Puravankara Projects IPO – The India Street Analysis

Summary

The Issue: With so many real estate IPO’s

entering the capital market will there be
reasonable returns from this stock in long term?
The Answer: We expect yes as this company is
backed by decent financials, good experience and
strong marketing network.

Puravankara Projects Limited is a Bangalore

based real estate developer company with more
than 30 years of presence in Mumbai, Bangalore,
Kochi, Chennai, Coimbatore, Hyderabad, Mysore, Colombo and the
United Arab Emirates (U.A.E). Its public issue opens July 31, 2007 and
closes on August 3, 2007.

Business Overview:

The operations of the company include identification/acquisition of

land, planning, executing and marketing of real estate projects. Both
residential and commercial projects are executed. Residential projects
consist of apartment complexes, villas and townhouses while
commercial projects include retail and office premises.

The company was originally incorporated as Puravankara Constructions

Private Limited in 1986 at Mumbai. In 1992 it was made a public
limited company and the name was changed as Puravankara Projects
Limited.

The total land area available is 38.07 million square foot, developable
area is 116.24 million square foot and saleable area is 106.80 million
square foot.

The company’s real estate development is concentrated primarily in

southern India i.e. Bangalore, Chennai and Kochi. It has also acquired
roughly 1.06 million square foot of land in Colombo for luxury
residential project consisting of independent villas and townhouses.

The list of completed projects so far is given below:

At Mumbai:

Project Name Saleable area

Uran Park, Mora Road 0.02

At Bangalore:

Project Name Saleable area

Purva Park, Cox Town 0.50
Castlemaine, Jayamahal Road 0.02
Purva Nest, Cambridge Road 0.01
Purva Graces, Yelahanka 0.17
Purva Iris, Cox Town 0.06
Purva Heights, Bannerghatta 0.35
Road
Purva Paradise, Domlur 0.05
Purva Fairmont, Koramangala 0.41
Purva Pavilion, Hebbal 0.24
Purva Parkridge, Marathahalli 0.35
Purva Carnation, Cox Town 0.08
Whitefield Bouganvilla 0.07
Purva Riviera, Marathahalli 1.26

Saleable area is in million square foot.

The company has also completed a commercial project, The Pavilion,
on M.G. Road, Bangalore and it is ready for occupation. One more
commercial project is being undertaken at Chennai with a saleable
area of 0.35 million square foot.

There are 4 residential projects currently under execution at Bangalore

on land that is owned by the company with a saleable area of 6.41
million square foot. These are Purva Grande (Lavelle Road), Purva
Fountainsquare (Marathalli Junction), Purva Venezia (Yelehanka) and
Purva Highlands (Kanakapura Road).
Similarly there are two ongoing projects at Chennai. These are Purva
Swanlake (Old Mahabalipuram Road), Purva Jade (Arcot Road) with a
total saleable area of 0.92 million square foot. In addition, at Kochi,
there are three more projects currently in progress. These are Purva
Grand Bay (Marine Drive), Purva Eternity (Kakkanad), Purva Moonreach
(Airport Road) with saleable area of 1.86 million square foot.

The company also executes 5 more projects at Bangalore on joint

development basis with a total saleable area of 1.44 million square
foot.

A view of the Purva Fairmont, HSR Layout, Koramangala, Bangalore

The company has entered into a joint venture (Keppel Puravankara

Projects Private Limited) with Keppel Investment Mauritius Private
Limited, a subsidiary of the Singapore based Keppel Land Limited. Elita
Promenade, a residential project in Bangalore, is being executed with a
saleable area of 1.22 million square foot by this joint venture.
Through its IPO the company plans to mobilize Rs.1,125 crores at the
upper price band of Rs.525, which shall broadly be used for repayment
of loan of Rs.420 crores and Rs.351 crores for acquiring 43.56 million
square foot land in and around Sriperumbudur and Kancheepuram near
Chennai. After the IPO promotors shall have 89.95% stake in the
company.

Financial data:

Item 2003 2004 2005

Income 41.35 76.38 151.03
Expenditure 32.29 59.94 110.60
Profit before 9.06 16.44 40.43
tax
Net profit 6.49 15.44 38.02

Item 2006 2007

Income 280.42 416.86
Expenditure 197.81 284.53
Profit before 82.61 132.33
tax
Net profit 73.45 130.40

All figures in Rs. Crores.

Comparison with some listed companies:

Company EPS P/E Book

value
BLKASHYAP 43.80 35.00 237.80
PENINLAND 57.00 8.60 104.80
ANSAL ** 9.40 29.90 80.50
PURVA ** 6.80 77.20 * 11.50

* At the upper price band.

** Face value of Ansal and Puravankara is Rs.5.
IPO Details:

Issue Period: July 31, 2007 to August 03, 2007

Issue Size: 21,467,610 Equity Shares
Face Value: Rs. 5
Price Band: Rs. 500 to Rs. 525
Market Lot: 10 shares
Minimum Quantity: 10 shares
Retail Investor Limit: Rs.100,000

Click here to download application form.

Click here for Red Herring Prospectus.

Conclusion:

Puravankara has a strong presence in southern India, where lot of IT

companies have set up their operations. After Sobha Developers,
Puravankara is the second Bangalore based realty major to enter the
capital markets. The company sells the real estate properties directly
to the customers with marketing offices in India and UAE. The strong
marketing network will help the company to reach the large NRI
population in Gulf countries.

Puravanakara has the industry experience and technical expertise.

Moreover, it owns nearly 43% of the developable land which gives a
distinct advantage.

At the upper price band Rs.525, EPS of 6.80 and P/E of 77.20, the stock
may be slightly expensive but there seems to be some considerable
upside, based the growing demand in real estate industry and
company’s ongoing / proposed projects.

Sundaramurthy Vadivelu

LABELS: PURAVANKARA PROJECTS, IPO, INDIA STOCK MARKET, REAL

ESTATE, SOBHA DEVELOPERS, REALTY INDEX
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