Peninsula Land Ltd.

Fundamental Report

Creating Landmarks through Innovation August 10, 2009

Research Report: FS0907/02 Recommendation: Buy/Hold

Real Estate: Sector Overview

Current Market Price:
Recommended Buy:
Target Price:
70.80 The Indian real estate sector plays a significant role in the
country's economy. The real estate sector is second only to agriculture in
60.00 terms of employment generation and contributes heavily towards the
GDP. Almost 5% of the country's GDP is contributed to by the housing
80.00/85.00 sector. In the next five years, this contribution to the GDP is expected to
rise to 7-10%. According to industry players, housing accounts for 4.5 per
cent of GDP with urban housing accounting for 3.13 per cent. Almost 80
per cent of real estate developed in India is residential space, the rest
comprising of offices, shopping malls, hotels and hospitals.

In India there is a shortage of 22.4 million housing units. Thus,

over the next 10 to 15 years, 80 to 90 million housing units will have to
be constructed with a majority of them catering to middle- and lower-
income groups. Apart from the huge demand, India also scores on the
construction front. A McKinsey report reveals that the average profit from
construction in India is 18 per cent, which is double the profitability for a
construction project undertaken in the US.

Indian Market Outlook

Residential

Stock Data The Residential sector though is not as healthy as when the Sensex was at
BSE Code 503031 the 21000 level is still likely to flourish as the large growing population
NSE Code PENINLANDEQ base should sustain demand. Increased demand for luxury apartment
Market Cap Rs 1,899.96 Cr complexes across the major cities.
52 week H/L Rs 87.80/15.20
Retail
Industry Realty
Bloomberg PENL@IN
The major cities have already seen a growth in retail space especially in
Code
shopping centres, malls and grocery shops. The focus in India is now
Reuters Code PENL.BO
shifting to the smaller tier 2 cities like Amritsar, Ludhiana, Pune and
Ahmedabad. Retail Majors such as Walmart of the US have opened a store
in Ludhiana in a Joint Venture with the Bharti Group.
Share Holding Pattern

