Objective: Fundamental Analysis of Real Estate Sector in India

FUNDAMENTAL ANALYSIS OF REAL ESTATE SECTOR IN INDIA
OBJECTIVE
To understand the concept of Fundamental Analysis, its various parameters and how it
helps to a normal investor.
Objective for the project has been to identify the right stock to invest for long term wealth
creation. The stocks have been identified on the basis of various situations prevailing in
the country keeping in mind the global scenario.
Another important objective of this project is to explain the risk and return in investment
in real estate sector and the role of volatility in the stock markets.
The Research Analysis at the end of the project gives a real idea about how this sector
works. It helps us to apply these strategies in real life with the help of research analysis.
1|Page
METHODOLOGY OF STUDY
Sectoral Analysis refers to the study of the performance of the economy as a whole, the
industry and various companies and analyzing the same. It enables to predict the future
performance of a particular stock based on its past performance, the current status of the
internal as well as the external environment.
The internal environment includes:
The financial performance
The operational performance
The future deals with the clients
The share price trend
The management of the company, i.e. the Board of Directors etc.
The nature of the business
The external environment includes:
The Economy
The global scenario with respect to the business
General economic scenario
Political scenario
Performance of the stock market on the whole
Competitors
2|Page
Fundamental Analysis:
Here we look at balance sheet, income statement etc. to determine a company‘s value. In
financial terms it is used to measure a company‘s intrinsic value. It takes a long term
approach to analyze the market as compared to technical analysis. It often looks at data
over a number of years.
3|Page
LIMITATIONS
The research that we are doing of the companies and IPOs help us to suggest as to buy,
hold or to sell the particular stock. But these suggestions are based on what we expect,
would happen in the environment, the working of the company, global economies, etc.
This means that whatever value we expect would change as the conditions that are
beyond our control, keep on changing.
4|Page
Endurance and Emergence of Indian Real Estate
Real Estate Industry is a capital intensive industry and it thrives on easy availability
of credit. Last year’s subprime crisis brought an ineluctable change and with banks
freezing credit real estate industry was the worst hit as reflected in the stock prices of the
companies which plummeted almost 90% of their all time highs.
The unprecedented recession brought with it lessons for the real estate players and with
the hey days of the boom period ending the real estate players who had gone on a land
acquisition spree at unimaginable prices were left in an abrupt situation.
The banks which some time earlier were willing to provide easy credit to the real estate
companies put as plug on the credit and had it not been for the RBI’s intervention the
liquidity crunch would have left the companies in a precarious situation.
As the markets crawled back out of recession most of the real estate companies took the
opportunity to raise funds through various routes so that they could repay their ever
mounting debt or restructure their business in some way or the other so that
1. They are able to survive
2. They can align themselves in a manner by which they are able to take advantage of the
future growth.
5|Page
Sector Overview
•The Indian economy has witnessed substantive changes over the past decade growing at
an average GDP growth rate of 7.06% over the last 9 years. The Real Estate Industry has
been a crucial contributor to the Indian Economy being 2 largest employers after
agriculture and the housing sector alone contributes 5% to the country’s GDP.
•The construction sector has grown at an average of 9.85% since 2000 with growth rates
being as high as 16.2% in 2005 and 2006.
6|Page
• The strong economic performance of India provided fresh impetus to the real estate
sector which has been witnessing investments pouring in over the past decade.
•Substantial investor interest, large scale infrastructural activities undertaken by the

government, rapid urbanization are some of the factors that have contributed to the
phenomenal growth rate the sector witnessed over the years.
• The metros mainly Delhi, Mumbai, Bangalore and to an extent Chennai witnessed
heightened activity during the boom period and achieved global recognition and became
top investment destination among the world over the years.
• The strong growth witnessed by the Indian Economy coupled with strong fundamentals
of the companies had a favorable impact on not just residential real estate but all the other
asset classes as well.
• The growth in service sector coupled with growth in manufacturing sector helped
demand for construction related activities in the infrastructure and services sector which
has resulted in an increase in demand for commercial and industrial real estate over the
years.
7|Page
Market Classifications
8|Page
Growth Driver’s for the industry
9|Page
Residential:
•Even in the era of modernization housing still remains a prime need of common man and
this is what has been driving up the need for houses over the years.
•According to the 11th Five Year Plan Document Housing shortage as on 2007 is
estimated to be around 24.71 million. Most of this is from lower income segments which
are the reason why it is not being translated into demand. Thus new concepts like Low
cost housing and small houses are on a rise.
• The National Housing & Habitat Policy 1998 was formed to address the shortage and
the objective was to construct 20 million housing unites every year.
• Launch of JNNURM from 2005 which will bring under its purview development of 63
cities will impact Real estate in the region directly as Real Estate prices are directly
linked with development.
Growth Drivers:
10 | P a g e
•Urbanization: For any economy urbanization becomes a key factor of overall

