FM Analysis Final

7/31/2019 FM Analysis Final

1/10

Financial Analysis of Real Estate Sector


2/10

Introduction of Real Estate Sector in India

Real Estate Industry is 2nd largest employer after agriculture andcontribute to 5% to the countrys GDP

The construction sector has grown at an average of 9.85% highest

being 16.2%

Investor interest, infrastructure activities undertaken by government

and Indian economy growth has contributed to the growth of thesector

The growth in service sector and manufacturing sector resulted in

increase demand for commercial and industrial real estate.

Commercial real estate boom is attributable to Indian Corporates

and MNCS


3/10

Future Growth Drivers for the Industry

SEZGovernment incentives for developers of SEZ

International Tourism growing in India Hospitality industryexpected to rise in future

Medical Tourism expected to grow in India being low cost countryand having high quality

Retail Industry

Urbanization Development India has only 28% people urbanized

compared to Asia 36% and USA 77.2% Service Sector industry accounts more than 50% of India GDP with

India expected to grow at 8-9% will be major contributor forcommercial real estate.

Dual Income people group rising in India

Key Factors affecting the Real Estate industry inIndia

Rising Interest rates Political involvement in the project Regulatory issues Unclear titles Time Consuming Approval

Relaxed FDI rules in India implemented byIndia will invite high investment in India


4/10

Real Estate Sector AnalysisSwot

Weaknesses : Mutual funds shun sector on rising

interest rates

691.55 crore

(63.6% Change)1983 crore

Sluggish Demand

Regulatory Issue

Deleveraging

Strengths: PE Investment soars in reality

$1656 million (Yr 2011)(75% change)

$944 Million (yr 2010)Demand for the office space

continues to

be higher side for IT/ITES Sector

Opportunities:Improved Macro Economic

Condition

Improve Capital Structure

Threats: Margin Pressure

Liquidity Pressure

Demand for the retails commercial

Spaces is expected to be low in 2012


5/10

Sluggish demand to Continue


6/10

Intro of DLF and Unitech and why

these two sectors


7/10

Current RatioQuick Ratio

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011

Operating Margin ratio

0

0.2

0.4

0.6

0.8

1

1.21.4

1.6

1.8

2

2009 2010 2011

Debt to Equity Ratio

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2009 2010 2011

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2009 2010 2011

Ratio Analysis
http://www.unitechgroup.com/index.shtmlhttp://www.unitechgroup.com/index.shtml


8/10

0%

2%

4%

6%

8%

10%

12%

2009 2010 2011

ROCE Ratio Price Earning Ratio

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2009 2010 2011

Earning Per Share

0.00

10.00

20.00

30.00

40.00

50.00

60.00

2009 2010 2011

0.00

0.02

0.04

0.06

0.08

0.10

0.120.14

0.16

0.18

2009 2010 2011

Sales to Capital Ratio
http://www.unitechgroup.com/index.shtmlhttp://www.unitechgroup.com/index.shtml


9/10

Findings from the Research

Report Unitech's asset value is strong but has to focus on reducing debt

Non-core assets for sale will help improve cash inflow andstrengthen the business

PINC - Unitech maintain 'BUY' with a reduced target price of Rs 45

(from Rs55) .Unitech Infra listing and new launches from thecompany are likely to be key triggers going forward.

DLF to reduce debt through sale of non -core assets and fastercash generation through sale of plotted development. It is planning

to sell its 100% hotel subsidiary (DLF Hotels and Hospitality) toKolkata based Square Four Housing & Infrastructure for Rs5.5bn

PINC- DLF 'BUY' rating with a target price of Rs315. DLF is likelyto reduce debt and accelerate cash flows through plot sale and non-core assets sale that will act positively for the stock


10/10

DLF or Unitech ?

We recommend Unitech for long-term BUY for the followingreasons:

EBIDTA margins have improved sequentially by and going forward

we expect margins to improve further as contribution of older

projects reduces.

Unitech's asset value is strong but management has to focus on

certain key decisions such as:

1) reducing debt level further with some large asset sale or creating

a basket of non-core assets for sale that will help improve cash

inflow and strengthen the business,(2) Increasing the work force further to improve the execution level

which is likely to help saving both financial cost and generate cash

flows faster.

(3) approval of court decision for listing of Unitech Infra.

Documents

FM Analysis Final