Sector : Construction - Factories/Offices/Commercial. (In %) Total Equity Share in Issue. Pre-Issue Post-Issue Employees Reserve Portion

Transcription

1 SUBSCRIBE Issue Open: July 17,2007 Issue Close: July 20,2007 Sector : Construction - Factories/Offices/Commercial Price Band Rs Rs. 310 Issue Summary (Shares in million) Shareholding Pattern (In %) Total Equity Share in Issue Pre-Issue Post-Issue Employees Reserve Portion 0.30 Promoters Net Issue To The Public Promoter Group - Individuals & HUF Of Which Reserved for:- QIB Non - Institutional Promoter Group - Corporate Bodies Employees Public Retail 2.25 Total Equity Share Outstanding Total no. of shares 154,953, ,500,000 Prior to the issue #Post Issue total no. of shares contain the Green Shoe Option of 1.75mn shares. After the issue Company Valuation Multiple OL Industry Avg. Financial Snapshot (Rs. In Million) Sales (Rs. in million) 14, , Operating Profit (Rs. in million) 3, , FY 2007 FY 2006 FY 2005 FY 2004 RONW (%) Inc 14, , , , OPM (%) Total 14, , , , NPM (%) Optg Profit 3, , P/E (265 & 310) & Net Profit 2, , Price to Book Value (265 & 310) 9.88 &11.56 EPS* capital 1, Objects of the issue: Res&Surplu 2, , To make payments related to land. Networth 4, , Repayment of loans. Total Debt 12, , , , Development & construction cost of some of the projects. Book Value* General corporate purpose / working capital requirement. *The no. of shares are of the post issue equity i.e mn shares. 5. Achieve the benefits of listing. Company Snapshot - Currently, the land reserves of OL are approximately to 3,255 acres with 52 current residential & commercial projects out of which 38 projects are in working condition. - Strengths are: Good land reserves; Experienced in the construction industry; Established brand image & consumer confidence; Strong marketing networks; Diversified business within the real estate sector; Empahsis on innovation & Experienced management. - Weakness are: Mainly concentrated in the NCR region & the brand name "Omaxe" is not owned by the company. - Opportunities are: OL is focused on Tier II & III cities which are now getting developed at a very fast rate & New concept of sub-urban towbships. - Threats are: Stiff competition from other leading players in the industry; Recently income tax department had searched & seized some of the promoters & employees, the outcome of which is stil pending; Expansion in new geographic areas poses risks & There are certain legal cases pending against OL amounting to Rs.21.35mn. - The NAV for the FY 2007 is Rs per share based on a calculation of weighted average number of equity shares outstanding Industry Scenario - Positive indicators including a stable annual growth rate of above 7.5% in the past three years & rising foreign exchange reserves of approximately US$179.1 bn as of January 26, Nuclearisation of Indian families has accelerated the demand for mortgages & for new housing. This would result in additional residential units requirement over the next few years to meet housing demand. - If the economy grows at the rate of 10%, the housing sector has the capacity to grow at 14% & generate 3.2 mn new jobs over the next 10 years. - New growth concentrations Tier II/III cities, & suburban & peripheral markets in established markets. - Key characteristics of real estate market are: Capital Structure; Higher margin in commercial properties; Leasing is an option for commercial properties; Development Risks & Credit Risk. - The housing stock is expected to grow at a CAGR of 2.4% over the next 5 years to reach 5.27 mn new houses in CRIS INFAC believes the growth in IT/ITES is likely to translate into construction investments of Rs. 148 bn. - Retail boom to result in construction investments of Rs.112 bn over the next few years. - There are also other growth segments in retail industry like hospitality & SEZs which are showing an upward trend in growth.

