Real Estate Analysis and

Recommendations
Dr. Shalini Kalra Sahi

Group 2
Heena Pahuja
Minerva Khajuria
Mohit maheshwari
Pushp Raj
Samarpan Jena
Shashank Sinha

Real Estate - India

Covers
Covers residential
residential housing,
housing, commercial
commercial offices,
offices, trading
trading spaces
spaces such
such as
as

theatres, hotels
hotels and
and restaurants,
restaurants, retail
retail outlets,
outlets, industrial
industrial buildings
buildings such
such as
as
theatres,
factories and
and government
government buildings.
buildings.
factories
Business
Business involves
involves transactions,
transactions, such
such as
as purchase,
purchase, sale,
sale, and
and development
development

of land,
land, residential
residential and
and non-residential
non-residential buildings.
buildings.
of
Major
Major players
players in
in the
the real
real estate
estate market
market are
are the
the land
land owners,
owners, developers,
developers,

builders, real
real estate
estate agents,
agents, tenants,
tenants, buyers
buyers etc.
etc.
builders,

One of
of the
the very
very important
important sectors
sectors for
for the
the overall
overall growth
growth of
of the
the economy.
economy.
One
Major employment
employment driver,
driver, being
being the
the second
second largest
largest employer
employer next
next only
only to
to
Major
agriculture.
agriculture.
About
About 250
250 ancillary
ancillary industries
industries such
such as
as cement,
cement, steel,
steel, brick
brick indirectly
indirectly

depend on
on real
real estate
estate which
which amplifies
amplifies the
the importance
importance of
of this
this sector.
sector.
depend

In
In the
the past
past real
real estate
estate was
was unorganized,
unorganized, fragmented
fragmented and
and was
was dominated
dominated by
by

high net
net worth
worth regional
regional players.
players.
high
Consequent
Consequent to
to the
the governments
governments policy
policy to
to allow
allow Foreign
Foreign Direct
Direct Investment
Investment

(FDI) in
in this
this sector,
sector, there
there was
was aa boom
boom in
in investment
investment and
and developmental
developmental
(FDI)
activities
activities

Real Estate India Contd..

The
The Indian
Indian real
real estate
estate industry
industry has
has been
been on
on aa roller
roller coaster
coaster ride
ride since
since

2005.
2005.
The
The industry
industry achieved
achieved new
new heights
heights during
during 2007
2007 and
and early
early 2008,
2008,

characterized by
by aa growth
growth in
in demand,
demand, substantial
substantial development
development and
and
characterized
increased foreign
foreign investments.
investments.
increased
The
The industry
industry in
in India
India faced
faced the
the heat
heat of
of the
the global
global crisis
crisis of
of 2008
2008 in
in terms
terms of
of

demand slowdown
slowdown and
and aa severe
severe liquidity
liquidity crunch.
crunch.
aa demand
Sector
Sector managed
managed to
to emerge
emerge without
without too
too much
much distress
distress due
due to
to the
the sound
sound

fundamentals of
of the
the economy,
economy, some
some regulatory
regulatory intervention
intervention and
and an
an overall
overall
fundamentals
better-protected financial
financial regime.
regime.
better-protected

Major Players - DLF

DLF
DLF is
is engaged
engaged in
in the
the development
development of
of residential,
residential, commercial
commercial and
and retail
retail

properties. The
The group
group primarily
primarily operates
operates in
in India
India
properties.
The
The residential
residential properties
properties segment
segment is
is engaged
engaged in
in the
the development
development of
of

super luxury
luxury homes,
homes, luxury
luxury homes
homes and
and premium
premium homes.
homes.
super
The
The commercial
commercial properties
properties segment
segment is
is engaged
engaged in
in the
the development
development of
of

commercial complexes
complexes including
including malls
malls and
and shops
shops in
in office
office complexes.
complexes.
commercial
Also
Also involved
involved in
in the
the rental
rental business,
business, comprising
comprising the
the leasing
leasing of
of spaces
spaces in
in

commercial offices,
offices, IT
IT (information
(information technology)
technology) parks,
parks, IT
IT special
special
commercial
economic zones
zones (SEZs),
(SEZs), retail
retail malls
malls and
and shopping
shopping centers.
centers.
economic
DLF
DLF also
also conducts
conducts other
other businesses
businesses including
including hotels
hotels and
and life
life insurance.
insurance.

