Smart City

Transaction Services Strategy
March 2014
LEPL Projects Limited

Project Lychee
This is a working draft. Messages in this draft
report are subject to amendments/withdrawl
Strictly Private and Confidential
Table of Contents
Section
Overview
Page
Scope and Process

1
Project background
Feasibility Assessment
2.1
The Tier 2 growth story
2.2
Vijayawada - An emerging destination
14
2.3
Vijayawada city attractiveness
23
2.4
Attractiveness of the proposed location
34
2.5
Micro-market assessment for project components
37
2.6
Summary
61
Other successful mixed use projects in India
64
Annexures
67
Appendices
1
Section 1
Project background
LEPL Projects Limited Feasibility Study

PwC
March 2014
1
Section 1 Project background
LEPL intends to undertake development of an integrated township on a

600 acre land parcel located on NH-5, Vijayawada-Guntur highway
The site is located on NH 5, 13 kms away from Vijayawada city, which is the 3rd largest city of Andhra Pradesh
Vijayawada Fact File
Andhra Pradesh
District
Krishna
Population (2011 census)
1.2 million
Geographic Area (sq.km)
119.8
Languages spoken
English, Telugu
Literacy rate
69%
Source: Zonal Development Plan, VUDA
Our understanding of project details

Vijayawada
LEPL (LEPL Projects Limited or the Company) is a Vijayawada-based

diversified Real estate development company with offerings in
residential, commercial, education, aviation, power and health sectors
Project is planned on a total land area of 585.83 acres, on NH5 between
Vijayawada and Guntur Highway. This falls under the authority of Vijayawada
-Guntur -Tenali- Mangalagiri urban development authority (VGTMUDA)
LEPL has acquired land parcel of 432 acres and is in the process of
acquiring the remaining land parcel. LEPL has also donated 6.5 Acres to
Chinmaya mission
Land is presently approved under the Residential category conversion to mixed-use development has been proposed to VGTMUDA by
LEPL
The site is likely to be developed in 4 phases, starting from October
2014 to 2018-19

PwC
Source: LEPL management
March 2014
2
As an integrated mixed-use residential township, the project will comprise

of various components residential, commercial, office and other social
infrastructure elements
S.
No.
Particulars
Plotted development
190.61
Golf course
45.93
Commercial & Entertainment
10.43
Residential apartments
82.62
Office
72.39
High end Villas
51.22
Education complex
19.02
Health care
17.48
IT Park SEZ
18.94
10
Retail
4.10
Net Land area for development
Total Area in
Acres
512.74
Source: LEPL management

PwC
March 2014
3
During the course of this engagement, we interviewed several

corporates, business professionals and industry players in Vijayawada
and other cities
Category
Number of interviews in
Vijayawada
Number of interviews
outside Vijayawada region
Industry Associations
Commercial &
entertainment
Hospital
Real estate players
6
(including International
Property Consultants such as
JLL and C&W)
Hotels
IT/ITes
Others
24
25
Total

PwC
We have carried out

c. 50 interviews till
date across various
industry players in
each sector of
interest
March 2014
4
Section 2
Feasibility Assessment

PwC
March 2014
5
Section 2 Feasibility Assessment
We have used a hypothesis based approach to evaluate the feasibility of the

integrated township
Developing an integrated township on the proposed location (in NH5)
between Vijayawada and Guntur is an attractive opportunity
2
Vijayawada as an emerging investment

destination
Vijayawada will emerge as an

attractive investment destination
Indias GDP is expected to grow
from 4.6% currently to 5.5% by
FY2015 and 6.5-7% by FY2016
Growth in Tier 1 cities is
stagnating due to infrastructure
constraints and saturation
This will lead to Tier 2 cities
like Vijaywada attracting
significant share of investments
going forward
Political developments in
Vijaywada to further accelarate
this
There are also other enablers in
Vijaywada which will drive this
growth

PwC
3
The proposed location offers several
advantages
Location Attractiveness of the project
The location has an attractive

catchment and offers some
unqiue advantages
Investment inflow into Vijaywada will

increase demand for housing and
other planned project offerings
Attractivess of each of the project

components within the township
Hypothesis
Demand and supply scenario

for various project components:
Plotted Development and
residential apartment
High-end Villas
Entertainment
Golf Course
Education Complex
Healthcare
Retail
Hotel
IT SEZ
Offices
Recommendations for LEPL
1. Average estimates from various sources such as IMF, Trading Economics, World Bank,
March 2014
6
Section 2.1
The Tier 2 growth story

PwC
March 2014
7
Section 2.1 The Tier 2 growth story
As Indias economy continues its growth trajectory, growth is likely to

become more broad-based involving cities beyond Top 6
As Indias economy continues on its growth trajectory, growth is likely to spill over and become more broad-based
by expanding beyond the traditional top 6 cities
First wave of growth: Concentrated in cities of
Top 6 cities
comprise 23%
of the GDP1
New York, Los Angeles, Chicago and Washington
Stage of development of the economy
1.3 X USA
1.4 X Japan
Top 6 cities
comprise 26%
of the GDP1
5 X China
Expansion to other cities: Factors such as housing

affordability, low population density and economic
abundance led to emergence of cities such as San
Francisco, Seattle, Boston etc . Manufacturing started
moving to other emerging cities such as
Texas, Austin, Wisconsin etc
First wave of growth: Limited to top cities of

Shanghai, Beijing, Guangzhou, Shenzhen and Tianjin.
Expansion to other cities: With rising wages nationwide, interior
4 X Brazil
Top 6 cities
comprise 31%
of the GDP1
3 X India
Note 1 GDP refers to the Nominal GDP as on FY 2012

PwC
regions started receiving greater investment and government support.

Cities such as Chengdu, Chongqing, Hangzhou, Ningbo etc witnessed
increasing industrial and commercial activity outpacing growth in
larger cities
First wave of growth: Historically, growth in India has been concentrated

in top 4 metro cities of Delhi, Mumbai, Kolkata & Chennai
Expansion to other cities: As metros reached saturation levels and with

increasing pressure on infrastructure, land and utilities, cities such as
Bangalore, Hyderabad and Ahmedabad gained prominence Slowly growth has
begun to become even more broad-based spilling over to cities such as NCR
region of Delhi, Pune, Kanpur, Surat etc
Timeline
X Represents the number of times GDP (nominal) has grown over last 10 years till FY 12
Source: Brookings Institution, World bank estimates, PwC analysis
March 2014
8
Rapid urbanisation in India has brought its own set of challenges for top
cities....(1/2)
Urban population is expected to increase to 600 mn by 2030...
India will have 68 cities with a population of more than

a million each by 2030 up from 42 in 2008
600+
+225
Urban Population
(In Million)
600+
375
223
Number of cities
291
340
Total Population
Million
Urbanization %1
1991
2001
2011
2030
856
1,040
1,210
1,470
26%
28%
31%
41%
Tier 1 > 4 mn
Tier 2
1 mn - 4 mn
Tier 3 & 4
< 1 mn
This rapid urbanization has propelled the creation of

satellite cities
Urban cities are facing challenges of high population density which
has led to sharp increase in housing costs, severe pressure on road
infrastructure and utilities such as acute water and power shortages.
Government policy too has been focussed on broad-basing growth
to other cities and this has led to emergence of satellite cities which can
sustain the momentum of economic growth
Source: Worlds Cities Summit- CII, US Census Bureau, PwC Research & Analysis

PwC
93
52
158 13
106
55
9
33
337
195
2008
6,000
5,000
2030
With saturation in Tier 1 cities, Tier II and III cities are

gaining momentum and will help drive India growth story.
As they develop, they will also provide people living close to
them access to jobs, markets and urban infrastructure
NASSCOM
Note 1 :Urbanisation is defined as the ratio of urban to total population based on the census
definition of urban areas; population >5,000; density >400 persons per square kilometre; 75
percent of male workers in non-agricultural sectors; and statutory urban areas.
March 2014
...They are plagued by rising cost and unavailability of land , manpower

adding pressure on infrastructure and utilities
Challenges faced by companies in metro cities
Paucity of land and rising

real estate costs
Infrastructural challenges
Ground water
availability, power shortages
and drinking water shortages
Rising manpower costs and

higher attrition rate

PwC
Land in Delhi-NCR has become expensive and

Bhiwadi and Dharuhera have become industry
hubs on the Delhi-Mumbai Industrial Corridor.
Companies such as Honda, Gillette and Lafarge
have set up plants there
Ashiana Housing
Larsen & Toubro is considering moving its
manufacturing facilities out of Mumbai to Surat
as Mumbai is facing severe pressure on its civic
infrastructure and utilities and it has become a
logistic nightmare to operate there
L&T, India
Ground water has depleted very fast due to rapid
urbanization, and at this rate Hyderabad will be
the first to run dry in three years time. Problems
of long and indiscriminate power cuts also
remain in the city
National Geophysical Research Institute
Attrition is a big worry in metros as salary hikes
of even 15-20% are ineffective due to rising cost of
living and retaining talent is becoming tougher
Infosys
Implications for companies

