.5 7.0 3.7 6.9

FY2013E
2,441 21.7 943 27.2 55.1 22.7 3.7 0.3 8.8 8.6 3.1 5.6

FY2014E
3,344 37.0 1,106 17.3 48.2 26.6 3.2 0.3 9.4 9.5 2.3 4.8

Rahul Kaul
Tel: 022 4040 3800 Ext: 6817 Rahul.kaul@angelbroking.com

Please refer to important disclosures at the end of this report

HDIL | 1QFY2013 Result Update

Exhibit 1: HDIL: Quarterly Profit & Loss Statement

(` cr) Revenues Total expenditure EBIDTA EBIDTA margin (%) Depreciation Net Interest Other income PBT Tax Tax rate (%) PAT Exceptional Items Adjusted PAT PAT margin (%) EO Items/Prior items Reported PAT Number of shares (m) EPS (`)
Source: Company, Angel Research

1QFY13 201 43 158 78.4 21 21 9 125 19 15.6 105 0 105 52.4 0 105 41.9 2.5

1QFY12 502 236 266 52.9 2 18 37 283 74 26.1 209 0 209 41.6 0 209 41.9 5.0

% yoy (59.9) (81.6) (40.7) 1,998bp 902.9 18.2 (74.7) (55.9) (73.7) (49.6) (49.6) 1,075bps (49.6)

4QFY12 625 360 265 42.3 22 20 25 248 (75) (30.3) 323 (8) 316 51.7 0 323 41.9 7.7

% qoq (67.8) (87.9) (40.4) 697bp (2.6) 7.2 (61.8) (49.6) (125.9) -67.4 (66.6) 70bps (67.4)

Exhibit 2: Actual vs estimates

(` cr) Net Sales Operating Profit OPM (%) Reported PAT
Source: Company, Angel Research

Estimates
552 287 52.0 202

Actual
201 158 78.4 105

Variation (%)
(63.6) (45.1) (47.8)

Performance highlights
HDILs 1QFY2013 results were below our expectations on account of no TDR sales due to low inventory and all the sales coming in from the high margin FSI sale in Vasai- Virar (realization of `1200/sqft). There were no FSI sales from the Guru Ashish project during the quarter. The management expects 1.5-2mn sqft of FSI sales per quarter going forward. The debt was reduced by 66cr during the quarter taking the debt to equity to .36x, down slightly from .37x qoq. The management highlighted focus on debt reduction by monetization of existing land and no new land purchase for the time being. The management also indicated towards a launch of its project in Pantnagar in Ghatkopar in a couple of month. According to the management, Exotica 2 (launched on august 11) with 800,000 sqft of saleable area has seen good demand with 10% of the project already sold out.

August 16, 201

HDIL | 1QFY2013 Result Update

Exhibit 3: Forthcoming Residential Projects

Project Meadows- Phase II Daulat Nagar Premier Exotica Bldg. 3 & Ghatkopar Kochi Kharadi Novinon Property (Shahad) Paradise City (Phase III) Total
Source: Company, Angel Research

Location Kandivali Goregaon Santacruz Kurla Ghatkopar Kochi Pune MMR

Saleable Area (mn sq ft) 1.5 1.6 0.8 0.8 0.5 6.3 0.4 5.0 23.7

Revenue dips due to muted TDR sales

Revenues decreased 60% yoy and 68% qoq to `201cr (vs our estimate of `552cr) on account of no TDR sales and all the sales coming in from the high margin FSI sale in Vasai- Virar. The EBITDA margin came in at 78.4%, up from 53% yoy owing to higher margin FSI sales from Virar- Vasai. Consequently, the operating profit stood at `158cr, down 40.7% yoy and 40.4% qoq. The tax rate for 1QFY2013 stood at 16.0% (26.6%) while the PAT de-grew 50% yoy and 67% qoq to `105cr.

