OBEROI REALTY In a league of its own

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1 India Midcaps INITIATING COVERAGE OBEROI REALTY In a league of its own India Equity Research Real Estate We initiate coverage on Oberoi Realty (OBER) with a BUY rating and NAV of INR 287/share, which implies 22% discount to NAV. OBER s key strengths include a strong track record of execution, asset light low cost land bank of ~20 msf in Mumbai and efficient management. With estimated net cash flows of ~INR 9.7 bn and RoEs of 16 20% over FY12 13E, and net cash of ~INR 14 bn as of FY11, OBER possibly represents the best exposure to the Mumbai property market. Strong cash flow visibility led by residential pre sales, rental income We expect OBER to generate ~INR 9.7 bn of cash flows over FY12-13E, driven primarily by residential pre-sales in Goregaon and Andheri and rental income/sale of commercial/retail assets. With its low-cost land bank, OBER is expected to maintain EBITDA margins of ~60% over FY12-13E. Increase in construction costs is likely to be compensated through higher realisations in ongoing projects and growth in rental income. As a result, we expect PAT CAGR of 25% over FY11-13E, with RoEs of ~16-20% over the same period. Competitive pricing to help sustain volumes We believe that OBER has pricing that is in line with competing developments in its vicinity, which along with a brand premium of OBER, implies competitive pricing. Accordingly, we believe that OBER is in a very good position to drive volumes over the forecast period. We estimate OBER to sell 1 msf and 2.6 msf in FY12E and FY13E, respectively. Risk reward favourable, NAV of INR 287/share Our FY12 GAV of INR 237/share includes INR 123 for development projects, INR 96 for rental assets and INR 18/share for social infra/other investments. Adjusting for FY12E net cash (including liquid MF investments) of INR 50/share, we arrive at FY12 NAV of INR 287/share, which implies 22% discount to NAV at CMP of INR 225/share. In our view, improved visibility on Mulund/Worli project launches and redeployment of cash for new land acquisitions at reasonable valuations, are catalysts for the stock in the medium term. Financials Year to March FY10 FY11 FY12E FY13E Revenues (INR mn) 7,836 9,960 12,015 17,043 Rev. growth (%) EBITDA (INR mn) 4,672 5,770 7,212 10,274 Net profit (INR mn) 4,576 5,176 5,905 8,146 Shares outstanding (mn) Diluted EPS (INR) EPS growth (%) 81.4 (0.6) ROE (%) ROCE (%) EDELWEISS RATING Absolute Rating Investment Characteristics Aashiesh Agarwaal, CFA aashiesh.agarwaal@edelcap.com Adhidev Chattopadhyay adhidev.chattopadhyay@edelcap.com May 24, 2011 BUY Growth MARKET DATA (R: OEBO. BO, B: OBER IN) CMP : INR 225 Target Price : INR week range (INR) : 306 / 210 Share in issue (mn) : M cap (INR bn/usd mn) : 74 / 1,641 Avg. Daily Vol. BSE/NSE ( 000) : SHARE HOLDING PATTERN (%) Others 11.0% MFs, FIs & Banks 1.0% FIIs 9.5% * Promoters pledged shares : NIL (% of share in issue) PRICE PERFORMANCE (%) Promoters* 78.5% BSE Midcap Stock Stock Over Index Index 1 month (8.3) (11.1) (2.8) 3 months (0.5) 12 months NA NA NA Edelweiss Research is also available on 1 Edelweiss Securities Limited Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.

2 Real Estate Investment Rationale Quality Mumbai based real estate player OBER has a land bank of ~20 msf of which over 90% is in Mumbai city and its suburbs Chart 1: OBER land bank (region wise) Mumbai city 10% Pune 6% Oberoi Realty (OBER) is focused on the Mumbai property market, with over 90% of its land bank originating from the city and its suburbs, admeasuring ~20.3 msf across 24 projects. Some of the company s key projects in Mumbai are Oberoi Garden City (11.2 msf) in Goregaon, Oberoi Splendor (3.1 msf) in Andheri, Oasis (2.1 msf) in Worli and Oberoi Exotica (3.2 msf) in Mulund. OBER differentiates itself on multiple fronts with a strong track record of execution, asset light low-cost land bank of 7-8 years and a debt-free balance sheet backed by strong management. Chart 2: OBER land bank (segment wise) Hospitality 7% Social Infra 10% Eastern Suburbs 15% Western Suburbs 69% Retail 2% Commerci al 20% Residentia l 61% Low cost land bank at city centric locations Low cost land bank purchased at an average cost of ~INR 35 mn/acre OBER has followed a prudent land acquisition strategy and has low average land acquisition cost of INR 35 mn/acre across four land parcels in Mumbai. It had acquired these land parcels, all city-centric, between 1999 and 2005 (before sharp spike in land prices post 2005) for a cumulative cost of ~INR 4.7 bn. Hence, the company is poised to maintain high EBITDA margins across its project portfolio, going forward. Table 1: OBER s historical land acquisitions Project name Location Type of acquistion Land area (acres) Year of purchase Acquisition cost (INR mn) Saleable Area (msf) Implied land cost (INR mn/acre)* Oberoi Springs Andheri (W) Outright purchase Oberoi Garden City Goregaon (E) Outright purchase , Oberoi Splendor Andheri (E) Outright purchase , Oberoi Exotica Mulund (W) Outright purchase , Total 134 4, Note: *Does not include benefits from additional FSI via TDR, parking scheme and loading 2 Edelweiss Securities Limited