Companies are setting operations in
the outskirts of major cities such as
Faridabad, Noida, Gurgaon, Navi
Mumbai etc.
However transportation costs and
commute time has increased
substantially causing dissatisfaction
among employees.
Paucity of land has led to
manufacturing companies
relocating to other cities which offer
good availability of resources and
infrastructure
As the competitive advantages of
operating in metro cities have started
becoming less apparent , service
sector companies such as
IT/ITes, banking etc are targeting other
emerging cities for expansion
March 2014
10
As a result, growth in recent years has spilled over to other Tier 2 cities
Vijayawada
Evolution: Tier 1 cities : 8 cities. Population > 4mn

Pre 2003
Stage of classification of Tier 1 cities
Next wave of growth
12 major clusters are expected to house more than 40%

of this rapidly growing urban population
Delhi
Mumbai
Chennai
Kolkata
2004
Bangalore
Hyderabad
2008 onwards
Ahmedabad
Pune
India had 4 major metro cities - Commercial and industrial activity has
quickly expanded in the last decade, leading to emergence of newer cities
which are driving growth in India
Infrastructural challenges and space constraints in Delhi has led to
growth expanding to 4 satellite towns
Mumbai has not been able to sustain its growth momentum and
infrastructure development; Pune as well as Navi Mumbai have emerged
as hubs of commercial and business activity
Bangalore and Hyderabad have started facing issues regarding real
estate costs, power and water shortages due to which cities such as
Mysore and Vizag have emerged as alternatives
Evolution: Tier 2 cities : 26 cities, Population 1 mn - 4 mn
Even a decade back, half of Indias 10.7 million households

with an annual income of up to $23,000 were living in
smaller cities such as Vadodara, Nagpur, Ahmedabad and
Vijayawada
National Council for Applied Economic Research
PwC
Emerging
cities
Kochi, Trivandrum, Mysore, Coimbatore, Bhubaneswar, Vishakha

patnam, Vijayawada , Jaipur, Chandigarh, Surat
Other
cities
Nagpur, Lucknow, Vadodra, Indore, Ludhiana, Madurai, Bhopal,

Patna, Nasik, Agra, Asansole, Varanasi, Rajkot, Meerut, Jamshed
pur
Source: NCAER, PwC Analysis and Estimates
Tier 3&4 cities : All other cities, Population < 1mn

March 2014
11
Tier 2 cities are emerging as a key investment destination across several

sectors
Services sector comprising of
trade, finance, IT/ITES etc has outpaced other
sectors in India during the last 6 years...
Components of GDP at factor
cost (in INR bn)
CAGR
55,054 GDP
19%
45,161
17%
35,644
16%
28%
8%
Finance, Insu
rance, Real 11%
Estate &
Business
Services
Trade, Ho
tel, Trans
port and
Communi
cations
Companies are expanding into Tier 2 cities to overcome

challenges of operating in metro cites and capture growing
demand in these emerging cities
Sector
IT/ITes
9%
Manufacturi
ng
27%
8%
26%
Manufactur
ing
6%
Healthcare
8%
8%
15%
Construction 7%
17%
Others
14%
Agriculture
16%
16%
18%
18%
18%
15%
FY 07
FY 10
7%
3%
Others
Retail,
Hospitality,
Education
FY 13

PwC
Source: PwC Analysis,

RBI data bank
Investment focus in Tier 2 cities

"We are looking for land in various parts of the country and
looking to expand our capacity with a focus on Tier 2 cities since
some of the Tier 1 cities are facing challenges of infrastructure
Infosys
There is ample scope for our operations in Tier 2 and Tier 3
locations. Over 70 per cent of the campus recruitment for TCS is
conducted at Tier 2 and Tier 3 locations
TCS
We plan to increase our sales and service outlets from 274
across 146 cities and towns in India now, to 500 by 2015,
mainly in 2 and 3 markets
Ford India
Tier 2 and 3 towns offer better return on investments - We
expect about 30 per cent of our revenues and profits to come
from Tier 2 and Tier 3 cities in the next three to five years. 50%
of our planned addition of 2,400 beds is in these cities
Apollo Hospital
There is a huge scope in Tier 2 and 3 towns as growth has
slowed down in metros and our model of retail with Brand
Factory is creating an opportunity to buy brands at lower
price
Brand Factory, (Future Group)
As Tier 1 cities in India are getting expensive for hotel
development with a gestation period of about 15 - 20 years,
there is booming scope in Tier 2 cities for future hotel demand.
March by
2014Taj
Vivanta
12
This is evidenced by prominent companies establishing their operations

beyond the metros and entering Tier 2 markets in recent years
Emerging Tier-2 destinations of India (2013)
IT investments in Tier 2 cities in last 5 years

No.
8
7
3
1
2
Tier 2 cities of India are definitely lucrative for us for
several reasons. Besides the cost factor, one gets an amazing
talent pool in Tier 2 cities. We have plans to extensively
expand in Tier 2 cities of India in the next two-three years
Genpact
PwC
City name
Sectors driving growth
Mainstream IT firms
with delivery centres1
Kochi
IT/ITes, Manufacturing
TCS, IBM, Wipro
Trivandrum
IT/ITes, Real Estate
Oracle , Infosys, TCS, IBS

Software Services
Mysore
IT/ITeS
Infosys, Wipro
Coimbatore
IT/ITeS, Education,
Healthcare, Manufacturing
Cognizant, TCS, IBM,

Dell
Bhubaneswar
IT/ITeS, Education,
Engineering and R&D
Mindtree, Genpact, IBM
Vishakhapatna
m
IT/ITeS, Healthcare,
Manufacturing
IBM, Infotech, Miracle

Software, Wipro
Jaipur
IT/ITeS, Education,
Manufacturing
Genpact, Infosys
Chandigarh
IT/ITeS, Education
HCL, Wipro, ST
Microelectronics, Sapient
Vijayawada
Education, Healthcare and

Automobile
FirstSource, domestic IT
companies
Other cities in South India that have emerged as manufacturing

hubs are Sri-city and Ranga Reddy in Andhra Pradesh, and
Tumkur and Kolar in Karnataka
Note 1: For each city, the list is indicative and doesn't include all mainstream IT firms
Source: PwC Analysis,
March 2014
13
Section 2.2
Vijayawada - An emerging destination

PwC
March 2014
14
Section 2.2 Vijayawada - An emerging destination
Services (IT/ITeS, Banking) has buoyed growth in Andhra Pradesh; A large

portion of these investments have flown to Hyderabad
GDP of Andhra Pradesh (FY 13 - constant (2004-05
prices) INR 4,265 bn
GDP growth by sector and cumulative investments

Growth in
GDP (CAGR
2008-13)
Industry
sector
Manufacturing
24%
11%
Agriculture
Sector
Construction
8%
Trade, Hotels &
Restaurants
13%
19%
11%
Others
6% 8%
Transport
& Storage
Real estate &

Business Services
Services
sector
Banking &
Insurance
Cumulative
investment
from FY11 -13
(INR bn)
Manufacturing
5%
1,341
Construction
7%
306
Trade, Hotels & Restaurants
5%
35
Real estate & Business Services
7%
103
Banking & Insurance
15%
n/a
Transportation, Logistics,
Warehousing & Packaging
11%
473
Agriculture Sector
Total
2%
7%
n/a
2,722
Historically, Hyderabad has attracted a larger share of investments Hyderabad accounts for 9% of the
states GDP, as compared to 5-6% of Krishna/Guntur districts.
However, with the bifurcation of the state, high growth sectors such as
transportation, logistics, construction, business services and food processing can gain
traction in these districts
Source: PwC Analysis, SEC AP Survey 2012-13, NSDC Skill Gap
Study for AP (2013), 12th 5 year Plan AP

PwC
March 2014
15
The bifurcation of Andhra Pradesh is likely to increase political will for

development of the Seemandhra belt, especially Vijayawada (as the
frontrunner for the capital of the new state)
Vijayawada is a leading contender for being the new capital after state bifurcation which can propel interest and
growth in the region
Telangana
Hyderabad
Hyderabad
Seemandhra
New capital:
Vijayawada ?
Andhra Pradesh has been pro-active in offering incentives under the ICT Policy, 2010-2015
such as single window clearance under APIIC, subsidy on lease rentals and exemptions
from certain regulations to promote IT/ITES industry in the state. However, most of these
investments have been channelled to Hyderabad
Absence of political will and lack of development of industrial ecosystem in the region has
discouraged companies from committing investments to the VGTM region
Vijayawada is being touted as the capital of the new state due to its inherent locational
advantages, superior connectivity and status as a major trading hub in Andhra Pradesh. If
Vijayawada becomes the new capital, it can radically alter the investment climate in the
region and provide significant boost to investment in the region
PwC
Source: Trade Press, Industry reports, Discussions with industry participants
Vijayawada can potentially emerge

as the new capital
The Andhra Pradesh Reorganization Bill
2013, in its current form, envisages
Hyderabad as a common capital for 10
years and a special financial package for
the Seemandra region to facilitate
creation of a new capital
The bill has been cleared in both houses
of the Parliament and is awaiting the
Presidents nod
Recent news articles and statements from
industry leaders positions Vijayawada as
a frontrunner for being the new capital
It is easier to establish a capital in Vijayawada as
it has facilities like airport, large bus terminal, a
railway junction and infrastructural facilities
besides being located centrally
Andhra Chamber of Commerce
Enquires from IT companies have gone up after
bifurcation bill as Vijayawada is the strongest
contender companies will be willing to set up
operations when there is clarity
STPI Vijayawada
March 2014
16
The region is likely to see a spurt in investments and demand once it is

accorded the special category status along with a substantial financial
package
Salient features of
Package to
Seemandhra region
Financial package for Seemandhra region
"Special category state" status for 5 years

