28 September 2010

Anant Raj Industries

The InSites
Takeaways from site visits

NCR site visit highlights

Execution muted due to heavy monsoon; key beneficiary of ongoing
recovery in the commercial/retail vertical

Anant Raj Industries (ARIL) is a focused city-centric developer and is one of the
largest land owners in Delhi, with a fully paid land bank of ~1,000 acres. Given its
city-centric focus and large holdings of prime land in and around Delhi, we expect
it to be a key beneficiary of the ongoing revival in the RE sector. ARIL has ~4msf of
completed commercial/retail projects along with ~3msf under construction, which
it can lease to bolster its rental income. In addition, it has ~3msf residential projects
in pipeline, of which it has launched ~0.6msf in 1QFY11.

MANESAR IT PARK: LEASING IN PROGRESS

Visited key sites: We visited some of the key sites of Anantraj in NCR
region which includes its recently launched residential projects in Kapasera
and Manesar; most awaited premium residential projects in Bhagwandas
and Hauzkhas; ~1.8msf IT park project in Manesar and remaining land parcels
over there; Kirti Nagar retail mall (which could have a strong positive impact
on its rental income) and some of the key completed and near completion
hotel projects. The company is in the process of effectively deploying its idle
cash on value accretive land acquisition in NCR region. We visited one of
such recently acquired land parcel of ~1.8msf in Gurgaon.

Execution progress in recent launches muted due to monsoon: We find the progress in construction to be
slightly muted (especially for it's recently launched residential projects) in last couple of months on account of heavy
monsoon in NCR. Nonetheless, we expect the progress on its IT Park and retail project in Kirti Nagar are satisfactory
enough to get completed within stated timeline, with a possibility of a minor delay of 2-3month.

Management guided for positive outlook for 2HFY11: During 1QFY11, the management ahs guided for strong
response in its residential projects with Kapasera projects fully sold within a month. On commercial vertical, it has
mentioned that early signs of recovery are visible with strong pick-up in enquiry and decent progress in lease transaction
across all its rental assets. ARIL has also witnessed a pick-up in its leasing activity in its rental assets. With possible
commencement of Kirti Nagar mall in 4QFY11 and improved leasing pick-up in Manesar IT park, the company expects
to witness a strong pickup in rental income in 2HFY11 from current level of Rs181m in 1QFY11.

Valuation and view

ARIL has a robust business model with multiple revenue streams and high monetization visibility. We estimate its rental
income in FY11 to be Rs815m and expected to increase to Rs1.8b in FY12.We believe the launch of premium residential
projects at Hauz Khas and Bhagwandas to be a key near-term trigger for ARIL. We expect revenues to increase at 70%
CAGR over FY10-12 and net profit to increase at 35% over FY10-12. Our FY12 NAV for ARIL is Rs210/share. The stock
trades at ~1x FY12E BV of Rs142/share and ~35% discount to its FY12 NAV of Rs210, which is very attractive compared
to industry peers. Maintain Buy.

Siddharth Bothra (SBothra@MotilalOswal.com); Tel: +91 22 3982 5407

Sandipan Pal (Sandipan.Pal@MotilalOswal.com); Tel: +91 22 3982 5436
 The InSites

Operational updates for key projects

We visited some of the key sites of Anantraj in NCR region which includes its recently
launched residential projects in Kapasera and Manesar; most awaited premium residential
projects in Bhagwandas and Hauzkhas; ~1.8msf IT park project in Manesar and remaining
land parcels over there; Kirti Nagar retail mall (which could have a strong positive impact
on its rental income) and some of the key completed and near completion hotel projects.
The company is in the process of effectively deploying its idle cash on value accretive
land acquisition in NCR region. We visited one of such recently acquired land parcel of
~1.8msf in Gurgaon.

Residential projects
Execution muted in recently #1. Kapasera Residential Project (GAV: ~Rs1b; Contribution to GAV: ~1%)
launched project due to  Background: During 1QFY11, ARIL launched residential projects in Kapasera, which
heavy monsoon received very strong response. The project of ~0.29msf (~104 units) has been
completely sold at an average realization of ~Rs5,000/sf; The company has booked
~60% of revenue from Kapasera projects in 1QFY11.
 Execution status: The excavation work is done and pilling work has started. However,
the construction has stalled due to heavy rainfall in last couple of months. The
management guided for delivery by FY12.
 Our view: Since the company has already booked a significant portion of revenue
during 1QFY11, incremental revenue booking from this project will be lower in
forthcoming quarters. We expect this project to contribute minimally in 2QFY11 due
to slow execution pace in last couple of months.