3 Oberoi Realty OBER has delivered ~5 msf of projects at group level Strong track record of timely project execution Along with a low-cost land bank, OBER has also differentiated itself through execution of ~5 msf (at group level) of real estate development across 34 projects. It has, thus, been able to establish strong brand equity in the highly competitive Mumbai market and follow pre-sale model ensuring positive cash flows all year round. Further, for its Goregaon and Andheri projects, OBER has appointed Larsen & Toubro (LT) as the contractor. Presence of a reputed contractor, together with the company s zero-debt position, ensures timely project completion, in turn, keeping its working capital cycle in check. Table 2: OBER s completed real estate projects Project name Development site/location Saleable area (in sq.ft.) Construction commencement date Completion date Residential: Plazo (Ghuman Villa) Plazo (Ghuman Villa), Juhu, Mumbai 19,850 September-99 September-01 Rehabilitation Project Goregaon East 56,794 June-00 May-02 Beachwood House Oberoi Enclave, Juhu, Mumbai 27,000 April-02 January-05 Oberoi Crest Oberoi Crest, Khar, Mumbai 23,300 May-02 May-06 Seawind Oberoi Enclave, Juhu, Mumbai 23,500 November-02 October-06 Oberoi Woods Oberoi Garden City, Goregaon - East, 598,200 October-04 May-08 Mumbai Oberoi Springs Oberoi Springs, Andheri - West, Mumbai 643,065 November-05 January-10 Oberoi Townhouse Oberoi Garden City, Goregaon - East, 39,550 November-08 June-10 Mumbai Total 1,431,259 Commercial: Oberoi Chambers Oberoi Chambers, Andheri (W), Mumbai 86,123 February-02 May-04 Commerz I Retail: Oberoi Mall Hospitality: The Westin Mumbai - Garden City Social Infra: Oberoi International School Oberoi Garden City, Goregaon - East, 364,888 March-05 March-08 Mumbai Total 451,011 Oberoi Garden City, Goregaon - East, Mumbai Oberoi Garden City, Goregaon - East, Mumbai Oberoi Garden City, Goregaon - East, Mumbai 552,893 April-04 March ,820 October-06 March ,309 February-07 March-10 OBER is expected to generate sales volume of ~6msf over FY12-14E factoring in volume slowdown in Mumbai in FY12 Strong cash flow visibility aided by residential pre sales, rental income OBER is well cushioned against the vagaries of real estate cycles since it is able to pre-sell its premium residential projects and also enjoys steady cash flows from annuity assets. Further, since majority of OBER s land bank have clear titles and are located in city-centric locations in Mumbai, we expect the company to be able to monetise its land bank over the next 6-7 years. 3 Edelweiss Securities Limited

4 Real Estate We expect OBER to generate sales volumes of ~6 msf over FY12-14E from development projects with bump-up in sales in FY13-14E with launch of Exotica, the Mulund project. In the rental portfolio, we expect area under lease (factoring in occupancy) to increase from 0.8 msf in FY11 to ~1.3 msf in FY14E on the back of Commerz II, Phase I office at Garden City, Goregaon, becoming operational from FY13 onwards. Table 3: OBER sales/rental development pipeline (FY11 13E) ORL sales model FY11E FY12E FY13E Devco sales (msf): Goregaon - Garden City JVLR - Splendor/Grande Worli - Oasis Residential* Mulund - Exotica Total Devco Sales Rental Assets Area under lease (msf): Commerz - I - Goregaon Commerz II - Phase I - Goregaon Oberoi Mall - Goregaon Total rental assets under lease *proportionate OBER share in JV Source: Edelweiss research OBER is expected to generate net cash inflows of ~ INR 9.7 bn over FY12-13E OBER is expected to generate PAT CAGR of 25% over FY11-13E with RoEs of ~16-20% over the same period With OBER sitting on a net cash balance of ~INR 14 bn as of March 2011, we do not foresee any major delays on execution. Accordingly, we expect OBER to generate net cash flows of ~INR 9.7 bn over FY12-13E. While cash flows in FY12 are expected to be execution driven, FY13 cash flows are likely to be generated by launches at Worli and Mulund. Table 4: OBER cash flow estimates (FY11 13E) ORL cash flow estimates FY11E FY12E FY13E FY11 13E Inflows: Devco Rentco - Commercial/Retail Hospitality Total cash inflow Outflows: Devco Rentco - Commercial/Retail Hospitality Admin/other costs Taxes Capex on devco/rental assets Total cash outflow Net inflows (INR bn) Source: Edelweiss research Robust execution to drive RoEs, yield PAT CAGR of ~25% With its low-cost land bank, OBER is expected to maintain EBITDA margins of ~60% over FY12-13E, as higher construction costs are balanced through higher realisation in ongoing projects and growth in rental income. As a result, we expect PAT CAGR of 25% over FY11-13E with RoEs of ~16-20% over the same period. 4 Edelweiss Securities Limited