Advantages of special category status ...
Funds for financial

assistance for 3 years1
INR 500 bn
The Andhra Pradesh Reorganization Bill 2013
provides for a special development package for the
backward regions of the successor state of Andhra
Pradesh, in particular for the districts of Rayalaseema
and North Coastal Andhra Pradesh.
While the quantum of the package has not been
announced, it is estimated to be around INR 500 bn
which can provide a huge boost to the region
Significant
excise-duty
concessions
Waiver of excise duty in the state (currently at

16%) for upto 10 years
Attracts industries to relocate/locate
manufacturing units within their territory
Higher
central
budgetary
allocation
30% of the Centre's gross budget has to be

mandatorily allocated to special status states
Higher share in the Union government's resource
allocation to help overcome their backwardness
Higher share
of central
grants
Special-category states obtain funds (Centrallysponsored schemes and external aid) in the ratio
of 90:10 grants versus loans, as opposed to 30:70
for other states under regular funds
The state of Seemandhra is 12th State to get the benefit of special

package besides 11 other states in the country
Timely sanctioning and allocation of the allotted money is key for
development of the residual state
Note 1 As per announcement from Union Minister for Rural Development, Trade press

PwC
Source: Trade Press, Industry reports, Discussions with industry participants
March 2014
17
Vijayawada will potentially emerge as a key investment destination; the

VGTM region can target investments flows of more than INR 250 bn by
2017
Indias investment flows have more than doubled every
5 years since FY 02
Investment inflow1 in India (INR bn)

63,990
Projected CAGR
15%
CAGR
18%
6,025
1.
2.
Share of Andhra Pradesh

@ 6%
INR 4480 bn
31,814
15,406
FY 02
Targeting even 5-6% share of the investment inflow to

unified Andhra Pradesh, will lead to Vijaywada
attracting investments of over INR 250 bn
FY 07
FY 12
FY 17
Potential share of VGTM1

region
@ 5-6%
INR 250 bn
Investment inflows for a year has been represented by the annual gross fixed capital formation (GFCF) for Industry, as reported by ASI. GFCF is net increase in physical assets for
industries (investment minus disposals). Industry as defined by ASI includes factories employing 10 or more workers using power; and those employing 20 or more workers without using
power. It also includes certain utilities and servicing units such as electricity, water supply, cold storage, repairing of motor vehicles etc.
Vijayawada, Guntur, Tenali and Mangalagiri
Source: Annual Survey of Industries (ASI), PwC analysis

PwC
March 2014
18
Services together with select manufacturing segments will be the key

drivers to this growth in the region
Incremental workforce requirement 2012-17

(in 000)
586
2,495
1,162
35
584
103
Banking & Insurance
580
n/a
Agriculture Sector
Construction
Real estate
Transportation &
logistics
473
217
679
IT/ITes
Hospitality
306
Real estate & Business Services
Transportation, Logistics, Wareho

using & Packaging
High
1,341
Construction
Trade, Hotels & Restaurants
Break-down of emerging sub-sectors in the state
Incremental
manpower requirement
requirementt
Manufacturing
Cumulative
investment in 2011-13
(INR bn)
Agriculture
Mining &
quarrying
Banking and
Food processing
insurance
Chemicals &
Auto and autopharma
components
Textiles and leather
Wood and paper

products
Recreational
services
Education and
other services
n/a
Low
Low
Economic potential and attractiveness of

the sector
High 15
Source: PwC Analysis, SEC AP Survey 2012-13, NSDC Skill Gap

Study for AP (2013), 12th 5 year Plan AP

PwC
March 2014
19
Sectors such as agri-processing, leather and textiles etc are suited for KrishnaGuntur districts. Growth in these segments can generate employment for over
80,000+ people in the region
Types of industries
Manufacturing and industries
Food and agrobased processing
Auto and auto

components
Leather and
textiles
Manpower
demand 2012-172
Total : 12,000+1
Total : 25,000+1
S/SS: 18,496
MS: 12,133
Others
S/SS: 6,000
MS: 4,000
Source: PwC Analysis, NSDC Skill Gap Study for AP (2013)

PwC
S Skilled
Opportunities
Challenges
Processing of chilies and spices produced in Guntur

Processing of rice, maize, pulses, mango produced in
Krishna district
Setting up of food parks and agri export zones
Auto Nagar Industrial Estate (340 acres) in

Vijayawada caters to the automobile sector with more
than 1500 automobile accessory units
Scope for setting up of automobile R&D
hub, bodybuilding and assembly plants
Guntur is a cotton producing hub contributing 16% of
APs overall production more than 600 cotton mills.
Exports of garments and fabric, setting up of
integrated textile park
Large livestock population indicates good scope for
processing raw hides and skins to finished leather
The region has potential for manufacturing metals &
non metallic products , chemicals & pharmaceuticals
including refractory manufacturing
SS Semi-skilled
MS Minimally skilled
Note 2 represents incremental manpower requirement over 5

years
High level of
fragmentation and
challenges in scaling up
Land is scarce and

prices are incraesing
rapidly
Government does not

own large tracts of land
Land availability will be
an issue
Lack of political will has

restricted flow of major
investments to the area
Note 1 based on an annualised 4-5%

growth over existing employment
March 2014
20
Services (IT/ITeS, banking) will also find this region attractive due to cost
advantages and availability of skilled labour pool
Manpower
demand 2012-172
Types of industries
S/SS: 14,210
MS: 6,395
Services
Transportation, logi
stics, warehousing
and packaging
IT and ITES Sector

S/SS: 99,400
Ancillary
sectors
Banking , financial
and insurance
MS: 12,381
Construction
S/SS: 300,000+
MS: 121,100
Tourism, travel
and hospitality
Opportunities
The Krishna-Godavari belt has significant agricultural
horticulture and marine produce, however current
cold storage capacity is only 6% of the total
produce and needs to be augmented
Vijayawada is a major commercial centre to a host of
wholesale and retail activities dealing in consumer
goods, textiles, automobiles and industrial products
Scope for setting up an integrated logistics park
and strengthening cold storage chains
Strategically located close to major IT hubs of
Hyderabad, Chennai and Bangalore
Large catchment of engineering graduates, low cost
of living and recent development of retail, malls and
entertainment complexes
Setting up of SEZ and STPI in the region
Rapid development of infrastructure in the region
expansion of road network, creation of commercial
and office space and expansion of the cities will lead
to a large manpower deployment in the construction
and real estate sector
Social infrastructure in terms of hotels and tourism is
likely to receive a boost as business activity increases
in the region.
Challenges
Inadequate skilling and

training of workforce
Investments have slowed

down in the region due to
political instability and
lack of government will
Social infrastructure has

started developing
recently, resulting in
stagnation of business
services dependant on
mid-level management
Limited flight options in

the past restricted travel
to the region
This will lead to incraesd demand for social infrastructure such as retail, entertainment and hospitality
PwC
S Skilled
SS Semi-skilled
MS Minimally skilled
March 2014
21
Vijayawada has in place most of the key enablers for emerging as a key
investment destination
Current
strength
Enablers for Investment
Political
Human capital
Infrastructural
Connectivity Road, Rail, Air
Rationale
Vijayawada is a major transit point major National Highways pass through the
city, largest railway junction in South, largest and busiest bus terminal in Asia
and a domestic airport
Land cost & availability
Within the main city limits, land availability is relatively scarce and is becoming
expensive. As a result, demand is likely to move to the peripheral regions as the
city expands
City infrastructure
and utilities (roads, water, power)
Development of city road infrastructure in Vijayawada has been slow, however

road widening and improvement work is under progress in various parts of the
city. Ground water availability is good and power supply is not a constraint.
Social Infrastructure
(Retail, hospitality, entertainment &
medical)
Vijayawada is strong in the healthcare segment, however the entertainment

and hospitality sector has picked pace only in the last few years and there is
significant scope for expansion.
Demographic and economic

profile
Vijayawada is the third largest city of Andhra Pradesh. The city has witnessed
rapid urbanization and rise in per capita income levels, partly driven by NRI
remittances
Middle management retention
Lack of employment options has led to migration to other cities. Due to lack of
social infrastructure, middle management is reluctant to move to the city
hampering growth of sectors such as IT /ITeS.
Availability of low cost skilled

talent
Governance and political system

PwC
Source: PwC Research & Analysis
Low
Medium
Vijayawada is an important educational hub, with a large pool of graduates

owing to the presence of large number of engineering and medical colleges;
however challenges around migration and lack of skilling remain
Vijayawada has been developed largely by entrepreneurs from the city and lack of
political will in the past has resulted in low emphasis on investment and reforms in
the region. However, the city landscape is likely to change drastically with the
bifurcation of the state and Vijayawada being the frontrunner for the new capital
High
Absent/Nil
March 2014
22
Section 2.3
Vijayawada city attractiveness