KAPASERA RESIDENTIAL PROJECT: PILLING WORK STARTED

The excavation work is done

and pilling work has been
started in Kapasera project

Source: Company/MOSL

28 September 2010 2

Construction has not
been started in Manesar
Residential Project
Bhagwandas project is likely
to get operational in FY12
Approval in progress,
construction not started yet
28 September 2010
The InSites
#2. Manesar Residential Project (GAV: ~Rs1.3b; Contribution to GAV: 1.5%)
 Background: During 1QFY11, ARIL launched another residential project in Manesar,
which has also received encouraging response. While ~25% of the Manesar project
(1.14msf, of which phase-1 is of ~0.28msf with 560 units) has been sold in 1QFY11 at
an average realization of ~Rs2,400/sf, the company has increased the rate to Rs2,700/
sf. As on date, ~35% of the project has been sold. The management is hopeful of
selling the remaining inventories very soon and launching phase-II by 3QFY11.
 Execution status: Work has not been started. The access road in still under
development. Delivery guidance for sold flats is FY13. DLF has launched its Manesar
project in proximity to this with relatively superior location and significant construction
activities visible in that project.
 Our view: Sales seems relatively muted in 2QFY11 for this project. Despite no visibility
in construction, this project will keep on contributing to revenue since its land cost is
more than 30% (the threshold level for ARIL to book revenue).
#3. Bhagwandas (GAV: ~Rs7b; Contribution to GAV: 7.5%)
 Background: Bhagwandas is one the high-end residential projects located in the
heart of Delhi in the vicinity of prime areas such Ferozshah Road and Tilak Marg. The
average residential capital values in the vicinity are in the Rs35,000-40,000/sf range
and is likely to remain stable owing to limited/no supply. Currently the project is under
approval stage. Nonetheless, the company has guided that the project is unlikely to get
launched in FY11.
 Execution status: Approval process in progress, construction activities not started
yet.
 Our view: We expect the project to get launched in 1HFY12.
FRONT VIEW OF BHAWANDAS PROJECT
Source: Company/MOSL
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 The InSites

#4. Hauz Khas Project (GAV: ~Rs5.6b; Contribution to GAV: 6%)

 Background: ARIL’s planned residential development of ~0.26msf in Hauz Khas is
strategically located in South Central Delhi, in the vicinity of prime areas such as
Safdarjung Enclave, Green Park, South Extension and Greater Kailash. Though the
company had done a soft launch of the project in Mar-10 and managed presale of
Management is hopeful ~12units at Rs36000/sf, the official launch has been delayed due to legal issues with
of launching Hauz Khas this project.
project in 3QFY11  Recent update: The management is confident on getting the necessary approvals in
its favor and has guided for possible launch of the project during 3QFY11. While, the
delay in launch of this key project has been a major concern, successful monetization
of this project could be a key catalyst for the stock.
 Execution status: ARIL is waiting for court’s ruling, construction activities not started
yet.
 Our view: In the event, ARIL gets the court ruling in its favor, Hauz Khas is likely to
get launched in 3QFY11. We have modeled the project to contribute ~Rs2.3b to ARIL’s
revenue in FY11.
SITE FOR HAUZ KHAS RESIDENTIAL PROJECT

Source: Company/MOSL

HAUZ KHAS IS STRATEGICALLY LOCATED IN SOUTH CENTRAL DELHI

Successful monetization of
Hauz Khas project could be
a key catalyst for ARIL

Source: Company/MOSL

28 September 2010 4
 The InSites

Commercial projects
#1. Manesar IT Park Project (GAV: ~Rs5.4b; Contribution to GAV: 6%)
Construction for IT park  Background: The company has completed a large portion of construction in FY10.
completed, hotel to get The project is located in Sector-8 of IMT township by HSIIDC. The total area of the
operational by 1QFY12 project is 1.8msf with 1.4msf of office space, 80,000sf of hotel and remaining area for
small retail spaces, recreation area, etc. The average rental for this project is Rs35/sf.
 Execution status: ~35% of total 1.2msf of office spaces has been leased out and
yielding rental. Management is confident of ~70% absorption by FY11. The key tenants
who have started operation are Inergy Automotive, GMT Teletech, Allahabad Bank,
New India Assurance, etc. For the hotel property, the management is in the process of
tying up with Hilton and hopeful of completing construction by CY10 and starting
operation by 1QFY12.
 Our views: The IT Park at Manesar has contributed ~Rs53m as rental income in
1QFY11. Management has guided for similar figure for 2QFY11 since incremental
rent yielding absorption has been minimal.