Commercial

Others,
20.70% With India Inc. continuing to shine and a major influx of MNC’s and
Banks/FI, growth in the outsourcing sector should drive demand for Grade A
4.90% infrastructure.
Promoters,
MF’s/UTI, 53.70%
0.30%
FIIS,
20.50%
 Be Wealthy, Be Wise
Company has tied with Arrow
Webtex (JV) to foray into the
hospitality business. In which
both the entities will invest Rs 1
billion in the initial phase to build
10 hotels of 100 rooms each.
Company eyeing cities like
Mumbai, Pune, Nagpur, Nashik,
Kolhapur in Maharashtra and
Ahmedabad, Surat, Jamnagar,
Mundra port in Gujarat and Goa
for their hospitality business. The
first phase is expected to be
operational in the next 2 years.
© Focus Shares & Securities Pvt. Ltd.
Peninsula Land Ltd.
Company Profile
The Ashok Piramal owned Peninsula Group is one of India’s largest
realty groups and has a diverse business portfolio. The Piramal group is
known for its expertise and professional corporate management in the real
estate sector & also known for their dynamic and entrepreneurship vision
which started with a successful textile venture the Morarjee Gokuldas
Spinning & Weaving Co. Ltd which was incorporated in 1871. The Morarjee
Goculdas Spinning & Weaving Co. Ltd is the oldest textile company in the
nation and also the 5th scrip to be listed on the stock exchange. The
Piramal group with its innovative and diverse plans ventured into
engineering and electronics businesses with Miranda Tools in 1978, PMP
Components Pvt. Ltd. in 1981 and G.P. Electronics Ltd which was
established in 1984. However the group came into its own in 1997 when
they forayed into the booming Indian real estate sector. In 1999 the
Piramal group established “Jammin entertainment” and with this entered
into the retail and entertainment sector.
The Piramal group has a diversified business interest and has
recently established itself in key industries such as real estate and retail.
The groups varied businesses are managed by highly innovative and
entrepreneurial talent. The group has a common vision and philosophy for
all its businesses across various industries. Since its inception in 1997 the
real estate arm of the Peninsula group has developed 3 Million Sq. ft in
real estate land and another 20 Million Sq. ft is under planning and
development. The Peninsula’s group majority projects have been in
Western India mostly Mumbai till date, however the group does have
ambitious plans to spread its network through out India. The Peninsula
group also has the accomplishment of being ranked in the top 100
companies of India by ET500 ratings.
Business Portfolio
Peninsula land
Peninsula land which forayed into the real estate sector in 1997 has built
Retail Malls, Corporate Offices, IT Parks, SEZ’s and Residential
Apartments. The Peninsula group was the first to venture into the
development of an organized retail malls with its “Crossroads” brand in
Mumbai. The group took advantage of the India’s thriving demographics to
build and develop three successful malls.
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 Be Wealthy, Be Wise
The company has tied up with
Leela Ventures to develop the
seven-storey commercial project
in Nagpur spread across 0.5
acres.
Goa SEZ, Peninsula Life centre
will come up on 30 acres of land
and 31 acre Hyderabad SEZ,
called Peninsula Technology Park,
would be a combination of
processing and non-processing
zones.
© Focus Shares & Securities Pvt. Ltd.
Peninsula Land Ltd.
Retail Malls
In 1999, Peninsula introduced the concept of shopping malls in Mumbai'
with Crossroads. With crossroads the Peninsula group tried to enhance the
shopping and entertainment experience and also tried to bring
international shopping standards to the country. Located in Mumbai, the
world class mall had some of the best Indian and International shopping
brands as well as some well known restaurants. However in 2006
Crossroads mall was sold for Rs 251 Cr by the Piramal group to Kishore
Biyani owned Future Group. Apart from “Jammin Entertainment”
Peninsula’s next venture in the retail segment was CR2 which combined a
Multiplex INOX with a shopping mall and a multi storey parking structure.
CR2 has redefined the mall experience while adding color to the business
hub. After the success of the Crossroads brand the group constructed the
Bayside mall which was situated opposite to crossroads. Bayside Malls has
a total of 103 shops that offer a different product mix and price structure
than Crossroads.
Peninsula Commercial
Peninsula Corporate Park has redefined the face of commercial properties
with its international look and world-class amenities. Peninsula Corporate
Park is a modern integrated complex designed in a manner that promotes
efficiency and harmony while meeting exacting quality standards. It has
introduced integrated complexes with large layouts. Some of the biggest
corporate houses and MNC’s have their office situated in this complex.
Peninsula Corporate Park also has a clubhouse called Club Peninsula which
includes a restaurant, library and executive rooms among other things.
Currently under construction Peninsula Business Park is the group’s next
commercial project. The project is already 30% complete and 50% sold.
Peninsula Business Park will also have recreational facilities inform of a
clubhouse. Peninsula Centre point still under construction is another
modern 4 storey commercial project in with the group has already sold
31000 Sq ft of retail and commercial space.
Peninsula IT parks
After the development of the Indian IT sector the group is constructing
Peninsula Technopark, situated in Kurla, Mumbai which provides state of
the art technology and infrastructure to the IT companies and IT
professionals. The project though still under completion is sold out 100%.
67, Rajgir Chambers, 8th Floor, Shahid Bhagat Sing Marg, Fort Mumbai – 400 023
Tel +91-22-67474300-01 Fax +91-22-22641345 Website: www.focuscomtrade.com
 Be Wealthy, Be Wise Peninsula Land Ltd.
Peninsula SEZ

Peninsula Biotechnology Park located in Goa is envisioned to become a

thriving biotech ecosystem catering to the biotech industry. It is spread
over 120 acres of industrial land and this SEZ will be a unique mix of
bioscience companies and research institutes. Peninsula Biotechnology
Park will offer world class infrastructure for Biotech firms and is also an
approved SEZ by the government. The Peninsula group is also coming up
with another SEZ in Goa known as the Peninsula life science centre which
will be also aid the biotech industry. The group’s third SEZ Peninsula
Solitaire Park located in Goa, is catering to the Gem and Jewellery
industries. The SEZ is ideally suited for any industry involved with cutting
and polishing of diamonds and gems, jewellery manufacturers, services
providers, machine manufacturers, designer studios and any other
company fitting into the Gem & Jewellery supply chain.