PwC
March 2014
23
Section 2.3 Vijayawada city attractiveness
We have discussed the following key enablers in detail
Social Infrastructure including

retail, entertainment and medical
Physical Infrastructure and

connectivity
Demographic and economic

profile
Supporting infrastructure for

business & leisure
Business destination
Human Capital including

Education
Vijayawada city
attractiveness

PwC
Strength of the parameter
High
Medium
Low
Vijayawada has majority of the enablers in

place good infrastructure, talent pool and
commercial activity. Bolstering of social
infrastructure and strong political will
attract businesses into the region
March 2014
24
Like most other Indian cities, Vijaywada too has significant population
growth with rising income levels, partly driven by NRI remittances
Vijayawada is the third largest city of Andhra Pradesh
and has witnessed rapid urbanization and rise in income
levels
Population growth in Vijayawada (in millions)

1.6
1.2
0.8
2001
Per capital income

(2010) (in INR)
Rank
2011
Hyderabad
Ranga Reddy
63,600
1
Vijayawada is the 3rd largest city in Andhra Pradesh and has

witnessed high population growth rates of over 30% (2001-11) driven
by higher economic and industrial activity in the region
Vijayawada forms a part of the Krishna District which is one of the

richest districts in Andhra Pradesh and ranks 4th in Andhra
Pradesh in terms of per capita income
Krishna district has witnessed a rapid increase in

urbanization, with urban population comprising 40% of the total
population in 2011. This indicates a higher migration of population
from surrounding towns and villages, especially into Vijayawada
2021
Vizag
Krishna
53,200
51,000
44,400
NRI remittances play a key role in the economic growth of the city
In the recent decades, there has been a strong emphasis on seeking employement opportunities outside India (US, UK etc) a sizeable number
of resdient households in the city have family members who work abroad. A significant proportion of investments in Vijayawada comprise of NRI
remittances from outside India
Vijayawada has been admitted as a sister city to California in US since 2003 by the Modesto Sister Cities International(MSCI), a nonprofit, community-based organization due to its strong ties with the NRIs
Almost every upper middle class household in Vijayawada has one
or more children working in the US or UK
President, Builders Association
- Vijayawada Urban Development Authority

A lot of the investments we have seen in the past are from NRIs
who buy property for capital appreciation or rental purposes or
for providing housing to their parents
HRT Builders (Developer)
Source: CII (Blueprint for KGPG Belt), Discussion with industry participants

PwC
March 2014
25
The city is a major transit hub with good road and rail connectivity
Vijayawada is well connected to the three major regions of Andhra Pradesh
Air Transport
Domestic airport located at Gannavaram, about 20 km
from the city, connects Vijayawada to major metros.
Regional airline, Air Costa, is also ramping up
operations to increase flights in the city
An international airport is being considered in
Vijayawada with the Government signing an MoU
with the Airports Authority of India (AAI) for upgradation of the existing operational airport.
Government has agreed in principle for acquisition of
additional 492 acres of land.
Rail Transport
Largest railway junction on the South Central
Railway network handling more than 320 trains
including both passenger and freight trains per day
Road Transport
Large network of state highways and district roads
with 3 National Highways, the NH5 from Chennai
to Kolkata, NH-9 from Machilipatnam to Mumbai
and NH 221 passing through the city
Second largest and busiest bus terminal in Asia
The Urban development authority has allocated 35% of the total capital investment for Vijayawada (estimated to be INR
1,1110 crores) towards improvement of road infrastructure in the city. Work is also under progress to widen the length of
Hyderabad-Vijayawada-Machilipatnam stretch on NH-9
PwC
Source: SEC Survey 2012-13 (Government of AP)
March 2014
26
However, challenges availability of land could pose a challenge
Key messages
PwC Comments
Land availability is relatively

scarce in the city (especially
within the main city limits);
land ownership by
Government is limited
Availability of land has been a major challenge in Vijayawada as land has become scarce and
expensive within the city. The Government has not been able to implement any major development
projects as it does not own major tracts of land in and around the city yet
It is hard to acquire land in Vijayawadas city limits and commercial activity needs to expand
outside the city boundaries. Landholding in the peripheral regions is fragmented, and the
Government does not own much land around the city yet
-
Credai (The Confederation of Real Estate Developers Association of India)
Infrastructure availability in the city is not an issue water, power are manageable and
connectivity is excellent. The only thing is that the city has to expand as land is becoming scarce and
expensive
-
Development of city
infrastructure has been slow
Expenditure on road sector
as on 2011 (INR crores)
Vijayawad
a
12
Guntur
Tenali
0.9
Mangalagi
ri
0.8
While Vijayawada offers excellent external connectivity with no significant power and water issues,
development of internal road infrastructure in the city has been slow. Only 50% of the proposed
allocation by VUDA (Vijayawada Urban Development Authority) has been spent on road widening and
improvement.
While intra-city infrastructure is good in Vijayawada the infrastructure within the city is yet to
keep pace as there are open sewages ; Road improvement has been slow in the last 3 years
22
13
35
14
Expenditure proposed
Marketing Private Ltd. (Retailer)
Gateway Hotels
Political will is lacking in the region to implement infrastructural projects the ambitious
Vijayawada-Kakinada Petroleum, Chemicals, Petrochemical, Investment Region (PCPIR) plan to
join the coastal district of Andhra Pradesh has not taken off as PSUs have backed out
70
APCII, Vijayawada
Actual expenditure
Source: Zonal Development Plan 2021- (VUDA), Discussion with industry participants

PwC
March 2014
27
Retail activity has increased with entry of marquee national brands and
emergence of malls
Upcoming malls
Mostly high street retail trade in
textiles, jewellery, cosmetics and consumer
goods concentrated around Bandar
Road
Brands: M&M, RS
Brothers, Kalaniketan, Twills, K-Lounge
Maanya
PVP Square
Area:
230,000 sq ft
Theatre:
Cinneapolis
LEPL Centro Mall

Area: 120,000 sq ft
Brands:
Lifestyle, Auchan, Reliance
Digital
2011
Pre 2011
2013
2012
LEPL ICON Mall

One of the first malls in
Vijayawada, it brought together
entertainment, dining and retail
through foray of national brands
Area: 120,000 sq ft
Brands: Shoppers Stop, Inox
Retail environment in Vijayawada has changed in recent years

with establishment of malls and entry of national brands
Retail and entertainment scenario have evolved in the last 5 years; Presence
of several national brands such as Shoppers Stop, Lifestyle, PVR etc
Vijayawada attracts residents from villages and towns in the surrounding
coastal districts as well as business travellers
Retail businesses continue to stay invested in the region

PwC
Source: PwC research, Discussion

with industry participants
Trendset Mall
Area:
300,000 sq ft
Theatre : Asian
Films
2014 onwards
Ripples Mall
Area:
200,000 sq ft
Brands:
PVR, Van
Heusen, Allen
Solly
People in Vijayawada
today know fashion and are
becoming more aware of the
brands retail has seen
faster growth since 2008
M&M Retail
Vijayawada stands 1st among Tier 2 cities for Lifestyle as it has

been growing at 20% here since 2011 even despite closing
down for 5 days and suffering losses due to the political
disturbance, we are still doing very well here
Lifestyle
The response has been good since we opened in 2011 even
without marketing, customers do have brand loyalty
Shoppers Stop
Walmart and Metro are already present in Vijayawada; there is
a Reliance Retail in Guntur as well. We hear Spencer is
looking
March
2014at
coming up with a hyper market here
28
Real estate broker
Vijayawada is also a large healthcare hub in the region

Vijayawada ranks among the top tier-2 cities in terms of number of private beds
Split of private hospital beds in India (Total =
c.960,000)
Top-8
cities, 27%
Tier-2 cities
Rest of
8%
India, 65%
Key tier-2 cities in terms of private hospital beds

(2013, '000s)
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Vijayawada is emerging as an attractive medical hotspot of

the coastal region
A sizeable demand for healthcare in Vijayawada comes from patients
under the Aarogyasri Scheme where financial cover is provided to
families living below poverty line for up to INR 2 lakhs in a year. This
also covers private hospitals
Vijayawadas 1st NABH certified hospital is Nagarjuna Hospital and
hospitals are applying for NABH certification to attract medical tourists
Vijayawada produces good quality doctors owing to presence of several
medical colleges and fondness for education in the region. However , they
usually end up migrating to Hyderabad
PwC
12.7
7.5
7.2
6.9
6.5
6.0
5.9
5.8
5.1
4.6
Break-up of private hospitals by bed size

4
Guntur
353
1
6
Vijayawada
385
<100 beds
100-300 beds
1
>300 beds
We had 1 medical college 10 years back and now within 60 kms

radius there are 7 medical colleges. All of them opened during
last 5-6 years. Hospitals in Vijayawada which have good
consultants are doing very well
Lata Super specialty
Source: PwC Knowledge Base, Discussion with industry participants
March 2014
29
Realizing the need for multi-specialty hospitals in Vijayawada, several

large corporate chains are planning to set up operations
Currently, Vijayawada has only a handful of large hospitals
(>100 beds)
No.
Hospital name
Bed size
Type
Aayush Hospital
200
Multi-specialty (started in May