5 Oberoi Realty Chart 3: PAT/RoE profile (INR bn) RoE (%) FY09 FY10 FY11 FY12E FY13E 10.0 Competitive pricing to help sustain volumes We have maintained a view of prices in Mumbai correcting by 15% in CY11 on account of high prices and dampened buyer sentiment. In this regard, our channel checks indicate initial signs of prices softening in Central Mumbai. However, we believe that the price correction of ~15% is limited to premium high-rise projects in initial stages of construction and does not represent a broad-based correction across the city. Although prices in Mumbai may eventually correct ~15% in CY11, for volumes to recover, a key monitorable will be developers pricing strategy once existing inventory begins to get absorbed. Overall, we expect CY11 to be a tepid year in terms of volumes. In this context, OBER s ability to price its projects judiciously will enable it to sustain volumes. Mumbai market volumes have slowed down on back of high prices, correction of ~15% expected in FY12 Chart 4: Mumbai property registrations have slowed down (Number of Monthly Registrations) 10,000 8,000 6,000 4,000 2,000 0 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Source: DGR Mumbai, Edelweiss research 5 Edelweiss Securities Limited

6 Real Estate Competitive pricing to enable OBER to sustain volumes In this context, we believe that OBER s prices for its projects are on an even footing compared to its peers. Even with a fall in prices in Mumbai, we believe that OBER s strong brand backed by its execution will enable it to cash in on the pent-up demand. Accordingly, we have factored in drop in sales realisations of ~15% in FY12E, post which we expect volumes to recover again. Even for new launches of Worli and Mulund in FY13E, we have assumed initial launch prices of INR 34,000/sf and INR 8,000/sf respectively to factor in fall in prices, which gives us comfort on our sales volume assumptions. We have estimated OBER to sell 1 msf and 2.6 msf in FY12E and FY13E respectively. We estimate the volumes in FY12E to be driven by sales at Goregaon/Andheri projects while volumes in FY13E are expected to driven by new project launches namely Oberoi Exotica, Mulund and Oberoi Oasis, Worli. Table 5: OBER pricing compares well with that of peers (Andheri Malad micro market comparison) *Current base selling Developer Project Location price (INR/sf) Possession Oberoi Oberoi Woods Goregaon (E) 17,000 Ready Possession Oberoi Oberoi Exquisite Goregaon (E) 11,500 Dec-13 Oberoi Oberoi Esquire Goregaon (E) 10,000 Dec-14 Oberoi Oberoi Splendor Andheri(E) 17,000 Ready Possession Oberoi Oberoi Splendor Grande Andheri(E) 11,500 Dec-13 Lodha Fiorenza Goregaon (E) 13,500 Dec-15 Lodha Eternis Andheri (E) 13,000 Dec-12 DB Realty Orchid Woods Goregaon (E) 12,300 Dec-11 HDIL The Meadows Goregaon (W) 8,000 Dec-13 Mahindra Lifespaces Eminente - Phase II Goregaon (W) 9,700 Mar-13 Rustomjee Group Rustomjee Elanza Malad (W) 13,500 Dec-11 Sanghvi Group Sanghvi Jewel Malad (W) 11,000 Apr-14 Acme Group Acme Oasis Kandivali (E) 8,500 Dec-13 Kalpataru Kalpataru Towers Kandivali (E) 9,300 Ready Possession Kalpataru Kalpataru Gardens Kandivali (E) 9,500 Oct-11 Source: Industry sources, Edelweiss research Note: * Quoted prices, actual selling price may vary on a case to case basis OBER s focus on Mumbai a key long term positive OBER s current area of focus is the Mumbai city and its suburbs which account for over 90% of its current land bank. Over the longer term, with the limited availability of large land citycentric land parcels in Mumbai, we believe that large land deals will be executed in the extended suburbs in Western and Eastern regions of the Mumbai Metropolitan Region. Further, as per the United Nations survey of the 30 largest cities of the world, Mumbai is expected to see the second largest incremental growth in population over CY E of ~5.8 mn which will drive demand for residential real estate. In this context, we believe that OBER s focus on Mumbai is a key long-term positive. 6 Edelweiss Securities Limited