development.
• India still has an only 28% person who is urbanized which is way below North
America’s average of 77.2% and even below Asia’s 36%.
• Considering the fact that India is considered one of the fastest growing economies in the
world we expect urbanization to happen at a much faster pace.
•Population Growth: With a population of 1028.17 million (2001 census) and an

average decadal growth rate of 36% over the last 50 years the demands for houses is ever
increasing.
• Development of slums: According to the 2001 census there are 607 towns with
population above 50000 which have a reported slum population 40.06 million
aggregating to 22.76% of the population implying that 1 out of every 4 persons in towns
still live in slums.
• With the country going through a mass transition we expect these slums to be
redeveloped in the coming years offering an opportunity to the real estate companies
(Source: Working Group Meeting on 11 Plans)
11 | P a g e
Commercial:
The boom in commercial real estate is attributable to demand from Indian corporates and
MNC’s. Robust demand from sectors such as IT/ITes, Telecom etc have contributed to
the growth in demand for commercial office space.
Growth Drivers:
12 | P a g e
• The service sector accounts for more than 50% of India’s GDP and with India expected
to grow at 8- 9% the service sector will be a major contributor which results in demand
for commercial Real Estate.
•The Government is promoting Tier2 & Tier3 cities as future centers of growth and with
a comparative cost advantage against western countries future prospects of growth in
these spaces look bright.
• With demand saturating in Tier1 cities like Delhi and Mumbai future growth prospects
in the rural market is the next growth story.
•With services like Telecom, Banking, FMCG etc treading the rural path land prices will
surely benefit in these areas indirectly benefiting the Real Estate companies operating in
these markets.
• Along with IT services such as Telecom, Banking, and Insurance are witnessing huge
growth ensuing in demand for commercial office space.
13 | P a g e
• Growth in FDI over the last decade has been a major focal point in increasing the
demand for commercial office space.
• With the opening up of FDI in various sectors Multi National Companies (MNC’s) have
e started setting up offices which has benefited Real Estate indirectly.
(Source: DIPP, ASSOCHAM)
Retail:
• The retail Industry in India is witnessing morphological changes over the years. Super
markets, Malls, Cash & Carry etc are the new words in shopping
•Development in the retail space has changed the face of retail and malls have taken
over stand alone “kirana” stores
• Malls have demand for high rises and organized model of shopping has led to an
increase in demand for new space to be dev eloped and this has translated into demand
for real estate companies.
•A rise in personal disposable income and changing habits of consumers has led to a
increase in demand for Retail Space.
•Organized retailing is slowly taking over with big domestic players entering the market
like Reliance, Aditya Birla and even international players entering the space like Wal
Mart, Metro etc.
14 | P a g e
Growth Drivers:
•The Indian retail market is the top attractive destination in the world followed by Russia
& China (AT Kearney’s Annual Global Retail Development Index 2009)
•The share of retail in India’s GDP is around 12% currently so with India growing at 8-
9% retail is expected to be a major contributor in its growth.
• Currently organized retailing constitutes just 5% of the total market in retail so we

believe this is still a virgin market with a potential to grow exponentially.
• Per Capita GDP is expected to grow exponentially leading to higher demand

resulting in a demand for retail space. The graph shows Per Capita GDP projections up to
15 | P a g e
Hospitality:
Tourism has been growing over the years which have been due to promotion of India as a
holiday destination both for the domestic citizens and foreigners living abroad. According
to the Conde Nast Traveler ranking hotels in India ranks 6th best among 100 best hotels
and resorts in the world and Jaipur ranks 8th amongst the top 50 cities in the world
according to the Conde Nast Traveler which shows why India is considered as an
upcoming tourist hot spot. The hospitality sector is expected to rise to US$ 275 billion in
the next 10 years. The domestic hospitality sector is expected to see investments of over
US$ 11 billion in the next two years with 40 international hotel brands making their
presence in the country in the next few years.
Growth Drivers
• International tourism in India has been growing over the years with promotion of the
country as a tourism hotspot
• Foreign tourist’s arrival in India stood at 5.37 million in 2008 with an annual average
growth rate of 5.6% while forex earnings stood at Rs 50730 crore with an annual growth
rate of 14.4%.
• India’s share in international tourism receipts stands at just 1.24% which shows the
potential to grow further
• Domestic tourists in 2008 stand at 562.92 million a growth of 6.9% over the previous
year in fact it has grown at an average rate of 11.6% from 1996-2008
• With India joining the bandwagon of countries which host games of the repute of
Commonwealth and also planning to bid for Olympics in the near future it acts as a fillip
for investment in the hospitality sector.
16 | P a g e
• With the development of airports and improving connectivity between cities

infrastructure spending by Government is acting as a catalyst for the hospitality industry.
• A new concept viz. medical tourism is gaining importance as India being a low cost
destination offers high quality services which has led to an increase in medical tourism
benefiting the hospitality industry
17 | P a g e
SEZ:
In order to promote exports and attract foreign direct investment in the country the
Government formulated the policy of Special Economic Zone (SEZ) in April 2000.
Incentives like duty free import, 100% tax exemption on export income for first 5 years
and 50% for the next 5 years, exemption from Service tax, Central Sales Tax, etc offer
fillip for investors which attracts investments from both domestic as well as foreign
investors.
18 | P a g e
Growth Drivers
• SEZ is considered investor friendly because of various incentives offered by