Peninsula Residential

Ashok House located in the suburbs of Mumbai is one of Peninsula group’s

early residential complexes. Ashok House is an exclusive 6 storey building
and it comes with a privacy of one 4 BHK apartment per floor. Palm Beach,
a residential complex of premium apartments, was visualized to meet the
increasing demand for large lifestyle homes. The group conceptualized an
elegant tower on the plot, which was aesthetically built to accommodate
spacious lifestyle apartments. Palm Beach was positioned as a high end
premium property located in a porsche locality in South Mumbai. The
group also has two major residential complexes under construction Ashok
Towers and Ashok Gardens. Ashok Towers is a luxury apartment complex
with world class amenities in central Mumbai. Peninsula recognized the
need to develop central locations in Mumbai and the group planned and
developed premium, fully furnished apartments offered by none else in the
market. Ashok Garden currently under construction is a mega luxurious
residential project by the group. Peninsula was among the first to
recognize the need for good quality, upscale apartments in this
convenient, central location of Mumbai.

Morarjee Textiles Ltd.

Morarjee Textiles Ltd. (MTL) is a leading player in the premium shirting

Peninsula group also
fabric business and high fashion printed fabric business for global markets.
manufactures tools and
MTL carried forward the legacy of the textile arm of the erstwhile Morarjee
electronic items under the
Goculdas Spinning & Weaving Co. Ltd. Established in 1871; this was the
company Miranda Tools and
oldest textile unit in the country and was the Group's first industrial
G.P Electronics.
enterprise when they took over in 1934. MTL entered the garments
business in mid 2004 by establishing a subsidiary company - Integra

67, Rajgir Chambers, 8th Floor, Shahid Bhagat Sing Marg, Fort Mumbai – 400 023
© Focus Shares & Securities Pvt. Ltd. Tel +91-22-67474300-01 Fax +91-22-22641345 Website: www.focuscomtrade.com
 Be Wealthy, Be Wise Peninsula Land Ltd.
Apparels & Textiles Pvt. Ltd. This forward integration move focuses on garments for women, men and children in
the international market.

Financials

Quarterly Results Rs. Million

Period Ending 30-Jun-09 31-Mar-09 31-Dec-08 30-Sep-08 30-Jun-08
Net Sales / Interest Earned / Operating Income 1155.20 1951.60 1120.50 1105.40 1238.90
Other Income 4.70 48.00 6.10 16.60 19.80
Total Income 1159.90 1999.60 1126.60 1122.00 1258.70
Expenditure -701.40 -1676.00 -850.70 -590.20 -829.10
Interest 128.40 134.90 153.20 85.70 78.90
Profit Before Depreciation and Tax 586.90 458.50 429.10 617.50 508.50
Depreciation -9.30 -9.70 -10.60 -9.30 -8.60
Profit before Tax 577.60 448.80 418.50 608.20 499.90
Tax -168.10 -53.30 -107.70 -27.80 -148.20
Profit after Tax 409.50 395.50 310.80 580.40 351.70
Extraordinary Items -81.00 -35.90 -33.30 -34.40 -39.20
Net Profit 328.50 359.60 277.50 546.00 312.50
Equity Capital 558.40 558.40 558.40 558.40 558.40
Basic EPS after Extraordinary items 1.18 1.29 1.11 2.08 1.12
Diluted EPS after Extraordinary items 1.18 1.29 0.99 1.96 1.12
Percent of Shares-Public 46.35 46.35 46.36 46.36 46.53
Operating Profit Margin 39.69 16.58 24.62 48.11 34.68
Net Profit Margin 28.44 18.43 24.77 49.39 25.22
Cash EPS 1.21 1.32 1.03 1.99 1.15