Exhibit 4: Quarterly revenue trend

700 600 500 400 60 40 20 0 (20) (40) (60)

Exhibit 5: Quarterly EBITDA trend

300 250 200 90 80 70 60 50 40 30 20 10 0

(`cr)

300 200 100 0

(` cr)

150 100 50 0

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

Revenue (LHS)

yoy change (RHS)

EBITDA (LHS)

EBITDA Margin (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 6: HDIL: Ongoing projects breakdown by type

Residential , 36.78

Exhibit 7: Quarterly PAT trend

350 300 250 200 150 100 50 0 150 100 50 0 (50)

TDR, 37.77

(Rs cr)

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

SRS/ Redevelopmen t, 5.76

Commercial and Retail, 7.57

PAT (LHS)
Source: Company, Angel Research Source: Company, Angel Research

yoy chg (RHS)

August 16, 201

1QFY13

1QFY13

HDIL | 1QFY2013 Result Update

Investment Arguments
High-margin slum redevelopment projects
Slum redevelopment (SRA) projects do not involve upfront investment in land compared to the conventional real estate projects. The cost per sqft in slum redevelopment projects is around `3,000/sqft vs `5,0006,000/sqft (including land cost) on freehold land due to the high property prices in Mumbai. Slum redevelopment also has high entry barriers, as it requires expertise and experience to deal with government agencies and slum dwellers regularly till the completion of the project. In Mumbai, more than 54% of the population lives in slum clusters situated in certain pockets of the city. A slum population of 7.5mn translates into 1.5mn families, with an average household size of five. This translates into SRA potential of 644mn sqft and revenue potential of `2,000bn for the redevelopers. HDIL, the market leader in slum rehabilitation, is well poised to cash in on the immense opportunity in the slum rehabilitation scheme (SRS) segment. The company has executed close to 10mn sqft of SRS projects in the last 15 years and is more competitive than other developers in the fray. A resolution of the Mumbai International Airport (MIAL) project will act as a strong catalyst for HDIL, in our view.

Outlook and Valuation

The HDIL stock underperformed in the last cyclical downturn primarily due to its overdependence on TDR sales. We believe that HDIL could outperform on the back of improving approval scenario in the city and successful new launches which are expected over the coming months, which would further improve its balance sheet. At `84, HDIL is trading at 0.3x and 0.28x on our FY2013E and FY2014E book value estimates, which seems cheap given the RoE profile of the company (FY2013E- 8.8%, FY2014E 9.4%). We maintain Buy on HDIL, with a target price of `115.

Exhibit 8: HDIL: PB price band

450 400 350 300 250 200 150 100 50 0

Dec-09

Dec-10

Aug-09

Aug-10

Aug-11

Dec-11

Apr-09

Apr-10

Apr-11

Apr-12

Price (`)
Source: Company, Angel Research

0.3x

0.5x

0.8x

1x

August 16, 201

Aug-12

Oct-09

Oct-10

Feb-10

Feb-11

Oct-11

Feb-12

Jun-09

Jun-10

Jun-11

Jun-12

HDIL | 1QFY2013 Result Update

Company Background
Housing Development & Infrastructure Ltd (HDIL) has established itself as one of India's premier real estate development companies. HDIL is also the largest slum rehabilitation company, with significant operations in the Mumbai Metropolitan Region. The company has completed more than 100mn sqft of construction in all verticals of real estate and has rehabilitated around 30,000 families in the past decade. The company's operations range from residential, commercial and retail projects to slum rehabilitation and land development.

August 16, 201

HDIL | 1QFY2013 Result Update

Profit & Loss Statement (Consolidated)

Y/E March (` cr) Net Sales Other operating income Total operating income % chg Total Expenditure Cost of construction Other operating expenditure Personnel Administrative exps EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: earnings of associate Less: Minority interest (MI) Prior period items & others PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2010 1,523 1,523 (13.0) (713) (141) (477) (29) (66) 810 1.0 53.2 (72) 738 (7.5) 48.4 (46) 14 2 705 (8.6) 705 (133) 18.9 572 (0) 572 572 (15.5) 37.6 15.9 13.8 (27.2) FY2011 1,869 1,869 22.7 (747) (92) (542) (46) (66) 1,122 38.5 60.1 (84) 1,038 40.8 55.6 (84) 31 3 986 39.8 986 (159) 16.2 827 827 827 44.5 44.2 19.9 19.9 44.5 FY2012 2,006 2,006 7.4 (946) (350) (479) (41) (76) 1,060 (5.5) 52.8 (86) 974 (6.2) 48.6 (75) 51 5 950 (3.6) 950 (209) 22.0 741 741 741.2 (10.4) 36.9 17.9 17.9 (10.4) FY2013E 2,441 2,441 21.7 (1,097) (483) (477) (37) (100) 1,344 26.8 55.1 (61) 1,283 31.7 52.6 (88) 62 5 1,257 32.3 1,257 (314) 25.0 943 943 943 27.2 38.6 22.7 22.7 27.2 FY2014E 3,344 3,344 37.0 (1,732) (794) (738) (51) (149) 1,611 19.9 48.2 (77) 1,535 19.6 45.9 (90) 49 3 1,494 18.9 1,494 (388) 26.0 1,106 1,106 1,106 17.3 33.1 26.6 26.6 17.3