Major Players Oberoi Realty

Oberoi
Oberoi Realty
Realty Ltd
Ltd is
is aa Mumbai
Mumbai based
based real
real estate
estate development
development company.
company.

The company's
company's primary
primary focus
focus is
is to
to develop
develop residential
residential properties.
properties. They
They
The
also develop
develop office
office space,
space, retail
retail and
and hospitality
hospitality projects.
projects.
also
Oberoi
Oberoi Realty
Realty is
is aa zero
zero debt
debt company;
company; aa feature
feature that
that no
no other
other company
company in
in

the realty
realty sector
sector can
can boast
boast of.
of.
the
Oberoi
Oberoi has
has got
got aa mix
mix of
of saleable
saleable residential
residential properties
properties as
as well
well as
as malls
malls

and office
office properties
properties which
which generate
generate aa steady
steady cash
cash flow.
flow. It
It also
also has
has
and
invested in
in schools
schools and
and hospitals.
hospitals. This
This model
model takes
takes care
care of
of any
any fluctuation
fluctuation
invested
in real
real estate
estate business
business to
to certain
certain extent.
extent.
in

Major Players Prestige Estate

The
The company
company is
is predominantly
predominantly present
present in
in southern
southern part
part of
of country
country in
in

cities like
like Mysore,
Mysore, Hyderabad,
Hyderabad, Chennai,
Chennai, Kochi
Kochi with
with major
major focus
focus on
on
cities
Bengaluru.
Bengaluru.
Prestige
Prestige has
has presence
presence in
in various
various segments
segments of
of real
real estate
estate such
such as
as

residential, commercial,
commercial, hospitality.
hospitality. The
The major
major portion
portion of
of cash
cash flow
flow for
for
residential,
brigade comes
comes from
from residential
residential segment
segment where
where it
it is
is present
present in
in all
all 3
3 sub
sub
brigade
segments namely
namely affordable
affordable homes,
homes, middle
middle income
income group
group and
and luxury
luxury
segments
segment.
segment.

Analysis - DLF

Cost of Equity
Cost of
of Equity
Equity =
= Risk
Risk free
free rate
rate +
+ Beta
Beta
Cost
Market Premium
Premium
** Market
Risk free
free rate
rate =
= 8.4
8.4 %
%
Risk
Market Premium
Premium =
= 9.05
9.05 %
%
Market

Beta

1 year daily
return
3 years
weekly
return
Average

1.78
1.99

1.89

An Average
Average Beta
Beta of
of 1.89
1.89 indicates
indicates that
that DLF
DLF has
has lot
lot of
of systemic
systemic risk
risk and
and is
is highly
highly
An
volatile. Hence
Hence this
this stock
stock is
is not
not suitable
suitable for
for risk
risk averse
averse investors.
investors.
volatile.
Cost of Equity

8.4 + 1.89*9.05 =25.49 %

Investors expect
expect minimum
minimum return
return of
of 25.49
25.49 %
% on
on their
their investment
investment in
in DLFs
DLFs
Investors
stock which
which is
is high
high because
because of
of inherent
inherent systematic
systematic risk
risk present
present in
in this
this stock.
stock.
stock

Cost of Debt & WACC

Year
2014

Cost of debt (%)

14.85

2013
2012
2011
2010

12.13
11.11
7.88
5.12

Average

10.22

Post tax
tax cost
cost of
of debt
debt =
= (1-tax
(1-tax rate)
rate) ** Pre
Pre tax
tax
Post
cost of
of debt
debt
cost
Tax rate
rate for
for DLF
DLF =27.2
=27.2 %
%
Tax
Post tax cost of debt

(1 - .272) * 10.22 = 7.43 %

Market Capitalization
Capitalization =
= 157.5*1781.93
157.5*1781.93 =
=
Market
280653.975 mn
mn
280653.975
Value of
of Debt
Debt =
= 165,830.31
165,830.31 mn
mn
Value
E/V =
= 62.86
62.86 %,
%, D/V
D/V =
= 37.14
37.14 %
%
E/V
WACC

.62*25.49

18.78 %

+.37*7.43 =

Return on Equity
Year
2014

PAT (crores)
526

Equity
16,643.54

ROE (%)
3.17

2013

501

14,614.20

3.43

2012

1041

14,496.56

7.19

2011

1269

13,810.49

9.19

2010

765

Average

12,830.01

5.96

5.79 %

ROE (%)
10

9.19

7.19

6
4
2

5.96
3.17

0
2014

3.43

2013

2012

2011

2010

ROE (%)