2012)
Dr Ramesh Hospital
200
Cardiac hospital
Nagarjuna Hospital
200
NABH certified specialty

hospital
Andhra Hospital
200
Corporate multi-specialty
hospital
Saumya Apollo
250
Corporate hospital
KIMS
150
Multi-specialty hospital
Other prominent hospitals with less than 100 beds include Sunrise, Rainbow,
City Neuro and Med-City Hospital.
Challenges of migration of medical staff continue to exist

There is continuous migration of doctors to cities such as
Hyderabad due to lack of social infrastructure in Vijayawada.
Additionally, penetration of insurance is low in Vijayawada.
Operational challenges exist here - while bed-day rates are
lower in Vijayawada, costs continue to be high as salaries to
retain doctors is much higher than average
Dr Pramod , Lata Super specialty

PwC
Source: PwC Knowledge Base
Realizing the need for multi-specialty hospitals, a number

of corporate hospitals are coming up in the region
Upcoming hospitals
Bed size
Kamineni Hospital (Super

specialty)
250+
Nagarjuna Cancer Centre
150
Andhra Hospital (Cardiac)
150
Given the need for super-specialty hospitals in the region - more

than a dozen 100-bed corporate hospitals have come up in
Vijayawada during the last few years and there are several
upcoming super-specialty hospitals
Large chains such as Apollo and Yashoda hospitals have expressed
interest in setting up operations while names such as L V Prasad Eye
Institute, Sunshine are already present in the city.
We are looking to invest in Vijayawada or Guntur region of

Andhra Pradesh, once there is political stability, as they
present an attractive opportunity due to factors such as good
supply of doctors, sound infrastructure and most
importantly higher affordability of the people"
Apollo Hospital
March 2014
30
Vijayawada is witnessing an increase in business travellers; some reputed

hospitality brands are already in the process of setting up operations
in/near the city
Currently Vijayawada has a handful of 3-4 star
hotels with majority of them being established
before 2008-09
The
Gateway
Hotel
Quality Hotel
D V Manor
Hotel Raj
Towers
Krishna
Residency
Fortune
Murali Park
The Kay
Hotel
Hospitality chains
consider Vijayawada as
an attractive market
However there are shortterm challenges around

attracting top executives
and strengthening city
infrastructure
however, new hotels in the luxury/upscale segment are planned

and will be operational in 3-5 years
Name
Segment
Keys
Greenpark Hotel
Upscale
N/A
Novotel
Luxury
240
Marriott
Luxury
N/A
KEES Hotel
Upscale
150
Majority of the hotels are setting up

operations around the Airport, with
some of them already in the
construction phase
Interest in hospitality has picked up
in the region owing to increase in
traffic from business travellers
We have a lot of corporate travellers in the city - 5-6 years back there were only 2 flights, now we
have 9 and soon there will be 14 flights everyday which is going to increase traffic. Labor is not much
of a problem here as we are not too dependant on local labor
- Quality Hotel DV Manor
Out of 365 days, we are sold out for atleast 100 days which is a good sign that there is sufficient
demand in Vijayawada there will be a boom for existing hotels for the next 3-4 years till new
capacity is added
- The Gateway Hotel
There are certain challenges in increasing average room rates as mostly mid-level executives come to
Vijayawada who have a lower entitlement for corporate stays. Additionally, while the outside
infrastructure is very good there is still need for improvement in the road and sewage infrastructure
inside the city. However these are short-term challenges which can be addressed
- Fortune Murali Park

Source: PwC Knowledge Base
PwC
March 2014
31
Penetration of IT/ITeS sector is currently low; however, with strong

political will, there is opportunity to gain share from Hyderabad and
emerge as an alternative IT/ITeS destination
Penetration of IT/ITes is currently low in Vijayawada
Revenue of Andhra Pradesh from IT/ITes

(in INR crores)
CAGR
18%
96
51,899
Hyderabad
Vijayawada offers significant headroom for growth as there are only

35 software companies (largely local/regional) which have set up
operations in Vijayawada including 22 in STPI and 4 in SEZ.
Vijayawada employs only ~2,000 employees in the IT sector as
compared to 17,000 in Vizag and 3 lakh in Hyderabad.
1,445
1,200
FY 11
Andhra Pradesh ranks number 4 in terms of IT performance in

India contributing more than 12% of the national IT sector
exports. However, growth has been driven solely by Hyderabad
which accounts for more than 95% of the share of IT/ITes
revenues in the state
115
53,246
45,900
64,354
FY 12
Vizag
Vijayawada
3,136
FY 13
Others
IT companies have shown interest in Vijayawada but due to

the lack of political will and clarity in the region they are wary
of committing investments
The city needs an anchor IT/ITes company to drive investments in the
region
However, IT/ITeS has not yet taken off in Vijayawada due to lack of
political will and Government incentives to channel investments
There has been a strong interest from First American (BPO)

and HCL (IT services), with HCL looking to have a 5,000-strong
workforce here. While they have not committed yet due to the
political uncertainty both are expected to start operations
STPI Vijayawada
Enquires from IT companies have gone up after bifurcation
and they are waiting the resolution of the bill before setting up
an IT Park here
APCII, Vijayawada
Source: Discussions with industry participants, Trade Press, PwC Analysis

PwC
March 2014
32
Vijayawada is an important educational hub with a large pool of

graduates; however challenges around migration and lack of skilling
remain
The Krishna and Guntur region have a large number of engineering and MBA colleges along with prominent
universities
Engineering
District
MBA
MCA
Undergraduate
Number of
colleges
Seats
Number of
colleges
Seats
Number of
colleges
Seats
Number of
colleges
Seats
Krishna
37
13,170
41
2,730
32
2,200
103
24,774
Guntur
46
15,690
47
3,060
46
3,020
114
27,420
Prominent
Universities in
VGTM area
Dr. N.T.R. University of Health Sciences, K L

University, Vignan University, School of Planning
and Architecture, Acharya Nagarjuna University
Prominent
medical
colleges
Guntur Medical College, NRI Academy of Medical

Sciences, KMC, Siddhartha Medical College
Vijayawada has a large pool of 90,000 graduates

passing out annually from the region...
...however challenges exist in terms of migration of

work force and lack of skilling
People in Vijayawada have a fondness for education with most parents

typically encouraging their children to enrol for engineering or medical
courses
Lack of opportunities along with aspirations to work in a bigger city

has led to ongoing migration of educated manpower to other cities.
Vijayawada-Guntur region has emerged as an important educational

hub in Andhra Pradesh - few large universities such as KL University
and Nagarjuna University have more than 10,000 students
Lack of sustainable programme s to develop skills in sectors as food

processing, textile processing, electronic system design etc is creating
a crunch for skilled manpower
Vijayawada is the educational hub of coastal Andhra and has a

large pool of workforce owing to many engineering and medical
colleges in the region
President, Builders Association
PwC
Source: CII (Blueprint for KGPG Belt), Discussion with industry participants
March 2014
33
Section 2.4
Attractiveness of the proposed location

PwC
March 2014
34
Section 2.4 Attractiveness of the proposed location
The proposed site is well-connected and could experience a boost in

demand with the potential secretariat of the new capital in close proximity
The proposed site has certain key advantages
The site is located at NH5 equidistant from Vijayawada

and Guntur with a large catchment (VijayawadaGuntur-Tenali-Mangalagiri)
The site is well-connected with 2 railway stations

within a 4 m radius and airport located 30 kms away.
The widening of NH5 to a six-lane express stretch is
also underway.
Poor land availability in Vijayawada, will lead to

expansion of city and extension of demand to the
outskirt areas
The site is located in close proximity to a 1000-bed NRI

hospital/college and Hailand Theme Park
Availability of water is not a challenge due to

availability of ground water and extraction from Guntur
channel or Krishna river
Due to the availability of government land near the

Nagarjuna University, it is best-suited to emerge as
the seat of the Secretariat if Vijayawada becomes
the new capital. This can lead to a boost in demand
for various components of the project such as
residential, office and commercial space.
Domestic Airport
30 kms
Site Location: 600 acres
NRI Medical College/Hospital

Hailand Theme Park
LEPL Raintree Park
Nagarjuna
University
Likely Secretariat of the new capital ?
Legend:
Railway Station
Tenali
PwC
Source: Vijayawada City Development Plan, VUDA,
Required land is not available in the city, so if

Vijayawada does become the capital the secretariat will
have to be located on NH5 where Govt can acquire land
March 2014
35
Section 2.4 Attractiveness of the proposed location
The project also addresses many of the issues faced by businesses while
contemplating an entry into Vijayawada
Enabler
Social
Infrastructure
Human
capital
Physical
Infrastructure
Key issues faced by businesses
Middle management reluctant

to move to Tier 2 city due to
limited social infrastructure
HCL wanted 1 lac sft space here, however middle

management is not interested in coming here due to
lack of recreational facilities
- L&T, Hitech City, Vijayawada
Lack of availability of skilled

middle-level talent
Vijayawada largely offers fresh graduates that can be

used mostly for back office operations and repeat jobs
training is very important for employability in IT/ITes
- APCII, Vijayawada
@
#
$
Availability of
land
Proximity to city and

transport infrastructure
Transport costs are high as the Hitech City SEZ is

located 30 kms from the city and this is a deterrent for
people to work here
STPI Vijayawada
Paucity of land in the city
Land has become scarce and expensive in Vijayawada.