August 16, 201

HDIL | 1QFY2013 Result Update

Balance Sheet (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Money received against warrants Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets
194 11 183 22 259 243 11,319 792 1,565 8,962 876 10,443 11,150 242 14 228 92 220 52 15,558 230 3,550 11,779 2,331 13,227 (259) 13,559 336 100 236 146 58 16,817 223 4,045 12,550 2,851 13,966 14,406 481 161 320 146 58 17,877 205 4,247 13,424 2,890 14,987 15,511 541 238 303 146 58 19,719 258 4,884 14,577 3,310 16,409 16,917 359 6,684 7,043 0 4,102 5 11,150 415 8,813 9,228 5 4,320 7 13,559 415 9,891 10,306 5 4,082 14 14,406 415 10,796 11,211 5 4,282 14 15,511 415 11,901 12,316 5 4,582 14 16,917

FY2010

FY2011

FY2012

FY2013E

FY2014E

August 16, 201

HDIL | 1QFY2013 Result Update

Cash Flow Statement (Consolidated)

Y/E March (` cr) Profit before tax Depreciation & others Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations Inc./ (Dec.) in Fixed Assets Inc./ (Dec.) in Investments Other Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash FY2010 705 113 (1,615) 14 (120) (931) (342) 0 14 (328) 2,078 (42) (0) (61) 1,976 716 FY2011 981 167 (3,451) 31 (159) (2,493) (118) 191 31 104 234 218 1,375 1,827 (562) FY2012 950 161 (793) 51 (209) 58 (2) (6) 51 43 (238) (82) (320) (219) FY2013E 1,257 149 (1,038) 62 (314) (8) (146) 62 (84) 200 (111) 89 (3) FY2014E 253 49 204 49 49 (110) (110) 143

August 16, 201

HDIL | 1QFY2013 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) Working capital (ex-cash, days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT/Int) 0.5 9.9 0.5 0.4 7.0 0.8 0.4 6.6 0.9 0.4 4.7 1.4 0.4 5.0 1.0 12 1,878 44 179 2,130 9 1,970 55 297 2,212 7 2,100 112 442 2,432 6 1,821 120 401 2,132 7 1,442 86 318 1,688 7.5 7.8 10.0 8.4 8.8 10.0 7.0 7.1 7.5 8.6 8.7 8.8 9.5 9.6 9.4 48.4 0.8 0.2 6.4 10.5 0.7 3.3 55.6 0.8 0.2 7.3 10.1 0.5 6.0 48.6 0.8 0.1 5.5 9.4 0.4 3.9 52.6 0.8 0.2 6.5 9.0 0.4 5.6 45.9 0.7 0.2 7.1 8.9 0.4 6.4 15.9 13.7 15.5 169.7 19.9 19.8 21.8 228.6 17.9 17.9 19.9 248.4 22.7 22.7 24.2 270.2 26.6 26.6 28.5 296.8 6.1 5.4 0.5 4.5 8.4 0.6 4.2 3.8 0.4 4.1 6.8 0.5 4.7 4.2 0.3 3.7 6.9 0.4 3.7 3.5 0.3 3.1 5.6 0.4 3.2 2.9 0.3 2.3 4.8 0.4 FY2010 FY2011 FY2012 FY2013E FY2014E

August 16, 201

HDIL | 1QFY2013 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

HDIL No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

August 16, 201

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