Government to the developers of SEZ’s.
• With a view of improving infrastructure and bring in investment and make India a
global hub for production the Government has recently put a lot of thrust on exports.
• Total value of exports from SEZ’s stood at Rs 66638 crore in 2007-08 an increase of
93% over the previous year showing the growing popularity of SEZ’s over the years.
• SEZ’s are most popular among IT and Pharma industry which constitute a major chunk
of total SEZ’s given approval.
• Currently approval for SEZ’s have witnessed a slowdown due to regulatory hurdles,
land availability and global economic slowdown but SEZ are sure to be a thing for the
future considering its attractive for the industry majors because of the tax concessions
attached with it.
(Source: Ministry of Commerce & Industry)
19 | P a g e
Current Scenario
• During the times of recession the Real Estate companies went down like a pack of
cards. We believe the main cause for this was a decline in sales which had them strapped
for liquidity be it in whatever form.
• Highly leveraged companies beared most of the brunt as it became difficult for them to
finance meet their debt obligations.
• We believe that demand will come from two segments of people
 Those who do not have proper houses

 Those who will still invest in Real Estate as an investment
• Our belief is validated by the fact that what was witnessed in other countries was not
replicated in India.
• None of the assets were put into distress sale like those in the western countries as it
was more a case of sentiments falling rather than demand.
• Companies which had made massive bids to acquire lands faced a crisis because they
had incurred huge costs and hence when sales plummeted they were not able to pay back
the interest on the debts taken.
20 | P a g e
Future Outlook
• We believe that the current decline in prices brings us to a situation where we believe
demand will come from two sources:
 Those who still do not have proper housing or housing at all

 Those who will invest in real estate as an asset class which offers a secured but
sure form of investment as seen over the previous years as the current decline in
prices will offer them a better opportunity.
• With the government putting the thrust on infrastructure and we believe that houses still
remain the basic necessity of the common man and we are not yet developed to
experience an asset bubble like the one witnessed in US
• Thus we believe that demand will stay as Real Estate as a sector has still not peaked like
in the developed countries and the potential for further growth still remains.
21 | P a g e
Government Initiatives
The government has introduced many progressive reform measures to unlock the
potential of the sector and also meet increasing demand levels. The stimulus package
announced by the government, coupled with the Reserve Bank of India's (RBI) move
allowing banks to provide special treatment to the real estate sector, is likely to impact
the Indian real estate sector in a positive way. RBI has decided to extend exceptional
concessional treatment to the commercial real estate exposure which is restructured, up to
June 30, 2009.
 100 per cent FDI allowed in realty projects through the automatic route.
 In case of integrated townships, the minimum area to be developed has been
brought down to 25 acres from 100 acres.
 Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed by
increasingly larger number of states.
 Minimum capital investment for wholly-owned subsidiaries and joint ventures
stands at US$ 10 million and US$ 5 million, respectively.
 Full repatriation of original investment after three years.
 51 per cent FDI allowed in single-brand retail outlets and 100 per cent in cash-
and-carry through the automatic route.
The 2009-10 budgets have also given sops to the realty sector. Developers of affordable
housing projects (units of 1,000-1,500 sq ft) have been granted a tax holiday on profits
from projects initiated in the financial year 2007-08. Such projects would have to be
completed before March 1, 2012.
At the same time, the finance minister allocated US$ 207 million to grant a 1 per cent
interest subsidy on home loans up to US$ 20,691, provided the cost of the home is not
more than US$ 41,382. This subsidy is expected to give a further boost to the housing
sector.
22 | P a g e
Key parameters for selecting a real estate stock
For an average investor, size of the 'land bank' remains the sole criterion for investing in
real estate companies. More often than not, their decisions are based on these land banks
with little or no importance attached to the execution time and the margins of the
projects. While land banks definitely give an indication of visibility in growth of the
company's revenues, there are a few other factors that investors need to consider before
investing in stocks from the sector. These include:
Management:
Though management is an important criterion for investment across the sectors, we