7 Oberoi Realty Chart 5: Incremental growth in population across cities ( E) Long-term Mumbai story intact on the back of rising population and demand outstripping supply (mn) (1.8) Delhi Mumbai Shanghai Beijing Guangzhou, Guangd Hong Kong São Paulo New York-Newark Los Angeles Chicago London Rio de Janeiro Buenos Aires Tokyo Paris Moskva (Moscow) Seoul Source: United Nations, Edelweiss research 7 Edelweiss Securities Limited

8 Real Estate Valuation We have valued OBER on SOTP basis with a combination of rental yield model for rental assets, DCF-based valuation for build-and-sell portion, land bank valuation for planned portions of specific assets and book value of investments in other entities. Our key assumptions are WACC of 14% for development/commercial assets and a cap rate of 11% for rental assets. Keeping in mind the likely fall in property prices in Mumbai, we have assumed a 5-15% correction in realisations across projects in FY12 and have assumed yearly selling price of 5% from FY13 onwards. Also, we have assumed yearly cost escalation of 5% for build-and-sell projects and 15% rental escalation every 36 months. Development assets account for 52% GAV while rental assets contribute 40% Our NAV estimate of INR 287/share (post-tax) on FY12 basis is derived as follows: INR 40.5 bn (INR 123/share) for development assets of ~12 msf with ~47% of the value being derived from the Oberoi Garden City projects. This section also includes the outright sale portion of Prisma/Maxima/IT Tower commercial projects at JVLR, Andheri. INR 31.4 bn (INR 96/share) for OBER s rent-yielding assets including Oberoi Mall, Westin Garden City hotel and Commerz I/II at Goregaon. ~INR 3.1 bn (INR 10/share) for OBER s social infrastructure projects. ~INR 2.8 bn (INR 8/share) for book value of investments in balance projects. Adjusting for FY12E consolidated net cash of ~INR 16.3 bn (INR 50/share), including liquid investment in mutual funds, we arrive at FY12E NAV of ~INR 94.1 bn or INR 287/share. At CMP of INR 225/share, the stock is trading at 22% discount to NAV. Hence, we initiate coverage on it with BUY recommendation/rating. 8 Edelweiss Securities Limited

9 Oberoi Realty Table 6: OBER valuation snapshot Saleable Area (msf) FY12 GAV (INR mn) Value (INR/share) Project Devco: Goregaon/Andheri (W) , JVLR 1.6 6, Worli 0.5 6, Mulund 3.2 8, Total Devco , Rentco/Hotels Commerz-Phase I 0.4 4, Commerz II - Phase I 0.7 7, Commerz II - Phase II , Oberoi Mall 0.6 5, Westin Hotel 0.4 2,772 8 Total Rentco/Hotels , Total Social Infra 2.0 3, Total other assets 2,774 8 Total GAV 77, Add: Net cash as of FY12 15, Add: Value of liquid investment in MFs NAV 94, Source: Edelweiss research Commercial/retail portion of Worli project not factored in our NAV and may give potential upside of INR 9/share Possible upsides to our NAV We have assumed only the residential component of ~1.5 msf for the Oasis (Worli) project in our valuation and excluded ~0.6 msf of upcoming commercial, retail and hospitality area. We estimate a potential upside of ~INR 3.0 bn (INR 9/share) for OBER s share from the incremental FSI of ~0.5 msf, in case, approvals for this project come through. OBER s investments in projects such as Sangam City in Pune, Juhu hotel in Mumbai and Goa hotel have been valued at book value of investments. Any traction in land acquisition and approvals for these projects could provide upside to our NAV. Redeployment of balance sheet cash towards fresh land acquisitions. 9 Edelweiss Securities Limited