MANESAR IT PARK: LEASING IN PROGRESS

~35% of total 1.2msf of office

spaces has been leased out RECREATIONAL AREA IN MANESAR IT PARK
and yielding rental

Source: Company/MOSL

28 September 2010 5

50-60% of total area tied-up
with key brands like MORE,
Westside, Bharti Walmart etc
Kirti Nagar Mall is expected
to be completed by 3Q/
4QFY11
28 September 2010
The InSites
#2. Manesar Logistic Park Project (GAV: ~Rs3.7b; Contribution to GAV: 4%)
 Background: The company is planning to develop IT park on ~112acres plot in
Manesar.
 Execution status: Management has guided for approval in CY10 and construction
to start in 1QFY11
 Our view: We expect this project to contribute to topline from 2HFY12.
Retail project
#1. Kirti Nagar Retail Mall (GAV: ~Rs12.7b; Contribution to GAV: 14%)
 Background: This is one of the key projects of ARIL in Delhi with ~0.75msf of
leasable area. Management has guided for 50-60% of area already tied-up with key
brands such as More (65,000sf), Westside, Liliput, FastTrack, Bharti Walmart, etc,
and is hopeful of achieving ~80% by FY11. While the average rental value achieved
till date is Rs110/sf, the company expects to reach Rs125/sf for its agreement in
pipeline.
 Execution status: The mall was expected get operational by 2QFY11. However,
significant part of finishing work is yet to be completed.
 Our view: We expect the Kirti Nagar mall to start yielding rental income only from
4QFY11.
KIRTI NAGAR MALL: FINISHING STAGE
KIRTI NAGAR MALL: INSIDE VIEW
Source: Company/MOSL
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 The InSites

INTERNAL FINISHING IN PROGRESS FOR "MORE" IN KIRTI NAGAR MALL

Facade work in
progress for key tenants

Source: Company/MOSL

Hotel projects
Hotel Tricolor / Grand Papillon (GAV: ~Rs7.9b; Combined contribution
to GAV 9%)
 Background: The company has tied up with Mapple on a fixed rental basis for a few
hotels in central Delhi. While Hotel Grand Papillon has already started generating
rentals since 1QFY11, the Tricolor is expected to start operation by 3QFY11.
 Execution status: Finishing activities going on.
 Our view: Grand Papillon will keep on contributing ~Rs29m/qtr and Hotel Tricolor
expected to contribute ~Rs22.5m/qtr from 4QFY11.

HOTEL TRI-COLOR: RENTAL TO START IN 4QFY11

Steady rental expected

from hotel assets

Source: Company/MOSL

28 September 2010 7
 The InSites

HOTEL GRAND PAPILLON : RENTAL COMMENCED IN 1QFY11

Hotel Grand contributes

Rs7.5m/month

Source: Company/MOSL

Gurgaon: New acquisition project (Not modeled in)

New acquisition in progress
 Background: With relative strong liquidity position and idle cash in hand, ARIL has
followed the strategy to acquire value accretive land parcels in NCR. As part of this
strategy, the company has already acquired a 16-acre land parcel with a development
potential of 1.8msf in Gurgaon Sector 91. Management has guided for launch of this
project in FY11.
 Execution status: Approval in process.
 Our view: Expect launch post phase-II of Manesar residential project.

We find the progress in construction to be slightly muted (especially for it's recently launched
residential projects) in last couple of months on account of heavy monsoon in NCR.
Nonetheless, we expect the progress on its IT Park and retail project in Kirti Nagar are
satisfactory enough to get completed within stated timeline, with a possibility of a minor
delay of 2-3month.

Management guidance - Key takeaways

Rental income to remain  Management mentioned that early signs of recovery are visible in most of its commercial
flat QoQ in 2QFY11 and retail projects. ARIL has also witnessed a pick-up in its leasing activity in its rental
assets.
 Total rental income stood at Rs181m in 1QFY11 and management has indicated the
figure to remain same in 2QFY11 due to minor delay in retail project at Kirti Nagar.
However, it expects significant boost in rental income by 2HFY11 post the
commencement of Kirti Nagar mall and improved leasing activities in Manesar IT
Park.

28 September 2010 8
 The InSites

ARIL'S RENTAL INCOME PORTFOLIO (RS M)

FY10 FY11

1Q 2Q 3Q 4Q 1Q

Anant Raj Exotica - Mehrauli 15 20 20 20 21

Anant Raj Retreat - Mehrauli 21 21 30 30 30
E-2 Jhandewalan 40 39 40 40 36
IT Park, Manesar 3 21 34 50 53
Karol Baug, Delhi 12 12 12 12 12
Grand Papillon - - - - 29
IIPM Bldg - - - - -
Total Rental Income 92 113 135 151 181
Source: Company

Outlook positive  On the slower execution pace in recently launched residential projects, management
for 2HFY11 has indicated heavy monsoon to be the key hindrance in last couple of months. However,
the company is confident of delivering the projects without any significant delay. While
the Kapasera project is expected to be delivered by FY12, the company has guided to
deliver phase-I of Manesar project in 1HFY13.
 The company expects the residential vertical to contribute moderately with incremental
bookings in Manesar and Kapasera project in 2QFY11. However, the management is
hopeful of launching phase-II of Manesar project, recently acquired Gurgaon property,
housing project in Rai and the Hauz Khas property by FY11, which will significantly
boost contribution from residential project.
 ARIL has net cash of ~Rs4.9b. The company is in the process of acquiring land worth
~Rs10b in Gurgaon. This acquisition will be in line with its strategy of effectively
deploying the unutilized surplus cash to acquire highly attractive land parcels from
distressed sellers. In this regard, the company has already taken a bank loan of ~Rs5b.
In FY11, the company has already acquired a 16-acre land parcel in Sector 91 (Gurgaon)
with a development potential of 1.8msf with an average acquisition cost of Rs538/sf.