2 Company Background:- The company was incorporated March 8,1989. OL is a real estate development and construction company with operations in 30 cities & 9 states in India. They are involved in residential & commercial real estate development projects ranging from integrated townships, group housing & retail & other commercial properties, hotels, information technology & bio-tech parks to special economic zones. As of March 31, 2007, OL has completed more than 120 construction projects in such capacity. As of March 31, 2007, OL has completed eight residential projects, consisting of seven group housing and one integrated township project & two commercial projects, including retail & office space, covering approximately 5.13 mn sq. ft. of built-up/developed area. OL has diversified it's project portfolio by undertaking projects for the development of hotels, information technology & bio-tech parks. The promoters of OL are: Mr. Roahtas Goel, Mr. Sunil Goel & Mr. Jai Bhagwan Goel. The companies which constitutes as promoters of OL are: Constellation Capital Limited; S A Finvest Limited; Kautilya Monetary Services Private Limited; NAJ Builders Private Limited; J B Realcon Private Limited; Dream Home Developers Private Limited & Guild Builders Private Limited. OL has 22 subsidiaries. The significant townships developed by OL are: Omaxe City at Jaipur, Omaxe City at Sonepat & Omaxe City at Lucknow. In commercial segment, the completed projects are the Omaxe Arcade at Greater Noida & Omaxe Plaza at Gurgaon. Company Snapshot:- - Currently, OL has 52 residential & commercial projects consisting of 21 group housing projects, 16 integrated townships, 14 shopping malls & commercial complexes & 1 hotel. The current projects include 38 projects which are under development & 14 which are under various stages of approvals for development. OL expects to commence development on these 14 projects within Fiscal Strengths are: Good land reserves - As of March 31, 2007, OL had access to land reserves of approximately 3,255 acres; OL has been in the construction & contracting business for 18 years & have a high level of technical expertise in executing their projects & as of March 31, 2007, OL had completed more than 120 construction projects in such capacity ; Established brand image & consumer confidence - As of March 31, 2007, the total number of units that have been sold and/or booked to OL's customers consist of more than 19,000 residential & 2,000 commercial property units; Strong marketing networks - OL has a strong marketing network of more than 800 business associates.; OL has diversified their project portfolio by undertaking projects for the development of hotels, information technology & bio-tech parks; Empahsis on innovation & Experienced management of more than 2 decades in this industry. - Weakness are: Mainly concentrated in the NCR & north India region. OL has paid an amount of Rs. 132 mn as royalty including initial lum sum amount for the year to it's promoter Mr. Rohtas Goel. Commencing Fiscal 2007, Mr. Goel, has agreed to receive the fixed payment of Rs.1 mn p.a. as royalty for the next 10 years after which Mr. Goel proposes to transfer the same to OL at Re.1 subject to some conditions which are not known. - Opportunities are: OL is focused on working on Tier II & III cities which are now getting developed at a very fast rate; New concept of sub-urban towbships - With a steep rise in prices of land in the Tier I cities, people have started shifting to the Tier II & III cities which has led to an increase in the demand of housing & commercial complexes in these cities. The example can be given by the four mini metros, Ahmedabad, Pune, Bangalore & Hyderabad; Strong growth in the sector - The sector currently has witnessed rapid growth in the last few years not only with the increase in demand but also with an more or equivalent rise in the prices of lands also. - Threats are: OL faces competition from other players in the northern region like DLF, Parsvnath, Ansal Housing, Mahindra Gesco, etc.; Income tax department had earlier seized & searched some of the promoters & employees, the outcome of which is stil pending; Expansion in new geographic areas poses risks as OL has no prior experience in these areas & There are certain legal cases pending against OL amounting to Rs.21.35mn. - The business strategy are: Expanding into new locations across India & focus on Tier II & Tier III cities; Continue to diversify the portfolio of the projects; Outsourcing to increase the scale of operations & Enter into joint ventures/collaborations & investment in innovation. - As of March 31, 2007 OL has completed 8 residential projects, consisting of 7 group housing & 1 integrated township project & 2 commercial projects, including retail & office space, covering approx mn sq. ft of built-up area. As of March 31, 2007, OL had access to land reserves of approx. 3,255 acres (including approx. 571 acres of land belonging to joint ventures & collaborations in respect of which OL's economic interest is approximately 74% calculated on a weighted average basis in relation to such land), of which approximately 3,096 acres (including approx. 451 acres of land belonging to the joint ventures & collaborations) related to projects that are currently under development or under various stages of approval for development, representing approximately 150 mn sq. ft. of saleable area & approximately 159 acres (including approx. 120 acres belonging to the joint ventures & collaborations) relate to OL's future projects & projects that are currently in various phases of planning.