Setting up a large IT/ITeS complex requires large land
tracts to be available
- Cushman & Wakefield
Solution offered by The integrated township

can address these issues
The project addresses
issues of land
availability, infrastructure
and transport with an
integrated residential, and
commercial proposition
The project includes social
and entertainment
facilities, which addresses
the challenge of attracting
and retaining) middlemanagement
The (likely) new Secretariat
will result in development
of transport facilities to the
site
The project also envisions
sizeable scale of plug and
play infrastructure for
IT/ITeS companies and
other businesses
Source: Discussions with industry participants, PwC Analysis

PwC
March 2014
36
Section 2.5
Micro-market assessment for project
components

PwC
March 2014
37
Section 2.5 Micro-market assessment for project components
LEPL is keen on a joint development model by tying up with a developer for

construction and management of the project components in the township
Developer-led model
Operator-led model
Land owner-led model
Relevance for LEPL

Type of operating
model
Salient
features
Rewards
Risks
Joint development with a 3rd

party developer who constructs
the property
Developer brings the operator
for individual components by
tying up with them
The land-owner directly ties up

with individual operators who
construct and manage the
property
The land-owner constructs the

warm shell and outsources the
management of the property to
an operator
The revenues from the

property are shared between
the land-owner, developer and
the operator; Returns tend to
be lower than other models for
the land owner
The land owner provides only

the land for which it charges a
lease rent (as per a long lease
arrangement) and/or a % of
revenues
The operator is typically paid a

management fee and/or lease
rental for managing the
property which can maximise
returns for the land-owner
Flexibility of risk sharing

between the land-owner and
the developer reduces the
overall risk of the project
Since the capital and

operational risk lies largely
with the operator, the operator
may not be keen on committing
huge investments unless
returns are reasonably assured
Land-owner is exposed to
higher capital and operational
risk related to
construction, development and
management of the property
Land owner can

also choose to
develop as well as
manage the
individual
components.
However, we
understand LEPL
is not focused on
development and
management of
properties, hence
this option is
currently limited
to development
and sale of plotted
developments
only
Level of control
Low
High
Resources (cost, time and effort) committed
PwC
March 2014
38
Snapshot of feasibility assessment across various components...1/2
Total area allocated

(in acres)
Saleable area
Feasibility demand
over next 5 years
Unabsorbed supply
anticipated
Key recommendations
! Residential
@ Office
# IT Park
$ Retail
324.45
75.4
19
4.1
155.43 acres
14.5 mn sft
2.8 mn sft
0.6 mn sft
Minimal
High
Medium
Minimal
Upto 11.5 mn sft
Upto 1.1 mn sft
Estimated workforce
demand required for the
site across various
sectors is lower than the
quantum required for the
site, potentially resulting
in significant
unabsorbed supply
The IT park SEZ

could witness a
slower absorption in
the first 5 years, due
to vacant supply in
existing IT parks and
lower incremental
skilled IT/ITeS
workforce
requirement in the
region from FY 15-20
Sufficient demand is
expected for residential
housing due to growth
in existing population,
influx of workforce and
lack of significant
residential supply in the
region
The retail proposition in

the township is expected
to have a reasonable
walk-in to catchment
population ratio of 2-3%
and can cater to the
institutional demand
from hotels and colleges

PwC
4 High 4 Medium 4 Low
March 2014
39
Snapshot of feasibility assessment across various components...1/2

% Education complex
^ Commercial and
& Hospital
* Golf course
entertainment
Total area allocated
(in acres)
19
10.43
17.48
45.93
Saleable area
n/a
3.4 mn sft
1.75 mn sft
n/a
Feasibility demand
over next 5 years
Unabsorbed supply
anticipated
n/a
n/a
n/a
n/a
Key recommendations
An IB school is an
The project is estimated to have
attractive option and
sufficient demand from the local
enrolments of up to 750
catchment for setting up a 2
students can be achieved
screen multiplex in the
by targeting even 10% of
entertainment complex
the local catchment
By targeting a 3-4% market
Another suitable option
share, there is scope for setting
that can be explored is
up a 100-120 room hotel in the
setting up of a professional township as a first phase
course college with an
There is opportunity to add
average student enrolment another 100-120 rooms as part
of 500-600 in first phase,
of second phase of expansion,
gradually growing to 1000
once the first phase has
students over subsequent
stabilised
phases of expansion

PwC
While the region is wellcovered in terms of general

healthcare, it lacks in
sufficient number of large
specialty hospitals
A super/multi specialty
hospital of 250-300 beds can
be set up in the township
March 2014
40
Residential
! Large demand is expected for residential housing due to growth in

existing population and influx of workforce
Demand for Housing in VGTM region
Housing demand
in the region will
come from..
1
Influx of people
in the region
Demand drivers
If Vijayawada becomes the capital of the bifurcated

state, new offices and businesses will emerge
around the secretariat in the vicinity of the site
This will lead to a surge in creation of new jobs in
the region and demand for skilled manpower
This workforce is expected to drive the demand for
housing in the region
Estimated population
driving demand for
housing for next 5 years*
c.156,600
Total skilled workforce
requirement in 5 years
(FY15-20) in VGTM region
Can generate potential

demand of
> 1 lakh
housing units in the
VGTM region between
2014-2020
2
Growth in
existing
population
*Refer Annexure for details
With scarcity and rising cost of land in

Vijayawada, growth is already spilling over to the
north-eastern and western regions in Vijayawada
As people look for cheaper options outside the
city, the demand will expand to the NH 5 belt due to
affordable housing options, availability of ground
water and proximity to the city
362,000+
Incremental growth in
population in 5 years
(FY15-20) in VGTM region

PwC
March 2014
41
Residential
! There are few large residential projects that have been announced in the
region; hence we expect robust offtake for LEPLs planned 5900 housing
units
Supply scenario
There are very few large residential projects (>300-500
units) that are ongoing/have been announced in the region
- Lotus Real Estate Group is marketing a township with
1600+ housing units (total project area of 110 acres)
- A 300-400 unit housing project has been announced
near Lanco township
- Arihant Housing has an ongoing 290 unit housing
project in the region
Once demand picks pace, we expect more residential
projects to be planned and announced; however these are
also likely to be smaller in size (compared to the LEPL
project)
Large tracts are land not available easily in the
region, hence most of the new residential projects are
smaller in size 40-50 acres or so
- Builders Association, Vijaywada
Implication for LEPL project
5900 units as per

project masterplan
The supply of 5,900 units by the project can be

absorbed over a 5 years time frame due to the higher
housing demand in the region and lack of upcoming
supply
The LEPL project is likely to be the largest project of its
kind in the region, and is well positioned to be a hub for
residential, and consequently commercial demand.
The project envisages 5,900 residential units, including
400 villas which can cater to the demand from influx of
workforce and existing population growth in the region
In light of anticipated demand for housing (refer previous
slide), the proposed units are likely to be absorbed with
growth in commercial and office activity in the region.
These 5900 units translate to a approximate 26,500
residents; providing an attractive catchment for allied
sectors such as retail & entertainment

PwC
March 2014
42
Residential
! Residential prices in other large and emerging Tier 2 cities have

historically grown at 8-14% levels (CAGR over 6 years)
CAGR
2007-13
Price trends in residential pricing, Residex (indexed to 2007=100)

250
14%
Bhopal
200
Bhubaneshwar
Ahmedabad
12%
12%
Nagpur
10%
8%
Patna
Large and growing Tier

2 cities have kept an
overall positive growth
momentum, despite
short term fluctuations
in property rates over
the recent quarters
150
Jaipur
Hyderabad
100
In comparison, residential prices in

Vijayawada have been more
volatile, with some areas (such as
CBD) seeing high growth
spurts, while other areas showing
poor growth due to lack of demand
50
Q1 2011
1%
-1%
Q2 2011
Q3 2011
Q4 2011

PwC
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
March 2014
43
Residential
! With recalibration of the market dynamics, Vijayawada is likely to

witness faster escalation in property rates in the coming years
Unlike other Tier 2 cities, Vijayawada is expected to undergo a complete recalibration of

demand due to the anticipated political changes, which will also change the economic development in
the region
As a result, while other cities have historically grown at 8-14% levels, price escalation in the site
(VGTM belt) is likely is be 500-600 basis points higher than peer Tier 2 cities
Y-o-y growth in apartment rates in the project site

(projected)
25003500
FY14
30003500
FY15
36004000
43004560
51005250
Y-o-Y Growth in plot rates at project site (projected)
60006200
70007500
43-64
CAGR of
15-20%
FY16
39-58
35-52
30-45
26.5-40
INR 000 per
sq yard
INR per sq ft
CAGR of
15-20%
Acutal prices on a year-on-year basis may

vary from our estimates below due to to
uncertainity in the market (since it is not
cleat when the city will be formally declared
as the capital). However, over a 5-8 year
time frame, overall rates are likely to
appreciate significnatly
FY17