believe that the same assumes greater significance in the real estate industry considering
the poor disclosure standards followed by the companies.
Key ratios:
Not giving much importance to the land bank, investors should focus on working capital
to sales (considering high gestation period of projects), debt to equity, operating margins
and return on capital employed ratios. Also, considering the huge amount of funding
required for timely execution of projects, investors should also keep a check on the
possible dilution in equity, going forward.
Valuations:
We believe that 'price to earnings ratio', is an appropriate metric for valuing construction
companies. Besides, investors can also use 'price to sales ratio' for valuation purpose. As
we have explained earlier that 'land bank' should not be 'the' key criteria for looking at
real estate stocks.
23 | P a g e
Also, while valuing such companies, one has to practice caution. When valuing a real
estate company, taking the 'best' price per square foot skews the investment decision in
favour of risks. It is therefore, pertinent to value real estate companies based on a
'normalised' square foot price. It is also important to focus not just on the 'price per
square foot' but also the 'profit per square foot'. This is because real estate developers
increase prices also because of higher input costs (including legislative policy changes).
Some pitfalls
With respect to real estate stocks, a new theme has emerged in the Indian equity markets
- 'land banks'. In order to meet the rising demand for homes and commercial spaces in a
fast developing economy, construction activity has reached feverish levels in the country.
Not only real estate companies but companies from other sectors having free land for
development are also witnessing significant appreciation to their market values on the
back of expectations that the free land would eventually be developed and monetised.
While there is nothing wrong with this approach, the fact remained that even loss-making
companies with poor fundamentals are witnessing a sharp run up in their market
capitalization and this kind of euphoria is really uncalled for.
As far as the real estate companies are concerned (companies with real estate
development as their core business), these companies are entirely being valued based on
their land banks i.e. the total land they own and no thought is being given to important
considerations such as track record of the management, execution capabilities and
balance sheet strength.
Further, even the lands are being valued using a high per square feet rate, presumably on
the back of the assumption that they will keep on increasing indefinitely!
The risks with respect to investing in real estate stocks only get amplified considering
that projects have high gestation periods and are highly capital intensive. Add to this the
24 | P a g e
fact that there are no clear valuation methods available for valuing land accurately; not to
forget, the highly varied costs of land in different parts of the country.
25 | P a g e
DLF LTD.
Snapshot
Chief Executive Name: Mr. T C Goyal
Face Value: 2
Business Group Name: DLF Group
Incorporation Date: 18/06/1980
Industry Name: Construction and Contracting - Real Estate
Registrar of Company: KARVY computer share pvt ltd
Santosh complex, K G Road
Bangalore, Karnataka -560009
Listed on: National Stock Exchange of India Ltd.
The Stock Exchange, Mumbai.
Board of Directors
Name Designation
Mr. G S Talwar Non Executive Director
Mr. K N Memani Non Executive Director
Brig.(Retd) N P Singh Non Executive Director
Ms. Pia Singh Whole Time Director
Mr. Rajiv Singh Vice Chairman
Dr. K P Singh Chairman / Chair Person
Mr. B Bhushan Non Executive Director
26 | P a g e
Mr. Kameshwar Swarup Senior Executive Director
Mr. T C Goyal Managing Director
History of Company
YEAR EVENTS 2000 - The Scheme of Merger/Amalgamation of DLF Industries