Valuation and view

Key beneficiary from  ARIL has a robust business model with multiple revenue streams and high monetization
ongoing recovery in visibility. The company is likely to be one of the key beneficiaries from the ongoing
commercial verticals recovery in commercial vertical with its 4msf of completed commercial/retail projects
along with ~3msf under construction, which it can lease to bolster its rental income.
We estimate its rental income in FY11 to be Rs815m and expected to increase to
Rs1.8b in FY12
 We believe the launch of premium residential projects at Hauz Khas and Bhagwandas
to be a key near-term trigger for ARIL. Effective deployment of idle cash in value
accretive land acquisitions at attractive prices is going to aid better ROE.
 We expect revenues to increase at 70% CAGR over FY10-12 and net profit to increase
at 35% over FY10-12. Our FY12 NAV for ARIL is Rs210/share. The residential
vertical constitutes 34% of GAV while commercial and hospitality verticals constitute
~20% each of GAV.
 The stock trades at ~1x FY12E BV of Rs142/share and ~35% discount to its FY12
NAV of Rs210, which is very attractive compared to industry peers. Maintain Buy.

28 September 2010 9
 The InSites

ESTIMATED PROJECT-WISE RENTAL INCOME

RENTAL INCOME PROJECT-WISE (RS M) AREA (MSF) RENTAL (RS/SF) FY11 FY12

IT - Parks
Manesar Haryana 1.1 34 323 391
Rai Haryana 3.0 27 0 144
Sub - Total (A) 4.1 323 535
% of total rental income 39.6 30.0
Commercial/ Retail
Koral Bagh, Delhi 0.1 155 43 46
Kirti Nagar, Delhi 0.8 137 167 709
Jhandewalan, Delhi 0.2 61 110 115
Faiz Road, Delhi 0.0 27 6 6
Rani Jhansi Road, Delhi 0.0 35 5 6
We estimate rental income to
Greater Noida, UP 0.1 27 6 29
be Rs815m in FY11 and to Sub - Total (B) 1.1 337 911
increase to Rs1.8b FY12 % of total rental income 41.4 51.1
Hotels
Manesar IT Park 0.1 - 0 25
Shahoorpur, Delhi, Kalinga 0.5 - 35 68
Grand Meadows Near Airport, Delhi 0.3 - 30 67
Papillion Estates, Near Airport, Delhi 0.2 - 25 43
Bhasin Resorts, Shahoorpur, Delhi 0.4 - 30 65
Tri Color NH8 delhi -Reliance JV 0.6 - 35 70
Sub - Total (C) 2.1 155 338
% of total rental income 19.0 18.9
TOTAL (A+B+C) 7.4 - 815 1,784
Source: Company

NAV CALCULATION

PARTICULARS RS M NAV/SHARE % NAV % GAV

Residential 31,181 106 50.4 34.1

Commercial and Retail 17,874 61 28.9 19.6
Hotels 19,603 67 31.7 21.4
IT Park 21,599 73 34.9 23.6
Commercial and SEZ 1,134 4 1.8 1.2
Retail verticals contributes Gross Asset Value 91,390 310 147.8 100.0
~40% of GAV Less: Net Debt -3,502 -12 -5.7 -3.8
Less: Other Op Exp 9,139 31 14.8 10.0
Tax 21,934 74 35.5 24.0
Land cost 2,000 7 3.2 2.2
Net Asset Value 61,819 210 100.0 67.6
Source: Company

VERTICAL-WISE GAV ANALYSIS CITY-WISE GAV ANALYSIS

Hotels
SEZ
12%
1%
Resident
IT Park ial Resid-
SEZ
24% 34% ential
25%
32%

Commer Commer-
cial and cial and
Hotels Retail Retail
IT Parks
21% 20% 3%
28%

Source: Company

28 September 2010 10
 The InSites

Financials and Valuation

28 September 2010 11
 The InSites

For more copies or other information, contact

Institutional: Navin Agarwal. Retail: Manish Shah
Phone: (91-22) 39825500 Fax: (91-22) 22885038. E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd, 3rd Floor, Hoechst House, Nariman Point, Mumbai 400 021
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28 September 2010 12