PwC
FY18
FY19
FY20
Current rates near project site as per

market discussions
23-34
20-30
FY14
FY15
FY16
FY17
FY18
FY19
FY20
March 2014
44
Office
@ The estimated demand for office space in the vicinity of the LELP project
site is expected to be 3.9-4.9 mn sq ft till 2020...
Demand for office space
Sector
Growth in
employment
(for sector) in
VGTM (FY 1520)
Estimated
requirement
for new office
space (mn sq
ft)
Estimated
share of
project site
(%)
Banking & Financial

Services Insurance
39,437
3.2 3.9
50%
Tourism, Travel &

Hospitality
37,450
3.0 3.7
50%
5,991
0.5 0.6
50%
Transportation,
logistics,
warehousing
Others
Domestic/small IT &
ITES Sector
~2300

PwC
1 1.6
0.2
Rationale
Out of the total demand for

office space from new
businesses, the LEPL project site
is expected to take majority
share (c. 50%) due to
Lack of large scale organized
office space in the city and
Likely Secretariat in the
vicinity of the project site
50%
Additional demand from various

other services such as legal,
accounting etc due to the
potential location of Secretariat
near the project site; assuming
this accounts for 10-15% of rest
of office space demand
10%
A lower share has been

attributed to smaller domestic
IT/ITes companies as larger
companies are expected take up
space in IT SEZ
Potential demand of
3.9
4.9 mn sq ft at
project site between
2015-2020
March 2014
45
Office
@ We suggest that the planned allocation for non-IT office area be reduced
to 4-5 mn sq ft in the initial phase; room for adding office space in
subsequent phases once demand is more certain
Planned area for office space (as per
project master plan)
65-70% reduction in
office space allocation
PwC estimate of office space

allocation for the project
14.4 mn sq ft
4-5 mn sq ft
The project master plan has an allocation

of 14.4 mn sq ft of saleable area (over 72.4
acres of land)
Considering the potential demand, we

recommend a reduction of 65-70% of the
area allocated to office space
Demand for office space is expected to be

around 3.9-4.9 mn sq ft (refer previous
slide); this is much lower than lower than
the planned project allocation, which could
lead to over-supply situation and high
vacancies
This translates to 4-5 mn sq ft of saleable

area (ie, 22-25 acres of land)

PwC
In order to avoid a supply overhang, LEPL can plan for

lower allocation of office space in the initial
years.
The capital for Seemandhra (assuming it is

Vijayawada) is likely to be operational only after 10
years, as per the current bill. Once the potential
Secretariat and other civic and government offices
become fully operational, demand is likely to pick up
The project can plan for expanding its office space once
demand is more certain in the region
March 2014
46
IT Park
# Similarly, for the IT park, the current allocation of 2.84 mn sq ft could

lead to a supply overhang. Expected demand for IT park is estimated at 1.8
mn sq ft
Projected Demand-Supply scenario for IT space
in VGTM (till 2020)
Location
SEZ (L&T
Hitech
City)
STPI
Other
commerc
ial IT
space
Total
Unoccupied
area in FY 14
(mn sft)
Upcoming
supply
(mn sft)
0.18
0.02
0.06
0.04
0.151
0.24
0.21
Saleable area of 2.84 mn

sq ft (19 acres of land)
allocated for IT Park as
per project masterplan
2.84
3.29
Excess supply of
1 1.1 mn q ft
2.22
0.21
0.24
Existing surplus
Growth in supply (new LEPL project - IT/ITeS

additions till 2020)
space
Total supply
Current occupancy in the city is low

(only c. 30% of available IT space is
occupied)
1.
2.
As per primary discussions, on an average 25,000-35,000 sft gets added each year under this non-SEZ, non-STPI
commercial IT space in Vijayawada
Standard industry norm of a requirement of 96 sft of super built up IT space per person has been taken for
computation

PwC
At planned allocation of
2.94 mn sq ft of saleable
area, there is likelihood
of overall excess supply
of 1 1.1 mn sq ft
Hence the project could
either reduce its
allocation for the IT
Park to c. 1.8 mn sq
ft of saleable area or
anticipate some unsold
inventory in the initial
years
Demand for IT space by

FY 20
Demand for IT space based on expected
incremental employment of more than 23000
people in IT/ITeS sector by 2020
Note that demand projection is based on
current industry estimates; there may be a
possibility of a single large player like IBM or
Accenture requiring a large allocation (say 11.5 lakh sq ft), which could change the
demand dynamics significantly
March 2014
47
Retail
$ The project and its surrounding regions is expected to provide a

reasonable retail catchment of 80-90,000 potential customers...
Population in retail catchment area

Tertiary
catchment
2.8 mn
Secondary
catchment
86,000
Primary
catchment
24,000
The tertiary catchment is

the population of
Vijayawada and Guntur in
2020 (only a fraction of this
will be addressed)
Secondary catchment
comprises floating
population from visitors,
employees and students
within the project
township
Primary catchment
comprises the resident
population in the project
township; assuming 90%
occupancy by 2020

PwC
Addressable catchment for retail outlets in the

project township
% of
addressable
population
Target
population
for retail
Primary
catchment
100%
24,000
Secondary
catchment
50-60%
43-51,000
Tertiary
catchment
0.5-0.6%
14-17,000
Total
81-92,000
Taking a very small

proportion of city
population as floating
population that may
include visitors to nearby
locations (such as Hailand
Entertainment park or the
potential Secretariat)
March 2014
48
Retail
$...which can support the viability of the retail component envisaged in

the township
A walk-in to catchment population ratio of 6-7% can make the
planned retail space of 0.6 mn sft viable in the township
Food and
grocery
space
Space available
(in sft)
Expected monthly
rentals (INR per sq ft
per month)
Minimum monthly
revenue required per
sqft (INR)
Target monthly
revenues for
breakeven (in INR
mn)
Number of walk-ins
required daily
Other
retail
shops
248,000
372,000
30-40
40-50
120-130
130-135
25-35
45-55
5000-5100
Comments
Assuming a mix of 40:60, for
hyper/super market for food
(40%) and other retail shops
(60%)
Current rental in the non-CBD
regions (periphery) in Vijayawada
is INR 15-20; assuming a 100200% increase in rentals as
demand in the region picks up
Break even rentals have been
assumed to be 12-15%
Average bill size has been

assumed at 500 and 2,500 and
5300-5500
conversions at 80% and 30% for
food and other retail, respectively
Retail shops in the township will serve a

large resident catchment and could also
cater to institutions such as hotel, colleges
directly
The retail outlets in the project township will largely
serve the local residents
A mix of food and grocery retailing
(super/hyper markets, restaurants, other food
oulets) and non-food outlets (apparel, other
consumer goods, gifts & stationery etc) is
envisaged
The food and grocery shops can also tie-up and cater
directly to the hotels and educational institutions
Higher affordability and a sizeable catchment of
residents and working class population can drive
growth in retail in the township.
We procure grocery from Walmart (in the
outskirts), Metro (in Vijayawada) and Reliance
Retail (in Guntur) - cash and carry retail is doing
very well here. Even Spencer wants to come up with
a hyper market in Vijayawada
- Taj Gateway Hotel
Assuming a catchment of 80-90,000

customers, this translates to a population-towalkin ratio of 6-7% for breakeven
PwC
Source: PwC estimates, Discussions with industry participants
March 2014
49
Rentals for nonresidential area
Future rental rates for commercial areas (office, retail, entertainment etc)
in the project township are dependent on changes in the political and
economic scenario in Vijayawada
Current rentals in Vijayawada (retail, office etc) vary significantly between

the CBD and peripheral regions on the outskirts
Rental rates in Tier 2 cities in India
INR per sq ft
per month
Office
Retail
INR per sq ft per

month
Office
space
Retail
space
CBD
60-70
100-150
Patna
20-50
40-150
Non-CBD (within
city limits)
20-35
30-70
Jaipur
30-110
40-170
Peripheral regions
10-20
15-25
Surat
25-40
30-60
Coimbatore
city
35-60
45-80+
Coimbatore
(peripheral)
25-42
25-45
Chandigarh
30-120
50-180
Kochi
25-60
50-150
Vizag
12 60
16-78
Nagpur
30-80
40-130
Indore
25-65
50-120
Rentals in the peripheral regions are low due to limited demand

today. However, with the changes expected in the political and economic
scenario in the city, the demand scenario in and around the project
site is expected to be very different from current levels.
Comparing with other Tier 2 cities that have seen significant appreciation in
property rates in recent years (due to changing demand dynamics), it is
likely that rental rate in the project site will move closer to its other Tier 2
city counterparts.
Hence, we expect rentals for office space to range from INR 30-50
and for retail to range from INR 40-60 in the project site. Note that
these rates assume competition from other commercial/retail options that
may emerge once demand in the project region picks up. As such, real estate
rentals are difficult to predict over the long term as supply-demand
scenario can be very dynamic
Source: PwC research, discussions with real estate developers and agents

PwC
March 2014
50
Education
% LEPL can consider an international school or a professional college as

part of the educational complex envisaged in the township
University
Salient
features
Demand
drivers
Large student
enrolment of 2500+
students
Offer a variety of
courses
Colleges general
courses
Colleges Professional courses
International school
Courses such as arts,