3 Industry Scenario:- + Positive indicators including a stable annual growth rate of above 7.5% in the past three years in the GDP & rising foreign exchange reserves of approximately US$179.1 bn as of January 26, An important factor in the growth of the services sector has been the strong growth of the IT & ITES sectors. - Nuclearisation of Indian families has accelerated the demand for mortgages & for new housing. This would result in additional residential units requirement over the next few years to meet housing demand. Rising income levels & greater job creation, paricularly in sectors such as BPO & insurance is also resulting in enhanced demand for quality housing. Further, housing mortgage rates have declined considerably over the last five years, making it easier for the expanding middle-class to buy homes. - Contribution of housing & real estate to India s GDP is market 1% against 3-6% of developing countries. If the economy grows at the rate of 10%, the housing sector has the capacity to grow at 14% & generate 3.2 mn new jobs over the next 10 years. - New growth concentrations Tier II/III cities & suburban & peripheral markets in established markets. The construction activity in residential, commercial and retail segments of real estate, which until recently was focused on the four metros, is spreading to Tier II & Tier III cities as well. Also, within the established markets, real estate activities are moving into suburban business districts from central districts to take advantage of lower real estate prices & higher availability of space, which provide built-to-suit larger centralised office space. - Key characteristics of real estate market are: Capital Structure; Higher margin in commercial properties; Leasing is an option for commercial properties; Development Risks & Credit Risk. - CRIS INFAC has estimated the number of housing stock is expected to grow at a CAGR of 2.4 per cent over the next few years to reach 5.27 mn new houses in The total Floor Space Area ( FSA ) is expected to grow at a CAGR of 4 per cent over the next few years to reach 3 bn sq. ft. by This would roughly translate into 14 bn sq. ft. to be added over a period of few years. During the same period, the total housing construction investment is estimated at Rs 9,176 bn. - CRIS INFAC believes the growth in IT/ITES is likely to translate into construction investments of Rs. 148 bn (118 mn sq ft) by as compared with investments of Rs 74 bn (61 mn sq. ft.) in the last 3 years. The investments are based on the manpower/workspace requirement in the sector. - CRIS INFAC believes the current spark in mall construction activity across India will result in around 105 mn sq ft of mall space by This would translate into construction investment of Rs. 112 bn over the next few years. The organised retail segment in India is expected to grow at a rate of 25% to 30% over the next few Fiscals. The growth of organised retail is expected to be driven by demographic factors, increasing disposable incomes, changes in shopping habits, the entry of international retailers into the market and the growing number of retail malls. Of the total malls space to be available by 2010, Mumbai, Pune, NCR (including Gurgaon, Noida, Greater Noida, Faridabad & Ghaziabad), Bangalore & Hyderabad will have a share of 74 per cent. The balance 26 per cent will be made up by cities such as Kolkata, Chennai, Ahmedabad, Jaipur, Nagpur, Lucknow, Indore, Ludhiana & Chandigarh. - India s Travel & Tourism is expected to grow by 8 % p.a., in real terms, between 2007 & WTTC has also projected India as one of the emerging tourism markets having potential of earning US$24 bn annual foreign exchange through tourism by With the industry expected to grow at 8-9% in 2006, the number of business travelers to the country are also likely to increase. The majority of segments in the Indian hotel industry have shown robust recent growth in room rates as well as occupancy rates. With increased demand and limited availability of quality accommodation, the average room rates in metropolitan markets have grown at a rapid pace over the last two years. - In the wake of strong economic growth, real estate market should continue to gain momentum resulting in falling vacancies in Central Business District areas & more development in suburbs; it is unlikely that commercial property prices will rise or fall significantly, beyond rational reasoning. Share Price Dividend/ Share Company* EV/EBITD Multiple (Times) EPS A P/E MCAP/SALES MTBV (Rs.) (Rs.) (Rs.) OL - Rs.265 L BAND OL - Rs.310 U BAND Ansal Housing & Unitech Limited Parsvnath Sobha Developers *Source : Based on annualised FY07 figures from RHP & Capitaline.