Limited with M/s. DLF Universal Ltd., which was approved by the Hon'ble High Court
of Delhi at New Delhi and by the Hon'ble High Court of Punjab and Haryana at
Chandigarh came into effect on 09.10.2000.
2007 -The US-based Hilton Hotels Corporation has declared that it will develop 10 hotel
projects in the country in alliance with DLF Ltd.
Our business was founded by the late Mr. Raghvendra Singh and our Promoter, Mr. K P
Singh. Our business has a history of over 6 decades, commencing with the incorporation
of Raisina Cold Storage and Ice Company Private Limited on 16.03.1946 and Delhi
Land and Finance Private Limited on 18.09.1946. Since the inception of our Company,
Mr. K P Singh has been the promoter of the Company.
Pursuant to the order of the Delhi High Court dated 26.10.1970, Delhi Land and Finance
Private Limited and Raisina Cold Storage and Ice Company Private Limited along with
another group company, DLF Housing and Construction Private Limited, merged with
DLF United Private Limited with effect from 30.09.1970.
Thereafter, DLF United Limited merged with our Company, then known as American
Universal Electric (India) Limited, with effect from 1.10.1978, under a scheme of
amalgamation sanctioned by the Delhi High Court and the Punjab and Haryana High
Court.The merged entity was renamed as 'DLF Universal Electric Limited' with effect
from 18.06.1980.
27 | P a g e
Key events and milestones
Year Key events, milestones and achievements
1963 Incorporation of American Universal Electric (India) Ltd
1979 DLF United Limited amalgamates with American Universal Electric
(India) Limited to form DLF Universal Electric Limited
1981 DLF Universal Electric Limited changes name to DLF Universal Limited
1981 DLF Universal Limited obtains its first license from the State Government
Of Haryana and commences development of the 'DLF City' in
Gurgaon, Haryana
1985 We initiated plotted developments, self first plot in Gurgaon, Haryana.
Consolidate the development of DLF City for township development.
1991 Construction of our first office complex, 'DLF Centre', at New Delhi
1993 Completion of our first condominium project, 'Silver Oaks', at DLF City,
Gurgaon, Haryana
1996 Construction of 'DLF Corporate Park', our first office complex at DLF City,
Gurgaon, Haryana.
1999 Development of the DLF golf course
2002 We venture into retail development in Gurgaon, Haryana
2002 We offer integrated family entertainment centers with the commencement
28 | P a g e
of operation of 'DT Cinemas' at Gurgaon, Haryana
2003-04 Development of 'DLF Cybercity', an integrated IT park measuring
approximately 90 acres at Gurgaon, Haryana.
2005 Acquisition of 16.62 acres (approx) of mill land in Mumbai * Received
'Corporate Buildings Award' instituted by 'Indian Architect and Builder',
a publication of Jasubhai Media Group, Mumbai
 Received 'Superbrand' award from Hon'ble Minister for Civil Aviation,
Mr. Praful Patel.
2006 Construction joint venture signed between DLF Universal Limited and
U.K. based Laing O'Rourke Plc to form DLF Laing O'Rourke (India)
Limited
2006 DLF Universal Limited changes name to DLF Limited
2006 Alliance agreement signed between DLF and Hilton International Co.
to incorporate a joint venture company in India to develop, own and
acquire 50 to 75 hotels and services apartments.
2006 DLF enters into a joint venture with WSP Group Plc. for the purposes
of providing engineering and design services, environmental and
infrastructural facilities and also project management services.
2007 DLF enters into a joint venture with Prudential Insurance to establish a
joint venture company to undertake life insurance business in India.
29 | P a g e
- DLF launches $2 bn issue.
2008 DLF inked a memorandum of understanding with the infrastructure
company Gayatri Projects Ltd (GPL) to develop roads, highways and
bridges across the country.
- DLF Ltd and the Tamil Nadu Industrial Development Corporation
(TIDCO) have forayed into a alliance agreement for a Rs 1,500-crore
Information technology Special Economic Zone (SEZ).
Fundamentals:
Scrip ID DLF
Scrip Code 532868
Group / Index A / SENSEX
Industry Realty
Market Capitalization ( Rs cr ) 50,105.65
Book Value 72.90
Market Price 299.50
P/E 32.91
P/BV 2.27
EPS 9.09
BETA 1.5
30 | P a g e
Capital Structure
Authorised Issued PaidUp

From To Class Of PaidUp Face
Capital Capital Capital
Year Year Share Shares Value
(Cr.) (Cr.) (Cr.)
2008 2009 Equity Share 499.50 340.97 1704832680 2 340.97
2007 2008 Equity Share 499.50 340.97 1704832680 2 340.97
2006 2007 Equity Share 499.50 305.88 1529421080 2 305.88
2005 2006 Equity Share 39.50 37.88 37767997 10 37.77
2004 2005 Equity Share 4.50 3.62 3508007 10 3.51
2003 2004 Equity Share 4.50 3.62 3508007 10 3.51
2002 2003 Equity Share 4.50 3.62 3508007 10 3.51
2001 2002 Equity Share 4.50 3.62 3508007 10 3.51
1999 2001 Equity Share 4.50 3.62 3508007 10 3.51
1997 1999 Equity Share 4.50 3.62 3508007 10 3.51
Yearly High Lows
Year High Low

2007 1,099.00 505.60
2008 1,225.00 158.00
2009 490.80 124.15
Investors Returns
Dividend:
Year Dividend / Share Face Value Dividend %

2009 / 03 2.00 2 100.00
2008 / 03 4.00 2 200.00
2007 / 03 2.00 2 100.00
2006 / 03 4.00 10 40.00
2005 / 03 4.00 10 40.00
31 | P a g e
Price Movement
Performance Chart
Index Comparison
32 | P a g e
Ownership Pattern
33 | P a g e
Profit & Loss
Rs. Cr
Period & months 2009/03 2008/03 2007/03 2006/03 2005/03
Income
Net Operating Income 2,827.90 5,496.96 1,101.66 953.46 412.23

Expenses
Material Consumption 0.00 6.06 8.72 2.58 3.07

Manufacturing Expenses 778.34 2,141.29 237.75 577.64 256.22
Personel Expenses 71.12 103.78 44.82 16.76 33.32
Selling Expenses 59.28 45.70 63.42 26.74 23.69
Administrative
156.39 128.16 88.51 23.13 28.81
Expenses
Capitalised Expenses 0.00 0.00 0.00 0.00 0.00

Cost of Sales 1,065.14 2,424.98 443.22 646.85 345.11

Reported PBDIT 1,762.76 3,071.98 658.44 306.61 67.12

Other Recuring Income 1,006.72 560.74 327.67 191.56 33.07
Adjusted PBDIT 2,769.48 3,632.72 986.11 498.17 133.95