67, Rajgir Chambers, 8th Floor, Shahid Bhagat Sing Marg, Fort Mumbai – 400 023
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 Be Wealthy, Be Wise
The company plans to build two
residential projects in Nashik on
112 acres of land,
Peninsula Tech City, on 100 acres,
in Pune would be constructed in
two phases and eventually add an
integrated township.
© Focus Shares & Securities Pvt. Ltd.
Peninsula Land Ltd.
Peninsula Land Ltd. posted results for June 30th 2009 below market
expectations. Market & investors were expecting revenue to grow to Rs
160 Cr for the June 2009 Quarter. The company’s sales revenue was
however down 6.76% from 123.89 Cr in June 2008 to 115.52 Cr in June
2009 despite huge expectations from the market. The reason could be
attributed to the housing meltdown in the US that impacted the Indian
market as well. Peninsula’s operating expenses were down from 82.9 Cr to
70.1 Cr by 15.40% for the June 2008 to June 2009 period, as a result
Profit after tax went from 31.25 cr form the quarter ended June 30 2008
to 32.85 cr in June 2009, an increase of 5.12% despite of lower sales
revenue in the period. This gain could be attributed to a higher realization
in property value sold per sq ft. The profits of the Peninsula group mainly
increased as a result of sale of their upcoming residential properties Ashok
Towers and Ashok Gardens. The group has already sold 50% of its
property at Peninsula Business Park their latest commercial project.
Peninsula groups’ revenue break up for the quarter ended June 30 2009
was from Centre Point at 42 Cr, Peninsula Business Park at 35 Cr, Ashok
Tower at 31 cr and Ashok Garden at 3 Cr. The latest quarter saw a revival
in their residential projects as they sold a total of 35000 Sq ft in Ashok
Towers and Ashok Gardens from the quarter ended March 2009. The group
also has two commercial projects under construction which should be
ready within FY10. OPM in % terms is up from 33.08% in June 2008 to
39.28% in June 2009. Net Profit Margin a profitability ratio for the
Peninsula group was up from 25.22% in June 2008 to 28.43% in June
2009. This was a healthy sign for the group as higher profit margin
indicates a more profitable company that has better control over its costs.
The company’s EPS was up from Rs.1.12 in June 2008 to Rs. 1.18 in June
2009 on quarterly basis.
Investment Argument
• Real Estate investments yield huge dividends in India. 70% of
foreign investors in India are making profit while another 12% are
breaking even.
• The government has introduced many progressive reform measures
to unlock the potential of the sector and also meet increasing
demand levels.
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 Be Wealthy, Be Wise
Foreign direct investment
(FDI) into India in the real
estate sector for the fiscal
year 2008-09 has been US$
12.62 billion approximately.
Company has land in the cities of
Pune, Goa, Nashik, Nagpur and
Hyderabad wherein development
work is expected to commence
shortly and the projects will be
completed over a span of 2 to 3
years.
© Focus Shares & Securities Pvt. Ltd.
Peninsula Land Ltd.
• RBI has decided to extend exceptional concessional treatment to
the commercial real estate exposure.
• The Union Ministry of Commerce & Industry has initiated steps to
reduce the time taken to develop special economic zones.
• The Peninsula group is one of the most diversified business houses
in India who depend a lot on their real estate business for their
revenues.
• The group has new promising projects like Peninsula Business Park,
Ashok Towers and Gardens which are still under construction and
90% sold.
• The group is now looking to expand its business opportunities
outside Mumbai, by venturing into SEZ’s in Goa and commercial
property in Nasik.
• Peninsula Group is expecting stronger growth and revenues in the
future with the further development of their real estate land.
Concerns
• The global economy is looking in an uncertain state of affairs after
the housing and credit crisis in US. Peninsula groups profit will be
hit by state of the global economy and the dip in the value of their
properties.
• There is abundance of real estate players coming up with new
ventures, supply could exceed demand.
• There are too many big players in the Indian real estate markets
such as DLF and Unitech that the Peninsula group has to compete
with.
• The Peninsula group has 75% of their new construction in
residential and commercial segment in Central Mumbai. Known as
an industrial hub central Mumbai could not pick up as a residential
market.
• The group in its SEZ segments is competing with a Powerhouse like Reliance
who is looking to build state of the art SEZ’s through out India.
67, Rajgir Chambers, 8th Floor, Shahid Bhagat Sing Marg, Fort Mumbai – 400 023
Tel +91-22-67474300-01 Fax +91-22-22641345 Website: www.focuscomtrade.com
 Be Wealthy, Be Wise Peninsula Land Ltd.
Investment conclusion