Average Return
Return on
on Equity
Equity for
for
Average
last 5
5 years
years is
is way
way less
less than
than
last
expected return
return from
from investors
investors
expected
(cost of
of equity
equity =
= 25.9%).
25.9%). Hence
Hence
(cost
company is
is not
not doing
doing very
very well
well
company
in this
this regard.
regard. PAT
PAT is
is
in
consistently going
going down
down year
year by
by
consistently
year which
which is
is again
again aa concern
concern
year
for company.
company.
for

Capital Structure
Debt
Year
2010

Debt (mn)
21676

2011

21,652.16

2012

20,222.91

19,077.25

16,583.31

2013
2014

Equity
From Year

To Year

Class
Of
Share
Equity
Share
Equity
Share
Equity
Share
Equity
Share

2013

2014

2012

2013

2011

2012

2010

2011

2009

Equity
2010 Share

Debt/Equity Ratio
1.13

0.96

0.87

0.81

0.67

Authoriz
ed
Capital
(Crores)

Issued
Capital
(Crores
)

Paid Up
Shares
(Nos)

499.5

357.83

499.5

341.28

499.5

341.25

499.5

341.01

1,781,451,3
07
1,698,719,0
77
1,698,385,7
19
1,697,571,7
94

341.01

1,697,390,8
90

499.5

Paid Up
Face
Value

Paid Up
Capital
(Crores
)

356.29

339.74

339.68

339.51

339.48

Capital Structure Analysis

Continuing
Continuing their
their efforts
efforts of
of improving
improving D/E
D/E ratio,
ratio, company
company is
is financing
financing its
its

need by
by issuing
issuing new
new equities.
equities. Recently
Recently SEBI
SEBI introduced
introduced aa ban
ban on
on DLFs
DLFs
need
participation in
in capital
capital market
market which
which will
will adversely
adversely affect
affect their
their capital
capital
participation
structure as
as they
they will
will have
have to
to rely
rely on
on debt
debt for
for financing
financing their
their needs.
needs.
structure
The
The capital
capital structure
structure of
of DLF
DLF can
can be
be understood
understood by
by static
static trade
trade off
off

theory. Heavy
Heavy debt
debt resulted
resulted in
in high
high cost
cost of
of financial
financial distress
distress resulting
resulting in
in
theory.
overall low
low value
value of
of firm.
firm. Company
Company is
is reducing
reducing the
the debt
debt so
so as
as to
to increase
increase
overall
the value
value of
of firm
firm to
to maximum
maximum point
point as
as depicted
depicted in
in trade
trade off
off theory.
theory.
the
Extra
Extra debt
debt increases
increases EPS
EPS when
when EBIT
EBIT is
is above
above aa threshold
threshold value.
value. In
In case
case of
of

DLF, EBIT
EBIT is
is continuously
continuously decreasing
decreasing year
year by
by year
year and
and hence
hence it
it makes
makes
DLF,
sense for
for them
them not
not to
to take
take any
any more
more debt.
debt.
sense

Dividend Policy
Year

Dividend %
value=2)

DPS
2014
2013
2012
2011
2010

2/share
2/share
2/share
2/share
2/share

(face
100
100
100
100
100

Dividend
Payout
64.35%
67.59%
32.54%
27.96%
46.53%

Dividend Policy Analysis

DLF
DLF has
has maintained
maintained aa consistent
consistent dividend
dividend percentage
percentage (100
(100 %)
%) even
even

though profits
profits have
have been
been consistently
consistently going
going down.
down. In
In 2014,
2014, DLF
DLF retuned
retuned
though
about 65
65 %
% of
of profit
profit back
back to
to investors
investors in
in form
form of
of dividends
dividends which
which signals
signals
about
lack of
of investment
investment opportunities
opportunities for
for them
them in
in near
near future.
future.
lack
DLF
DLF has
has not
not provided
provided any
any bonus
bonus or
or right
right issues
issues in
in last
last 5
5 years.
years. As
As they
they are
are

looking to
to improve
improve debt
debt to
to equity
equity ratio,
ratio, they
they can
can look
look at
at this
this option
option
looking
instead of
of providing
providing cash
cash dividend
dividend as
as payout
payout ratio
ratio as
as high
high as
as 65%
65% is
is not
not
instead
viable in
in long
long term.
term.
viable