Depreciation 114.08 25.68 9.44 3.90 3.40
Other Write-offs 37.86 41.79 0.00 0.00 0.00

Adjusted PBIT 2,617.54 3,565.25 976.67 494.27 130.55

Finanical Expenses 809.86 447.65 356.25 146.15 33.07
Adjusted PBT 1,807.69 3,117.59 620.42 348.12 97.48

Tax Charges 261.00 543.52 214.56 120.47 29.18
Adjusted PAT 1,546.68 2,574.07 405.86 227.65 68.30

Non-recurring Items -2.15 0.16 -0.19 -0.24 -0.62
Other Non-cash
33.05 0.36 1.24 1.11 0.02
Adjustments
REPORTED PAT 1,547.77 2,574.40 405.77 227.44 67.70
APPROPRIATIONS
34 | P a g e
Equity Dividend 339.44 681.93 340.97 1.55 1.40

Preference Dividend 0.00 0.00 0.00 0.00 0.00
Retained Earnings 2,944.19 2,046.03 531.76 543.76 324.96
Balance Sheet:
Rs. Cr
Period & months
2009/03 2008/03 2007/03 2006/03 2005/03
SOURCES OF FUNDS
Owned Funds
Equity Share Capital 339.44 340.96 305.88 37.77 3.51

Share Application
0.00 0.00 0.00 0.00 0.00
Money
Preferential Share
0.00 0.00 0.00 0.00 0.00
Capital
Reserves & Surplus 12,035.39 10,928.19 346.92 607.16 380.42
Loan Funds
Secured Loans 7,979.97 4,945.91 6,242.81 3,010.93 630.15

Unsecured Loans 1,635.00 3,440.49 526.48 2.99 2.95
TOTAL 21,989.79 19,655.55 7,422.10 3,658.85 1,017.03
USES OF FUNDS
Fixed Assets
Gross Block 1,968.40 1,533.72 365.58 108.91 98.80
Accumulated
152.87 59.34 37.01 29.24 26.79
Depreciation
Less: Revaluation
0.00 0.00 0.00 0.00 0.00
Reserve
Net Block 1,815.52 1,474.37 328.57 79.67 72.00
Capital Work-in-
1,657.73 1,781.79 665.03 456.73 406.63
progress
Investments 2,956.32 1,839.83 769.17 1,397.28 173.82
35 | P a g e
Net Current Assets

Current Assets, Loans &
18,718.62 18,345.94 9,442.25 3,092.12 1,710.39
Advances
Less: Current Liabilities
3,158.40 3,786.38 3,782.93 1,366.95 1,345.82
& Provisions
Total Net Current Assets 15,560.22 14,559.56 5,659.32 1,725.17 364.57
Miscellaneous Expenses
0.00 0.00 0.00 0.00 0.00
not written off
TOTAL 21,989.79 19,655.55 7,422.10 3,658.85 1,017.03
Number of Equity
170.48 170.48 152.94 3.78 0.35
shares outstanding (Cr.)
Bonus component in
267.72 267.72 267.65 0.00 0.00
Equity Capital
Notes:
Book Value of
2,956.32 1,808.92 758.98 1,397.28 173.82
Unquoted Investments
Market Value of Quoted
0.00 30.92 10.19 0.00 0.00
Investments
Contingent liabilities 4,875.99 3,047.92 3,818.81 1,643.36 502.91
36 | P a g e
Key Financial Ratios:
2009/03 2008/03 2007/03 2006/03 2005/03

Per Share
EPS 9.08 15.10 2.65 60.22 192.98

Cash EPS 9.97 15.50 2.71 61.25 202.66
Book Value 72.59 66.10 4.27 170.76 1,094.43
Dividend/Share 2.00 4.00 2.00 4.00 4.00
Operating Profit / Share 10.34 18.02 4.31 81.18 191.34
Net Operating Income /
16.59 32.24 7.20 252.45 1,175.12
Share
Profitability Ratios
OPM 62.33 55.88 59.76 32.15 16.28

GPM 58.30 55.41 58.91 31.74 15.45
NPM 40.36 42.49 28.38 19.86 14.13
RONW 12.49 22.84 62.17 35.29 17.78
Liquidity Ratios
Debt/Equity 0.77 0.74 10.37 4.67 1.65

Current Ratio 5.93 4.85 2.50 2.26 1.27
Quick Ratio 3.83 3.28 1.36 1.91 0.73
Interest Cover 3.42 8.12 2.77 3.41 4.05
Turn Over Ratios
Sales/Total Assets 0.18 0.38 0.19 0.55 1.13

Sales/Fixed Assets 0.81 1.69 1.11 1.78 0.86
Sales/Current Assets 0.15 0.30 0.12 0.31 0.24
37 | P a g e
Research Analysis:
 How fast is the company growing?
Companies are judged by their sales and earnings growth rates than on the
absolute value of their sales and earnings.
Year 2009/03 2008/03 2007/03 2006/03 2005/03

412.23
Sales 2,827.90 5,496.96 1,101.66 953.46
Var % -48.56 398.97 15.54 131.29

ProfitAfter Tax 1,547.77 2,574.40 405.77 227.44 67.70
 How profitable is the company?