10 Real Estate Key Risks Inefficient redeployment of cash flows Although OBER has a debt-free balance sheet with net cash of ~INR 14 bn as of March 2011, the company s inability to augment its land bank or purchase of high-cost land could cause concern. Longer than expected delay in Worli/Mulund projects OBER s projects at Worli and Mulund, originally scheduled to launch in FY11, are delayed owing to lack of requisite approvals. Although we have factored in a delay of ~6-12 months for these projects, any further delay could render cash flows from these projects backended. Prolonged weakness in commercial/retail segment in Mumbai The commercial/retail segment in Mumbai continues to be plagued by oversupply, although select micro-markets have seen healthy absorption. As 43% of OBER s estimated GAV comes from commercial/retail projects, prolonged weakness in these segments may lead to delays in leasing/project execution. Slowdown in demand for premium housing in Mumbai Historically, OBER s completed residential projects have been targeted at the upper middle class and its projects typically command a premium compared with other developers in the specific micro-market. The company s inability to sustain pricing in residential projects, owing to slowdown in demand for premium housing or competition from other developers, remains a key risk. 10 Edelweiss Securities Limited

11 Oberoi Realty Company Description Oberoi Realty (OBER), incorporated in 1988 as Kingston Properties, is a Mumbai-based real estate developer, focused on development of premium residential projects. It has also diversified into development of commercial, retail, hospitality and social infrastructure in the Mumbai Metropolitan Region (MMR). The company is promoted by the Oberoi family, including Mr. Vikas Oberoi (chairman and managing director), Ms. Bindu Oberoi (nonindependent and non-executive director), Mr. Ranvir Oberoi and Mr. Santosh Oberoi. The promoters have been developing real estate since 1983 and as on June 30, 2010, the promoters and promoter group have collectively developed 33 projects covering ~5 msf of saleable area. Completed projects include landmark projects such as Oberoi Springs and Oberoi Sky Heights in Andheri (West); and Oberoi Woods, Oberoi Mall, and The Westin Hotel in Goregaon (East). OBER has a strong presence in Mumbai, with over 90% of its land bank in the city and its suburbs. It has a total of ~20.3 msf across 24 projects. Some of its key projects in Mumbai are Oberoi Garden City (11.2 msf) in Goregaon, Oberoi Splendor (3.1 msf) in Andheri, Oasis (2.1 msf) in Worli and Oberoi Exotica (3.2 msf) in Mulund. Fig. 1: OBER business structure Oberoi Realty 100% 100% 100% 31.67% 100% 100% 100% Oberoi Constructions Oberoi Mall Kingston Property Services Sangram City Township Kingston Hospitality and Developers Expressions Realty Triumph Realty 100% 100% Siddhivinayak Realties Perspective Realty Oasis Realty (3) Zaco Aviation (4) 11 Edelweiss Securities Limited

12 Real Estate Financial Outlook OBER s revenues expected to grow at 31% CAGR over FY11-13E Revenue growth to be driven by execution in FY12, launches in FY13 We expect OBER s revenue to grow from ~INR 10 bn in FY11 to ~INR 17 bn in FY13E, implying 31% CAGR over FY11-13E. While we expect revenue growth in FY12 to be driven largely by sales and execution of ongoing projects (Garden City, Goregaon, and Splendor, Jogeshwari), growth in revenues in FY13E will be largely led by new launches at Worli, Mulund and Goregaon and partly from higher weighted average rentals at the completed rental projects and rentals commencing from Phase I of Commerz II, Goregaon. Chart 6: Robust growth in revenues (INR bn) FY09 FY10 FY11 FY12E FY13E OBER s EBITDA expected to grow at 33% CAGR over FY11-13E in line with revenues EBITDA to grow in line with revenues over FY11 13E We expect OBER s EBITDA to grow at 33% CAGR during FY11-13E, in line with revenues. EBIDTA margins are likely to remain flat at ~60% in FY12-13E, as higher construction costs are balanced through higher realisations in ongoing projects and growth in rental income. Chart 7: EBITDA to grow in line with revenues with stable margins (INR bn) Margin (%) FY09 FY10 FY11 FY12E FY13E Edelweiss Securities Limited

13 Post tax, profit likely to post 25% CAGR Oberoi Realty We expect PAT to grow from INR 5.2 bn in FY11 to INR 8.1 bn in FY13E, implying PAT CAGR of ~25% over FY11-13E. Although the growth in PAT is healthy, it is lower than EBITDA growth, primarily due to higher effective tax rate of ~26% in FY12-13E (owing to non-80ib projects, which do not enjoy tax-exemption, coming up for revenue recognition). As a result, PAT margins are expected to taper off from 52% in FY11 to ~48% in FY13E. Chart 8: Post tax adjusted profit to soar OBER s PAT expected to grow at 25% CAGR over FY11-13E (INR bn) Margin (%) FY09 FY10 FY11 FY12E FY13E Edelweiss Securities Limited