Working Capital

Current
Ratio
Receiva
ble days
Inventor
y days
Payable
days

Cash
Conversi
on Cycle

2014
1.82

2013
1.78

2012
1.84

2011
2.16

2010
6.59

46.15

78.08

37.34

50.37

61.92

1299.40

1441.88

862.52

933.95

992.85

305.87

404.77

170.33

110.32

83.08

1039.68

1115.19

729.53

874

971.69

Cash Conversion Cycle

1200
1000 1039.68

1115.19
874

800

971.69
Cash Conversion days

729.53

600
400
200
0
2014

2013

2012

2011

2010

Working Capital - Analysis

Real
Real Estate
Estate companies
companies traditionally
traditionally have
have high
high conversion
conversion cycle
cycle because
because of
of

long gestation
gestation period
period of
of projects.
projects. Days
Days payable
payable for
for DLF
DLF is
is higher
higher
long
compared to
to its
its peers
peers which
which signifies
signifies the
the power
power which
which DLF
DLF commands
commands
compared
among it
it suppliers.
suppliers. Conversion
Conversion cycle
cycle of
of nearly
nearly 3
3 years
years signifies
signifies the
the issue
issue
among
of liquidity
liquidity crunch
crunch which
which most
most real
real estate
estate players
players including
including DLF
DLF are
are facing
facing
of
today.
today.

Analysis Oberoi Realty

Cost of Equity
Cost of
of Equity
Equity =
= Risk
Risk free
free rate
rate +
+ Beta
Beta
Cost
Market Premium
Premium
** Market
Risk free
free rate
rate =
= 8.4
8.4 %
%
Risk
Market Premium
Premium =
= 9.05
9.05 %
%
Market

Cost of Equity

Beta

1 year daily
return
3 years
weekly
return
Average

1.12
1.08

1.10

8.4 + 1.10*9.05 =18.38 %

Oberoi Realty
Realty has
has an
an average
average Beta
Beta of
of 1.1
1.1 which
which is
is lower
lower than
than its
its peers.
peers. This
This
Oberoi
indicates low
low systematic
systematic risk
risk and
and volatility
volatility present
present in
in stock.
stock. Hence
Hence Oberoi
Oberoi
indicates
Realty is
is suitable
suitable stock
stock for
for risk
risk averse
averse investors.
investors.
Realty

Cost of Debt & WACC

Oberoi Realty
Realty is
is aa zero
zero debt
debt company;
company; aa feature
feature that
that no
no other
other company
company in
in the
the
Oberoi
realty sector
sector can
can boast
boast of.
of.
realty

Value of
of Debt
Debt =
=0
0
Value
E/V =
= 100.00%
100.00% %,
%, D/V
D/V =
=0
0%
%
E/V
WACC

.1*18.38%

= 18.38%

Return on Equity
Year
2014

PAT (crores)
295

Equity
2,734.12

ROE (%)
10.79

2013

327

2,506.38

13.05

2012

254

2,245.06

11.31

2011

170

2,061.10

8.25

2010

24.28

923.99

Average

2.63

9.21 %

ROE(%)

14.00%
12.00%
10.00%

13.05%
10.79%

11.31%
8.25%

8.00%

ROE(%)

6.00%
4.00%
2.63%

2.00%
0.00%
2014

2013

2012

2011

2010

Oberoi Realty
Realty has
has shown
shown aa
Oberoi
consistent increasing
increasing trend
trend in
in
consistent
ROE but
but it
it is
is still
still less
less than
than
ROE
required cost
cost of
of equity(18.38%)
equity(18.38%)
required

Capital Structure
Debt
Oberoi realty
realty is
is debt
debt free
free for
for the
the
Oberoi
last 5
5 years
years
last

Equity

From Year

To Year

Class
Of
Share
Equity
Share
Equity
Share
Equity
Share
Equity
Share

2013

2014

2012

2013

2011

2012

2010

2011

2009

Equity
2010 Share

Authoriz
ed
Capital
(Crores)

Issued
Capital
(Crores
)

Paid Up
Shares
(Nos)

Paid Up
Face
Value

Paid Up
Capital
(Crores
)