Investors prefer companies that increase profit margins, the percentage of sales
that they keep every year. This is accomplished either by lowering expenses or
raising prices.
Year 2009/03 2008/03 2007/03 2006/03 2005/03

Profit
1,547.77 2,574.40 405.77 227.44 67.70
After Tax
Var % -39.88 534.45 78.41 235.95
Year 2009/03 2008/03 2007/03
OPM (%) 60.86 55.41 60.87
Var% 9.84 -8.97
38 | P a g e
 How is the company's financial health?

The financial health of a company is dependent on a combination of profitability,
short-term liquidity and long term liquidity. Companies, which are profitable, but
have poor short term or long term liquidity measures, do not survive the troughs
of the trade cycle. Also firms, which are not profitable but are cash rich, do not
survive in the long term either. Such companies are taken over for their cash flow
or by others who believe that they can improve the profitability of the business.
Thus, those companies that do succeed and survive over the long term have a
well-rounded financial profile, and perform well in all aspects of financial
analysis. Profitability ratios reflect the business environment of the time.
The Key Profitability Ratios are:
Return on capital employed (ROCE) 15.5%

Net profit margin 40.36%
Short-term liquidity is the ability of the company to meet its short-term financial
commitments. Short-term liquidity ratios measure the relationship between current
liabilities and current assets. Current assets are stocks and work-in-progress, debtors and
cash that would normally be re-circulated to pay current liabilities. The ideal ratio 1:1.
But a very high ratio indicates that the company is unable to manage its cash properly.
The Short-term Liquidity Ratios are:
Current Ratio 5.93

Quick Ratio 3.83
Long term liquidity or gearing is concerned with the financial structure of the company.
Long term liquidity ratios measure the extent to which the capital employed in the
business has been financed either by shareholders through share capital and retained
39 | P a g e
earnings, or through borrowing and long-term finance. Highly geared companies are
risky. Look for a balance.
The Key Long-term Liquidity Ratios are:
Gearing Ratio 96.59%

Interest Cover 1.91
 How has the stock performed?
BSE NSE
Period close price Change Period close price Change

3 Months 355.60 -15.24 3 Months 355.60 -15.23
6 Months 423.65 -28.86 6 Months 423.60 -28.84
12 Months 171.10 76.15 12 Months 171.50 75.77
 Where is the stock's support and resistance?
BSE NSE
Rs.301.45
Close Price Rs.301.40 Close Price
Rs.160.30
52 Week Low Rs.160.40 52 Week Low
50-day Moving Average Rs.326.44 50-day Moving Average Rs.326.44
 How does the company stack up against it peers?
Market Cap
Company Sales (rs cr.) PAT (rs cr.)
(rs cr.)
51,158.01
DLF Ltd. 2,827.90 1,547.77
Housing Development &
1,719.29 754.87 9,751.03
Infrastructure Ltd.
Indiabulls Real Estate Ltd. 45.03 16.56 6,003.01
Anant Raj Industries Ltd. 32.01 365.84 3,879.04
40 | P a g e
Peer Analysis
Company ROCE OPM Debt/Equity EPS P/E

DLF 15.5% 62.33 0.77 9.09 32.91
UNITECH 13.87% 56.73 2.69 4.56 15.88
HDIL 8.76% 75.73 0.92 30.14 9.49
Source: www.bseindia.com
 Return On Capital Employed (ROCE): It indicates the percentage of return on

the total capital employed in the business.
ROCE of DLF is 15.5% which is satisfactory as compared to Peer Company.

ROCE of HDIL is 8.76% which is unfavorable for Company’s image as it may
result in decrease in the confidence among the investor’s about the company’s
performance, as investors invest in those companies which more often have a
constant ROCE or whose ROCE keeps on increasing.
The company should take measures to improve its Return on Capital Employed,
so that the investors and the shareholders regain the confidence in the company.
 Operating Profit Margin (OPM): It indicates net margin earned on a sale of