14 Real Estate Fig. 1: Oberoi Garden City Project development break up Annexure: Project portfolio Oberoi Garden City, Goregaon (East) Oberoi Garden City is a mixed-use integrated development project located at Goregaon (East) in Mumbai s western suburbs on ~84 acres of land adjacent to the Western Express Highway (~8 kms from Mumbai s domestic airport and ~5 kms from the Chhatrapati Shivaji International Airport, Mumbai). OBER acquired the land during for ~INR 1.1 bn at an effective land acquisition cost of INR 95/sf corresponding to ~11.2 msf of saleable area across the various components of the project. Of the total saleable area of 11.2 msf, OBER has completed and delivered ~2.4 msf of projects including Oberoi Woods (residential project of ~0.6 msf), Commerz I (offices of ~0.4 msf), Oberoi Mall (retail project of ~0.55 msf), Westin Mumbai Hotel (hospitality development of ~0.4 msf) and Oberoi International School (0.3 msf). Oberoi Garden City Residential Office space Retail Hospitality Social Infrastructure Completed Projects Oberoi (1) Commerz I Oberoi Mall The Westin Woods Mumbai - Oberoi Garden City Townhouse Oberoi International School Ongoing Projects Oberoi Exquisite (Phases I and II) Commerz II (Phases I and II) Planned Projects Oberoi Exquisite (Phase III) Hospital and Education Complex 14 Edelweiss Securities Limited

15 Oberoi Realty Table 1: Oberoi Garden City, Goregaon, project portfolio Project Type Completed/Ongoing/ Saleable Planned area (sft) Oberoi Woods Residential Completed 598,200 Oberoi Townhouse Residential Ongoing 39,550 Oberoi Exquisite I Residential Ongoing 1,506,810 Oberoi Exquisite II (Esquire) Residential Ongoing 1,970,530 Oberoi Exquisite III Residential Planned 1,900,000 Commerz I Office Space Completed 364,888 Commerz II Phase I Office Space Ongoing 725,769 Commerz II Phase II Office Space Ongoing 1,661,650 Oberoi Mall Retail Completed 552,893 Westin Mumbai Garden City Hospitality Completed 381,820 Oberoi International School Social Infra Completed 305,309 Education Complex Social Infra Planned 866,130 Hospital Social Infra Planned 375,481 Total 11,249,030 Fig. 2: Oberoi Garden City, Goregaon (East) Project location map 15 Edelweiss Securities Limited

16 Real Estate Fig. 3: Oberoi Woods (May 2008) Fig. 4: Commerz I office and Westin hotel (March 2008) Source: Company, Edelweiss research Fig. 5: Oberoi Mall (March 2011) Fig. 6: Oberoi Seven (March 2011) 16 Edelweiss Securities Limited

17 Oberoi Realty Fig. 7: Oberoi Exquisite I (March 2011) Fig. 8: Commerz II Phase I (March 2011) Oberoi Splendor, Andheri (East) Oberoi Splendor is a mixed-use integrated development project located at Andheri (East) in Mumbai s western suburbs on ~21.5 acres of land adjacent to the Jogeshwari- Vikhroli Link Road (JVLR), an arterial road connecting the western and eastern suburbs of Mumbai. OBER acquired the land between for ~INR 1.1 bn and the project has ~3.1 msf of saleable area at an effective land acquisition cost of INR 342/sf. Of the total saleable area, OBER is in the process of handing over ~1,300 residential units in Oberoi Splendor I between April and July Table 2: Oberoi Splendor, Andheri, project portfolio Project Type Completed/Ongoing/ Planned Saleable area (sft) Oberoi Splendor - I Residential Ongoing 1,279,152 Oberoi Splendor Grande Residential Ongoing 294,840 Oberoi Splendor - Commercial I Oberoi Splendor IT Tower Office Space Planned 318,804 Office Space Planned 93,873 Oberoi Splendor - Prisma Office Space Ongoing 711,577 Oberoi Splendor School Social Infra Planned 430,990 Total 3,129, Edelweiss Securities Limited

18 Real Estate Fig. 9: Oberoi Splendor, Andheri (East) Project location map Fig. 10: Oberoi Splendor (March 2011) Fig. 11: Oberoi Splendor Finishing work in progress 18 Edelweiss Securities Limited