425

328.23

328233262

10

328.23

425

328.23

328233262

10

328.23

378.5

328.23

328233262

10

328.23

378.5

328.23

328233262

10

328.23

378.5

288.67

288671262

10

288.67

Capital Structure Analysis

Oberoi
Oberoi Realty
Realty seems
seems to
to be
be following
following pecking
pecking order
order theory
theory as
as company
company

has not
not raised
raised any
any debt
debt or
or released
released any
any new
new equity
equity share
share for
for last
last 4
4 years.
years.
has
Management
Management believes
believes in
in using
using internally
internally generated
generated cash
cash for
for its
its

operations
operations
Consolidated
Consolidated balance
balance sheet
sheet of
of Oberoi
Oberoi Realty
Realty for
for year
year 2014
2014 shows
shows total
total

debt of
of 76
76 crores
crores after
after years
years of
of zero
zero debt
debt which
which shows
shows that
that management
management
debt
is finally
finally ready
ready to
to raise
raise funds
funds through
through debt.
debt. The
The reason
reason may
may be
be attributed
attributed
is
to low
low CFO
CFO for
for last
last few
few years
years which
which forced
forced company
company to
to raise
raise debt.
debt.
to

Dividend Policy
Year

DPS
2014
2013
2012
2011
2010

Rs.2.0/share
Rs.2.0/share
Rs.2.0/share
Rs.1.0/share
Rs.0.2/share

Dividend %
value=10)

(face

Dividend
Payout
20
20
20
10
2

22.25%
20.08%
25.85%
19.31%
23.55%

Dividend Policy Analysis

Oberoi
Oberoi Realty
Realty has
has increased
increased dividend
dividend from
from 2
2 to
to 20
20 percentage
percentage but
but has
has

maintained aa dividend
dividend payout
payout of
of about
about 20
20 %.
%. Oberoi
Oberoi Realty
Realty has
has not
not
maintained
provided any
any bonus
bonus or
or right
right issues
issues in
in last
last 5
5 years.
years.
provided

Working Capital

Current
Ratio
Receiva
ble days
Inventor
y days
Payable
days

Cash
Conversi
on Cycle

2014

2013

2012

2011

2010

2.61

2.14

4.06

1.89

27.68

19.73

22.35

16.8

84.12

429.05

303.88

314.6

224.79

1692.02

61.99

18.33

50.55

33.92

413.72

394.74

305.28

286.4

207.67

1362.42

Cash Conversion Cycle

1600
1400

1362.42

1200
Cash Conversion
Cycle

1000
800
600
400 394.74
200
0
2014

305.28

2013

286.4

2012

207.67
2011

2010

Working Capital - Analysis

Cash
Cash Conversion
Conversion cycle
cycle is
is lower
lower for
for Oberoi
Oberoi Realty
Realty compared
compared to
to its
its peers.
peers.

Inventory day
day is
is about
about aa year
year which
which is
is very
very good
good as
as far
far as
as real
real estate
estate is
is
Inventory
concerned. Company
Company should
should look
look to
to improve
improve payable
payable days
days so
so as
as to
to further
further
concerned.
improve their
their conversion
conversion cycle.
cycle.
improve

Analysis Prestige Estate

Cost of Equity
Cost of
of Equity
Equity =
= Risk
Risk free
free rate
rate +
+ Beta
Beta
Cost
Market Premium
Premium
** Market
Risk free
free rate
rate =
= 8.4
8.4 %
%
Risk
Market Premium
Premium =
= 9.05
9.05 %
%
Market

Beta

1 year daily
return
3 years
weekly
return
Average

1.13
1.47

1.30

An Average
Average Beta
Beta of
of 1.3
1.3 indicates
indicates that
that Prestige
Prestige realty
realty has
has some
some amount
amount of
of
An
systemic risk
risk and
and is
is highly
highly volatile.
volatile. Hence
Hence this
this stock
stock is
is suitable
suitable for
for investors
investors with
with
systemic
medium risk
risk appetite.
appetite.
medium
Cost of Equity

8.4 + 1.30*9.05 =20.18

%

Investors expect
expect minimum
minimum return
return of
of 20.18
20.18 %
% on
on their
their investment
investment in
in Prestiges
Prestiges
Investors
stock which
which is
is high
high because
because of
of inherent
inherent systematic
systematic risk
risk present
present in
in this
this stock.
stock.
stock

Cost of Debt & WACC

Year

Cost of debt (%)