The Indian economy is now on recovery path after strong round of

corporate result in the first quarter of 2010. The Sensex has rebounded to
the 15000 after falling to the 8000 levels earlier in the year, which is
showing strength on Indian economy & investor’s trust on Indian stock
market. The real estate sector is looking bullish as government of India is
concentrating on infrastructure development for next 3-5 years horizon. In
budget GOI mainly focused on infrastructure/real estate development,
ready to provide basic facilities to the infrastructure developers. GoI
instructed to leading financial to provide easy loan to infrastructure & real
estate players. Now all the leading finance institution providing easy loan
to developers & end users with very attractive interest rates.

Major real state players like DLF, Unitech and Peninsula Group are
planning new ventures in residential, commercial, IT Parks and SEZ
segments. Peninsula is working on large residential/commercial projects in
different cities. Most of the project will be completed in upcoming 2-3
years which will give solid surge in company’s top line growth. Company’s
bottom line growth will be strengthening by reducing operating expenses &
by property appreciation.

Valuation

Our enthusiasm in Peninsula Land Ltd. stock has been geared up by the
encouraging demand of residential & commercial property. Further, we
expect the company to continue generating higher revenue income after
completion of its recent project, which would lead a higher effective ROE
on the residential/commercial projects. Decent budgetary allocations for
the project development and the company’s diversification into Retail,
Textiles and Hospitality, also provide scope for higher returns. Company’s
long term prospectus is very bright as most of the development projects
being planned for the future & developing in tier II cities. Peninsula Land
Ltd, the only real estate company in the country after DLF, Unitech, is set
to benefit significantly from this scenario.

The stock at the current market price of Rs 70.80 trading 13.09 times to
its earnings per share of Rs 5.36 and 85.60 times to its book value of
0.82,it is expected to provide huge upside potential from Rs 60 in medium
to long – term.

We initiate a ‘BUY’ signal on the stock near Rs 60 levels with a target of

Rs 85 in the medium term investment horizon (6- 12 months) with an
appreciation of more than 30%.

67, Rajgir Chambers, 8th Floor, Shahid Bhagat Sing Marg, Fort Mumbai – 400 023
© Focus Shares & Securities Pvt. Ltd. Tel +91-22-67474300-01 Fax +91-22-22641345 Website: www.focuscomtrade.com
 Be Wealthy, Be Wise Peninsula Land Ltd.

Research Team

Mr. Rahul Bhandawat (Jain)

Manager- Equity Research
rahul@profitbulls.com

Mr. Varun Taparia

Fundamental Analyst – Equity
varun@profitbulls.com

Mr. Sunil Rokade

Commodity Research Analyst
sunil@profitbulls.com

Contact us: +91-22-67474310 Visit us: www.focuscomtrade.com

Prepared By:

Varun Taparia

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67, Rajgir Chambers, 8th Floor, Shahid Bhagat Sing Marg, Fort Mumbai – 400 023
© Focus Shares & Securities Pvt. Ltd. Tel +91-22-67474300-01 Fax +91-22-22641345 Website: www.focuscomtrade.com