19 Oberoi Realty Fig. 12: Splendor Grande (March 2011) Fig. 13: Prisma Commercial Tower (March 2011) Oasis Realty, Worli Oasis Realty is joint venture between OBER s full owned subsidiary (OCPL) and two other partners (Skylark Build and Shree Vrunda Enterprises) to develop a mixed-use development of ~2.1msf of saleable Area in Worli (Annie Besant road). The project is a slum rehab project under which OCPL will be responsible for developing the free-sale portion, while rehab work is the responsibility of the JV partners. While the rehabilitation work is already complete and excavation work on the free sale portion has already started, we expect the project to be launched by Q1FY13. The company is looking to develop this project as a branded residence and is in discussions with various international players including Ritz Carlton, Mandarin etc. As a JV partner, OBER would be entitled 25-40% of net revenues (EBITDA) depending on the net realization achieved by the company for the residential, office space and retail components. For the hospitality component, OCPL will receive a 36.25% share of net revenues (EBITDA). Table 3: Oasis Realty, Worli project portfolio Project Type Completed/Ongoing/ Planned Saleable area (sft) Oasis - Residential Residential Ongoing 1,541,738 Oasis - Commercial Commercial Ongoing 242,190 Oasis - Mall Retail Ongoing 121,095 Oasis - Hotel Hospitality Ongoing 215,280 Total 2,120, Edelweiss Securities Limited

20 Real Estate Fig. 14: Oasis Realty, Worli Project location map Fig. 15: Oasis Worli (March 2011) Fig. 16: Oasis Worli (March 2011) 20 Edelweiss Securities Limited

21 Oberoi Realty Fig. 17: Rehab buildings (March 2011) Oberoi Exotica, Mulund (West) Oberoi Exotica is a residential development project located at Mulund (West) in Mumbai s eastern suburbs spread across a total of ~18 acres in two adjacent land parcels. The land parcels are adjacent to the L.B.S. Marg, an arterial road of the eastern suburbs of Mumbai. OBER acquired the land in 2005 for ~INR 2.2 bn from GlaxoSmithKline Pharmaceuticals and the project has a total saleable area of ~3.2 msf, equally divided between the two land parcels. OBER s effective land acquisition cost is ~INR 690/sf. The Supreme Court has allowed the company to create third-party interest on the land and has asked it to obtain all necessary project approvals from various authorities including the Ministry of Environment and Forests (MoEF). OBER contends that it has already received all the requisite approvals for the project. As of March 2011, however, the project is yet to begin with the old factory structure yet to be demolished. Table 4: Oberoi Exotica, Mulund, project portfolio Project Type Completed/Ongoing/ Planned Saleable area (sft) Oberoi Exotica I Residential Planned 1,619,800 Oberoi Exotica II Residential Planned 1,581,580 Total 3,201, Edelweiss Securities Limited

22 Real Estate Oberoi Sangam City, Pune OBER holds 31.67% interest in Sangam City Township, a special purpose vehicle, established for a development project comprising ~56 acres of land located in Sangamwadi, Pune, surrounded by the Mula Mutha River on three sides. The land is situated 2 km away from Pune railway station and 6 km from Pune International Airport. Sangam City Township has entered into agreements to acquire development rights in respect of ~56 acres of land, which will be developed as a mixed-use property, comprising residential units, office space and retail components. On the date of execution of the development agreements, the relevant land was agricultural. A part of the consideration to be paid to the land owners for each parcel of land has been handed over to the original land owners; another part is being held in escrow and will be released to the land owners when a non-agricultural user certificate is obtained for such land. Table 5: Sangam City, Pune, project portfolio Project Type Completed/Ongoing/ Planned Saleable area (sft) Sangam City - Residential Residential Planned 773,951 Sangam City - Commercial Commercial Planned 279,939 Sangam City - Retail Retail Planned 279,939 Total 1,333, Edelweiss Securities Limited

23 Oberoi Realty Financial Statements Income statement (INR mn) Year to March FY09 FY10 FY11 FY12E FY13E Income from operations 4,254 7,836 9,960 12,015 17,043 Direct costs 1,596 3,026 3,766 4,232 5,959 Employee costs Other expenses Total operating expenses 1,780 3,164 4,190 4,802 6,769 EBITDA 2,474 4,672 5,770 7,212 10,274 Depreciation and amortisation EBIT 2,401 4,582 5,534 6,959 9,833 Interest expenses Other income ,040 1,276 Profit before tax 2,692 4,800 6,159 7,997 11,107 Provision for tax ,092 2,960 Core profit 2,515 4,574 5,176 5,905 8,146 Extraordinary items (8) (3) Profit after tax 2,523 4,576 5,176 5,905 8,146 Adjusted net profit 2,523 4,576 5,176 5,905 8,146 Equity shares outstanding (mn) EPS (INR) basic Diluted shares (mn) EPS (INR) fully diluted Dividend per share Dividend payout (%) Common size metrics as % of net revenues Year to March FY09 FY10 FY11 FY12E FY13E Operating expenses Depreciation Interest expenditure EBITDA margins Net profit margins Growth metrics (%) Year to March FY09 FY10 FY11 FY12E FY13E Revenues (16.8) EBITDA (3.9) PBT (11.1) Net profit (15.0) EPS (14.5) 81.4 (0.6) Edelweiss Securities Limited