2014

8.16

2013

6.15

2012

6.77

2011

8.11

2010

10.81

Average

8.00

Post tax
tax cost
cost of
of debt
debt =
= (1-tax
(1-tax rate)
rate) ** Pre
Pre tax
tax
Post
cost of
of debt
debt
cost
Tax rate
rate for
for Prestige
Prestige Estates
Estates =35.04
=35.04 %
%
Tax
Post tax cost of debt

(1 - .35) * 8.00 = 5.20 %

Market Capitalization
Capitalization =
= 262.7*375
262.7*375 =
= 98512.5
98512.5
Market
mn
mn
Value of
of Debt
Debt =
= 28054.9
28054.9 mn
mn
Value
E/V =
= 77.83
77.83 %,
%, D/V
D/V =
= 22.17
22.17 %
%
E/V
WACC

.78*20.18 +.22*5.20 =
16.86 %
.

Return on Equity
Year
2014

PAT (crores)
340.02

Equity
2,971.07

ROE (%)
11.44

2013

276.07

2,708.40

10.19

2012

129.07

2,127.02

6.07

2011

203.54

2,043.69

9.96

2010

141.73

627.62

22.58

Average

12.05
%

ROE (%)
25
22.58
20
15
10

ROE (%)
11.44

10.19
6.07

5
0
2014

9.96

2013

2012

2011

2010

ROE for
for Prestige
Prestige Estates
Estates has
has
ROE
been highly
highly volatile
volatile ranging
ranging
been
from 6
6 to
to 22
22 %.
%. ROE
ROE is
is lower
lower
from
than cost
cost of
of equity
equity (20.18%)for
(20.18%)for
than
4 out
out of
of last
last 5
5 years
years clearly
clearly
4
stating that
that Prestige
Prestige has
has
stating
underperformed in
in recent
recent
underperformed
times.
times.

Capital Structure
Debt
Year
2010
2011
2012
2013
2014

Debt (mn)
1,601.50

Debt/Equity Ratio
2.02

1,517.53
1,758.37
2,420.02
2,805.49

0.5
0.53
0.56
0.6

Equity
From Year

To Year

Class
Of
Share
Equity
Share
Equity
Share
Equity
Share
Equity
Share

2013

2014

2012

2013

2011

2012

2010

2011

2009

Equity
2010 Share

Authoriz
ed
Capital
(Crores)

Issued
Capital
(Crores
)

Paid Up
Shares
(Nos)

Paid Up
Face
Value

Paid Up
Capital
(Crores
)

400

350

350000000

10

350

400

350

350000000

10

350

400

328.07

328073770

10

328.07

400

328.07

328073770

10

328.07

400

262.5

262500000

10

262.5

Prestige has
has slowly
slowly increased
increased the
the number
number of
of outstanding
outstanding shares
shares from
from 26.2
26.2 to
to 35
35
Prestige
millions in
in period
period of
of 5
5 years.
years.
millions

Dividend Policy
Year

DPS
2014
2013
2012
2011
2010

Rs.1.5/share
Rs.1.2/share
Rs.1.2/share
Rs.1.2/share
No Dividend

Dividend %
value=10)
15
12
12
12
-

(face

Dividend
Payout
15.44%
15.21%
30.50%
19.34%
0.00%

Prestige Estates
Estates has
has not
not
Prestige
provided any
any bonus
bonus or
or
provided
right issues
issues in
in last
last 5
5
right
years
years

Working Capital

Current
Ratio
Receiva
ble days
Inventor
y days
Payable
days

Cash
Conversi
on Cycle

2014

2013

2012

2011

1.08

1.14

1.22

1.52

1.85

129.06

192.67

451.11

185.28

124.63

302.15

324.71

505.5

217.89

288.81

87.42

87.42

131.44

57.2

78.09

343.79

429.96

825.17

345.97

335.35

Cash Conversion Cycle

900
825.17

800
700
600
500
400
300

Cash Conversion
Cycle

429.96
345.97

343.79

335.35

200
100
0
2014

2010

2013

2012

2011

2010

Working Capital - Analysis

Cash Conversion
Conversion cycle
cycle is
is lower
lower for
for Prestige
Prestige Estates
Estates compared
compared to
to its
its peers.
peers.
Cash
Inventory day
day is
is less
less than
than aa year
year which
which is
is very
very good
good as
as far
far as
as real
real estate
estate is
is
Inventory
concerned. Company
Company should
should look
look to
to improve
improve payable
payable days
days so
so as
as to
to further
further
concerned.
improve their
their conversion
conversion cycle.
cycle.
improve