Rs.100. This ratio helps in determining the efficiency with which affaires of the
business are being managed.
There is no Standard norm. However, constant increase in the above ratio year
after year is a definite indication of improving conditions of the business.
 Debt – Equity Ratio: The debt-equity ratio is determined to ascertain the

soundness of the long term financial policies of the company. It is also known as
External-Internal equity ratio. The term external equities refer to total outside
liabilities & the term Internal equities refer to shareholders funds.
41 | P a g e
The D/E ratio of DLF is 0.77 implies sufficient safety margin whereas D/E ratio
of HDIL is satisfactory. The D/E ratio of UNITECH i.e. 2.69 is quite high which
means owners are putting up relatively less money of their own. It is danger
signal for creditors. A high D/E ratio has equally serious implications from the
firm’s point of view also.
The shareholders of the firm would, however stand to gain in two ways:
(1) With a limited stake, they would be able to retain control of the firm and
(2) The return to them would be magnified.
With the larger proportion of debt in the financial structure, the earnings
available to the owners would increase more than proportionately with an
increase in the operating profits of the firm. This is because the debt carries a
fixed rate of return and if the firm is able to earn on the borrowed funds a rate
higher than the fixed-charge on loans, the benefits will go to the shareholders.
 Earnings Per Share (EPS): EPS measures the profit available to the equity
shareholders on a per share basis, that is the amount they can get on every share
held.
EPS of HDIL is 30.14 which is very high compared with Peer Company. It is due
to HDIL is new company which got listed in 2007.EPS of DLF is 9.09 which
denote that company is able to give as returns only Rs.9.09 for the face value of
the share of Rs.2. EPS of UNITECH is 4.56 which is quite less & company
should try to increase the EPS by increasing the profits.
From point of view of shareholders the steep decline in EPS will not make the
companies share attractive to a potential investor.
42 | P a g e
 Price Earnings (P/E) ratio: The P/E ratio reflects the price currently being paid by
the market for each rupee of currently reported EPS. P/E ratio measures investors’
expectations & the market appraisal of the performance of a firm.
The P/E ratio of HDIL is very low i.e.9.49 which is due to company got listed in
2007, it is new to investors. The P/E of UNITECH is 15.88 which is quite
satisfactory on investors point of view. P/E ratio of DLF is 32.91 which is higher
in this sector that implies investors confidence is larger in firm’s future.
43 | P a g e
Bibliography
www.google.com
www.money.rediff.com
www.bseindia.com
www.nseindia.com
44 | P a g e

Objective: Fundamental Analysis of Real Estate Sector in India

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Objective: Fundamental Analysis of Real Estate Sector in India

Uploaded by

Copyright:

Available Formats

FUNDAMENTAL ANALYSIS OF REAL ESTATE SECTOR IN INDIA

The internal environment includes:

The financial performance

The operational performance

The future deals with the clients

The share price trend

The management of the company, i.e. the Board of Directors etc.

The nature of the business

The external environment includes:

The global scenario with respect to the business

General economic scenario

Performance of the stock market on the whole

Endurance and Emergence of Indian Real Estate

1. They are able to survive

•Substantial investor interest, large scale infrastructural activities undertaken by the

Growth Driver’s for the industry

•Urbanization: For any economy urbanization becomes a key factor of overall

•Population Growth: With a population of 1028.17 million (2001 census) and an

(Source: Working Group Meeting on 11 Plans)

(Source: DIPP, ASSOCHAM)

• Currently organized retailing constitutes just 5% of the total market in retail so we

• Per Capita GDP is expected to grow exponentially leading to higher demand

• With the development of airports and improving connectivity between cities

• SEZ is considered investor friendly because of various incentives offered by

(Source: Ministry of Commerce & Industry)

• We believe that demand will come from two segments of people

 Those who do not have proper houses

 Those who still do not have proper housing or housing at all

Key parameters for selecting a real estate stock

Though management is an important criterion for investment across the sectors, we

Business Group Name: DLF Group

Incorporation Date: 18/06/1980

Industry Name: Construction and Contracting - Real Estate

Registrar of Company: KARVY computer share pvt ltd

Santosh complex, K G Road

Bangalore, Karnataka -560009

Listed on: National Stock Exchange of India Ltd.

The Stock Exchange, Mumbai.

Mr. G S Talwar Non Executive Director

Mr. K N Memani Non Executive Director

Brig.(Retd) N P Singh Non Executive Director

Ms. Pia Singh Whole Time Director

Mr. Rajiv Singh Vice Chairman

Dr. K P Singh Chairman / Chair Person

Mr. B Bhushan Non Executive Director

Mr. Kameshwar Swarup Senior Executive Director

Mr. T C Goyal Managing Director

YEAR EVENTS 2000 - The Scheme of Merger/Amalgamation of DLF Industries

Key events and milestones

Year Key events, milestones and achievements

1963 Incorporation of American Universal Electric (India) Ltd

1979 DLF United Limited amalgamates with American Universal Electric

(India) Limited to form DLF Universal Electric Limited

Of Haryana and commences development of the 'DLF City' in

1985 We initiated plotted developments, self first plot in Gurgaon, Haryana.

Consolidate the development of DLF City for township development.

1999 Development of the DLF golf course

2002 We venture into retail development in Gurgaon, Haryana

2002 We offer integrated family entertainment centers with the commencement

of operation of 'DT Cinemas' at Gurgaon, Haryana

2003-04 Development of 'DLF Cybercity', an integrated IT park measuring

approximately 90 acres at Gurgaon, Haryana.