24 Real Estate Balance sheet (INR mn) As on 31st March FY09 FY10 FY11E FY12E FY13E Equity share capital 26 2,887 3,282 3,282 3,282 Preference share capital Reserves & surplus 13,839 15,392 30,070 35,284 42,477 Shareholders funds 14,436 18,637 33,711 38,566 45,760 Unsecured loans Borrowings Sources of funds 14,543 18,637 33,711 38,566 45,760 Gross block 2,837 3,258 4,258 4,758 8,334 Depreciation ,121 Net block 2,736 3,068 3,831 4,078 7,213 Capital work in progress 3,851 5,103 5,901 8,428 7,755 Total fixed assets 6,586 8,171 9,733 12,506 14,968 Investments Inventories 7,122 6,226 7,742 9,220 10,060 Sundry debtors ,039 Cash and equivalents 1,669 3,631 13,950 15,753 20,693 Loans and advances 2,725 6,240 7,163 7,163 8,356 Other current assets Total current assets 11,793 16,517 29,495 33,009 40,402 Sundry creditors and others 3,962 6,746 6,002 7,384 9,995 Provisions Total CL & provisions 3,993 6,843 6,175 7,607 10,268 Net current assets 7,800 9,675 23,320 25,402 30,134 Net Deferred tax Uses of funds 14,543 18,637 33,711 38,566 45,760 Book value per share (INR) Cash flow statement (INR mn) Year to March FY09 FY10 FY11E FY12E FY13E Net profit 2,523 4,576 5,176 5,905 8,146 Add: Depreciation Add: Others (455) (103) (637) (1,038) (1,274) Gross cash flow 2,141 4,563 4,776 5,120 7,314 Less: Changes in W. C. (936) 673 (3,326) (280) 209 Operating cash flow 1,205 5,237 1,450 4,840 7,523 Less: Capex (2,219) (1,672) (1,799) (3,026) (2,903) Free cash flow (1,014) 3,565 (348) 1,814 4,620 Cash flow metrics Year to March FY09 FY10 FY11E FY12E FY13E Operating cash flow 1,205 5,237 1,450 4,840 7,523 Investing cash flow 1,652 (2,832) (1,031) (1,987) (1,628) Financing cash flow (1,648) (443) 9,900 (1,051) (955) Net cash flow 1,208 1,962 10,319 1,802 4,941 Capex 2,219 1,672 1,799 3,026 2,903 Dividend paid Share issuance/(buy back) (1,313) (212) 10, Edelweiss Securities Limited

25 Oberoi Realty Ratios Year to March FY09 FY10 FY11E FY12E FY13E ROAE (%) ROACE (%) Debtors (days) Current ratio Inventory (days) 1, Payable (days) Cash conversion cycle (days) Adjusted debt/equity Operating ratios (x) Year to March FY09 FY10 FY11E FY12E FY13E Total asset turnover Fixed assets turnover Equity turnover Du pont analysis Year to March FY09 FY10 FY11E FY12E FY13E NP margin (%) Total assets turnover Leverage multiplier ROAE (%) Valuation parameters Year to March FY09 FY10 FY11E FY12E FY13E Diluted EPS (INR) Y o Y growth (%) (14.5) 81.4 (0.6) CEPS (INR) Diluted P/E (x) Price/BV(x) EV/Sales (x) EV/EBITDA (x) Diluted shares O/S Dividend yield (%) Edelweiss Securities Limited

26 Real Estate Edelweiss Securities Limited, Edelweiss house, off C.S.T. Road, Kalina, Mumbai Board: (91 22) , Vikas Khemani Head Institutional Equities Nischal Maheshwari Head Research Coverage group(s) of stocks by primary analyst(s): Real Estate Anant Raj Industries, Brigade Enterprises, DLF, Jaypee Infratech, Mahindra Lifespace Developers, Orbit corporation, The Phoenix Mills, Unitech Recent Research Date Company Title Price (INR) Recos (INR) 1, Buy 23 May 11 Real Estate Mumbai project Estate approvals and policy action light at the end of the tunnel; EdelFlash 9 May 11 Buy Brigade Sluggish quarter, but 89 Buy Enterprises Buy new launches to drive growth; Result Update Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Buy Hold Reduce Total Rating Interpretation Rating Expected to Rating Distribution* * 3 stocks under review > 50bn Between 10bn and 50 bn < 10bn Market Cap (INR) Buy Hold Reduce appreciate more than 15% over a 12 month period appreciate up to 15% over a 12 month period depreciate more than 5% over a 12 month period Access the entire repository of Edelweiss Research on This document has been prepared by Edelweiss Securities Limited (Edelweiss). 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