4 Income Statement Rs, mn Operating Income Operating Cost Employment Costs Administrative Expenses Selling & Distribution Expenses Operating Expenditure Operating Income Other Income Gross Profits Finance & Interest Depreciation Profit Before Tax Tax Profit After Tax Extraordinary Items Net Profit Cash Flow Statement Rs, mn Cash flow from operations Cash for working capital Direct Tax Paid Net Operating Cash Flow - A Purchase of fixed assets Sale of fixed assets Purchase of investments Sale of investments Goodwill / (Capital reserve) Capital Reserve Net Interest Received Minority Interest Net Cash Flow From Investing - B FY 2007 FY 2006 FY 2005 FY , , , , , , , , , , , , , , , , , , , , , , FY 2007 FY 2006 FY 2005 FY , , , , , , , , , , Proceeds from equity Proceeds from borrowings 11, , , Repayment of borrowings -2, Interest & dividend payments Net Cash Flow From Financing - C Net Cash Flow (A+B+C) , , , Opening Cash Closing Cash 1, , ,

5 Balance Sheet Rs, mn Sources of Funds Equity Share Capital Reserves & Surplus Networth Stock option outstanding Minority Interest Secured Loan Unsecured Loan Loan Funds Current liabilities & provisions Deferred Tax Liability Total Total Liability FY 2007 FY 2006 FY 2005 FY , , , , , , , , , , , , , , , , , , , , , , , Application of Funds Gross Block Less: Depreciation Net Block Capital Work in Progress Net Fixed Assets Goodwill on consolidation Investments Current Assets Inventories Debtors Projects in progress Cash & Bank Loans & Advances Deferred Tax Asset Total Current Assets Misc Expenses Total Assets , , , , , , , , , , , , , , , , , , ,408.19

6 Objects of The Issue:- Sl. No Amount (INR, mn) Particulars Already paid/ Net proceeds proposed deployed upto to be utilized March 31,2007 Payments related to land. 2, , Repayment of loan. - 2, Development & construction cost. 3, , General corporate purpose / Working capital requirement. [*] [*] Total 5, , The funds raised in the issue, as set forth above, are expected to be utlized by March, The objects of the issue have not been appraised by any bank or any financial institution or an independent organization. Abhishek Kothari Research Associate abhishek.kothari@spasecurities.com SPA CAPITAL SERVICES LIMITED SPA MERCHANT BANKERS LTD. SPA SECURITIES LTD. SPA COMTRADE PRIVATE LIMITED SPA INSURANCE SERVICES LTD. Investment Advisory services, AMFI Reg. No. ARN-0007 SEBI registered Category-1 Merchant Bankers SEBI Regn. No. INM Member NSE-Capital Market & Wholesale Debt Markets,SEBI Regn.no. INB ,F&O Market,SEBI Regn.no. INF Member BSE-Capital Market,SEBI Regn.no.INB Member of NCDEX & MCX. NCDEX TMID-00729, NCDEX FMC no.ncdex/tcm/corp/0714 Direct Broker for Life and General Insurance broking IRDA Lic. Code No. DB053/03 NEW DELHI 25, C-Block Community Centre, Janak Puri, New Delhi Tel: (011) , , Fax: (011) B- 1A- 132, Sector-51, Noida Ph: Fax: , Qutab Plaza, DLF City, Phase- I, Gurgaon Ph: Fax: MUMBAI 101, 10th Floor, Mittal Court - 'A' Wing, Nariman Point, Mumbai Tel: (022) / Fax: (022) / KOLKATA Diamond Chambers, Room no. 8-O, 8th Floor, 4 Chowringhee Lane, Kolkata Tel: (033) Fax: (033) BANGALORE 703 & 704, 7th Floor, Brigade Tower, 135, Brigade Road, Corporation Division no. 61, Bangalore Ph: JAIPUR UL-15, Amber Tower, Sansar Chand Road, Jaipur Tel: (0141) / Fax: CHENNAI 3H, 3rd floor, East Coast Chambers, 92/34, G.N.Chetty, T. Nagar, Chennai Tel: (044) Fax: AHMEDABAD 407, Anand Mangal Complex - I, Behind Omkar House, C.G.Road, Navrangpura, Ahmedabad Tel: (079) Disclaimer: This information is for general purpose only, without regard to any specific objectives, financial situations and needs of any particular person. The information contained herein does not constitute an offer or an invitation for an offer to invest. These materials summarise certain points relating to the Offer and are not a comprehensive summary. Please note that this information is based on the disclosures made in the Red Herring Prospectus. Investors are requested to refer to the Red Herring Prospectus for risk factors, details about the issue and issuer company before taking any investment decision. SPA and/or its representatives do not accept any liability whatsoever direct or indirect that may arise from the use of the information contained herein. Inst. Dealing Desk : 101, 10th Floor, Mittal Court-'A' Wing, Nariman Point, Mumbai T e l. No. : , Fax No / E m a i l : cms@spacapital.com