Summary and
Recommendations

DLF
Summary
DLF
DLF has
has been
been one
one of
of the
the worst
worst performing
performing stock
stock in
in CNX
CNX realty
realty sector
sector in
in past
past

5 years
years which
which is
is clearly
clearly seen
seen by
by consistently
consistently decreasing
decreasing profit
profit and
and ROE.
ROE.
5
The
The reason
reason can
can be
be attributed
attributed to
to both
both macroeconomic
macroeconomic factors
factors (unfavorable
(unfavorable

conditions for
for real
real estate
estate in
in NCR
NCR region
region where
where DLF
DLF is
is primarily
primarily located)
located) as
as
conditions
well as
as systemic
systemic factors
factors (management,
(management, political
political issues,
issues, court
court litigations).
litigations).
well

Recommendations
Diversify
Diversify to
to other
other parts
parts of
of countries
countries like
like Mumbai
Mumbai where
where real
real estate
estate

conditions are
are better
better
Concentrate
Concentrate on
on bottom
bottom line
line and
and ROE.
ROE.
conditions
Paying
Paying out
out 65
65 %
% of
of profit
profit back
back to
to investors
investors in
in form
form of
of dividend
dividend and
and then
then

raising fund
fund at
at high
high cost
cost doesnt
doesnt make
make sense.
sense.
raising
Company
Company should
should look
look for
for other
other options
options such
such as
as bonus
bonus or
or right
right issue
issue

Government
Government emphasis
emphasis on
on REITS
REITS can
can prove
prove to
to be
be aa lifeline
lifeline for
for DLF
DLF as
as they
they

have large
large amount
amount of
of stable
stable rental
rental providing
providing assets
assets which
which can
can provide
provide
have
much needed
needed liquidity
liquidity to
to company
company
much

Oberoi Realty

Summary
Oberoi Realty
Realty has
has been
been an
an outperformer
outperformer in
in realty
realty sector.
sector.
Oberoi
Favorable market
market conditions
conditions in
in Mumbai
Mumbai real
real estate
estate sector,
sector, experienced
experienced
Favorable
management and
and large
large land
land bank
bank all
all contributed
contributed to
to outstanding
outstanding
management
performance of
of this
this stock.
stock.
performance
Company has
has maintained
maintained aa constant
constant dividend
dividend payout
payout which
which is
is again
again aa
Company
positive.
positive.
Oberoi Realty
Realty is
is mainly
mainly concentrated
concentrated in
in residential
residential segment
segment and
and hence
hence
Oberoi
may not
not be
be able
able to
to leverage
leverage REITS
REITS which
which is
is applicable
applicable only
only for
for commercial
commercial
may
rental paying
paying assets
assets as
as of
of now.
now.
rental

Recommendations
Diversify
Diversify in
in commercial
commercial segment
segment

Company
Company may
may need
need urgent
urgent funds
funds as
as their
their land
land bank
bank is
is at
at dangerously
dangerously low
low

level.
level.
Raise
Raise debt
debt to
to fund
fund the
the requirement.
requirement.

Prestige Estates
Summary
Prestige
Prestige Estates
Estates is
is primarily
primarily based
based out
out of
of Bangalore
Bangalore which
which has
has been
been the
the

fastest growing
growing city
city in
in last
last 10
10 years.
years.
fastest
Prestige
Prestige has
has aa perfect
perfect mix
mix of
of residential
residential and
and commercial
commercial assets
assets (malls,
(malls, tech
tech

parks) and
and hence
hence this
this model
model takes
takes care
care of
of any
any major
major fluctuation
fluctuation in
in real
real
parks)
estate business
business to
to aa certain
certain extent.
extent.
estate

Recommendations
Rapid
Rapid growth
growth in
in Bangalore
Bangalore has
has invited
invited various
various established
established players
players to
to

Bangalore which
which has
has increased
increased the
the price
price completion.
completion. Company
Company should
should
Bangalore
diversify to
to other
other parts
parts in
in south
south India
India such
such as
as Chennai,
Chennai, Mangalore
Mangalore etc.
etc.
diversify

Thank You