Courses such as engineering, medical,
commerce, science and
management, law and other vocational
education
courses such as hotel management etc
Account for the bulk of Higher fees of courses (more than 10
the of enrolment in
times)
higher education in
Growth rate in enrolments@20%
India
CAGR
AP has only 2 deemed

private universities vs.
more than 10 in other
south states
Large catchment of
Krishna-Guntur district
Schools offering international

standards of education for primary,
middle years and diploma (K-12)
Affiliation to either International
Baccalaureate (IB) headquartered at
Geneva or Indian General Certificate
of Secondary Education (IGCSE) run
from Cambridge, UK
Vijayawada-Guntur is the hub of education for the coastal region Aspirational value of international
attracting a large number of students from the region
quality education
Strong culture of providing quality education to children with
Large NRI base can be tapped
aspirations that they become engineers or doctors
Higher affordability and propensity of
people to invest in education
The site offers an area Large number of general

of 19 acres, while large
course colleges in the
private universities
region
such as Amity, IBS and No new college has come
Lovely University
up in last 5 years
Feasibility for operate on campus

Slow growth rate of
the site
sizes of at least 50-100 enrolments@ 6% CAGR
acres
4
PwC
Source: PwC estimates, Discussions with industry participants
The Krishna-Guntur region has one of

the highest number of engineering
and general management courses in
the state (more than 80)
There is opportunity for medical
colleges, MBA and specialised courses
(eg, law, polytechnics) however
tieup with reputed education brand
will be critical to differentiate from
existing providers
IB schools are the fastest growing

segment in India (@30% enrolment
CAGR)
Currently there are no reputed
international schools in Vijayawada
No
Can target larger catchment as people
are more willing to travel for an IB
school
4 High 4 Medium
4 Low
March 2014
50
Education
% There appears to be high feasibility for an IB school in the project;

enrolment of 500+ is achievable by targeting a small fraction of the local
school-going catchment
An IB school can be an attractive proposition for the township given the size of catchment, aspirational value of
an international course and tendency of the people to invest in good quality education
Particulars
Population Comments
Local catchment
(radius 2-5 kms)
School going
population
35,000
~7,000
Target share
@8%
Students
targeted in local
catchment
Additional students
within 5-15 kms
Total enrolment
that can be
achieved
400-450
200-300
600-750
Includes resident township population

(c. 27,000 and other residents in area
(c. 8,000)1
Out of the total population in Krishna
district, around 20% is in the age
group of 6-17 years (school going
population) with a gross enrolment
ratio of 80%
IB school enrolment as % of total
enrolment in cities such as Bangalore
and Hyderabad is currently around 68%
Typically 60% of the students of
overall enrolment are from local
catchment and rest travel a distance of
5-15 kms
Targeting even 8% of the of local
catchment can result in enrolments of
upto 750 students
While the size of IB schools vary

in India, a typical school has
enrolment of c. 500-600 students.
Lack of good quality schools in the region State board

schools dominate the Vijayawada-Guntur region and the region
lacks even good quality CBSE schools.
Larger catchment While CBSE schools have a localised

catchment, an IB school attracts students even as far as 5-15 kms
as willingness to travel longer distance is higher for international
quality education.
NRI population and affordability Vijayawada has a strong

NRI connect; an IB school can attract them to the region as it
provides an international education to their children
Attitude to education Residents of Vijayawada have high

propensity to spend on education and consider it as an
investment. Good quality education has an aspirational value and
families save to provide education to their children.
People in Vijayawada tend to save money for education as

they believe it is an investment for future. Lack of good quality
schools in the region often results in parents migrating to other
cities; Also, this impacts the overall quality of living and hence
willingness of professionals to live here
KL University
1. As per primary discussions, Lotus township is the only major residential complex in the vicinity with an expected 1600 units. Assuming an additional supply of 400 units by FY 2020,
resident population in the vicinity of 5kms has been taken at 8,000 with an average household of 4 persons.

PwC
March 2014
Source: PwC estimates, Educational Stats of AP 2010-11, Discussions with industry participants
51
Education
% Another option is to tie up with a reputed brand to set up of a college for

professional courses with enrolment of 500-600 students in first phase
There is a need for the current supply of seats in professional courses to grow at 4-5% to meet the expected
enrolments in FY 20
Total population of Krishna and Guntur
Additional seats
required by 2020
district has been taken at 11 mn in FY

20, with a growth rate of 2% over population
as per the last census 2011 (9.4 mn)
Taking 10% of the population in 18-23 band
with a GER* of 28%, expected enrolments in
FY 20 are c. 305,000 students2
Out of these typically, 35% opt will for
professional courses 106,8002
106,826
27-37,000
70-80000
As per current estimates, total seats

in Guntur and Krishna districts for
professional courses such as
engineering, MBA, MCA, medical,
polytechnic total 70-80k, with
maximum seats for engineering
courses at c.29,000.
Current supply (seats)
Expected demand in FY 20
Courses such as Engineering and General management are witnessing

saturation levels as Krishna-Guntur district already have more than 80
engineering and general management colleges. Growth in enrolments in existing
colleges is likely to cater to majority of the future demand for such courses
However there is scope for setting up of a professional college for courses such as
law, medical, hotel management, pharmacy etc, which have limited options in the
region
The region also lacks a reputed management college, which is affiliated
to a known domestic/global brand. This can attract students from the other
parts of the state as well as from other states in the country
Vijayawada is alredy saturated in terms of

professional colleges offering
engineering, MCA, MBA degrees...A strong brand is
key to position yourself differently in this market"
- Promoter, Management college in Vijayawada
The site can garner a share of the expected

enrolments in FY20 and have a specialized
professional course, medical college or a reputed
MBA college (option to have multiple
professional courses under the same college)
The college can target enrolments of 500600 students in the initial phase. As the
institute gains popularity , there is opportunity
for subsequent expansion in capacity to
1000-1200 seats
1.
2.
GER (Gross enrolment ratio) is the ratio of students enrolled in higher education to the population that is eligible for enrolment i.e. population in the age of 18-23
State averages have been used for estimating population in the age band of 18-23 and GER. All India enrolment in professional courses is 30% out of total enrolments, since enrolments in
these courses
are growing
at a higher
LEPL Projects
Limited
Feasibility
StudyCAGR of 30% as compared to general courses (6%), it is expected to form a share of 35% of total enrolments by FY 20.
March 2014
PwC
Source: PwC estimates, All India Survey on Higher Education (AISHE) 2012, CII (Blueprint for KGPG Belt)
52
Education
% Fees for IB schools ranges from INR 1-3 Lakh per student per annum;
fees for professional courses vary widely across various types of
programmes
Indicative
Fees in IB schools
12
INR lakh per student
Fees for professional courses
Fees for professional courses varies widely across

institutes, and is driven by the brand of the
institution, infrastructure and amenities offered in the
campus and residential vs day-scholar programmes
International schools target the upper echelons of the

socio-economic strata in India largely the upper
middle class and the rich
Fees in IB schools are significantly higher than ICSE
and CBSE schools, and can vary depending on
whether the school offer residential facilities or is dayscholars only
Typical fees range from INR 1 2 Lakh for a dayscholar only school
-
Step by Step school charges INR 0.8 Lakh at entry

level, INR 1 Lakh for mid-level and INR 1.5 Lakh
at Diploma level
Pathways School in Gurgaon charges 0.8 Lakh at

entry, 1.1 Lakh for Grades 9-10 and 1.4 Lakhs for
IB Diploma
Chinmaya International Residential School in

Coimbatore charges INR 5 Lakh at Diploma level
Indicative course fees

for private colleges
(INR lakh per annum)
Management
3 10+
Engineering
0.8 2 L
Law
0.5 2 L+
MCA/MCS etc
0.5 1.5 L
Hotel Management
0.75 1.5 L
Source: School/college databases, PwC internal knowledge base, PwC research

PwC
March 2014
53
Commercial &
entertainment
^ The project is likely to have sufficient demand from the local catchment
for setting up a 500-seater multiplex
Market opportunity for multiplex1 in the project
Estimated footfalls from movie-going population
in the catchment
Estimated footfalls in a 500-seater multi-screen

multiplex
Potential footfalls of
Footfalls in a 500-seater multiplex
120 140,000
80-90,000 per
per annum (by 2020)
annum
Demand estimation
Feasibility for 500-seater multiplex in the township
The catchment for the entertainment complex and multiplex

comprises residents in the project township and floating
population of the township
With limited competition due to absence of other options

in/near the region, a multiplex in the township can target a
large share of this demand
- The resident population of the township including villas, town

houses and apartments is estimated to be c. 26,500
- Additionally, a large population comprising of officegoers, hotel guests, college students, visitors etc of ~73,000 will
comprise primary catchment
Since people in the VGTM region are very fond of watching movies
(due to lack of any other significant entertainment option) a higher
share at 35% of the total catchment has been taken as the moviegoing population (compared to average penetration in urban India
of 30%)
Taking a conservative estimate of an average of 1 movie every 3-4
months per person, the total potential footfalls for movies
from local catchment has been estimated at 120-140k.
Source: PwC Research & Analysis, FICCI: Media and Entertainment report

PwC
A 500 seater multiplex can capture around 65-70% of this

demand, ie 80-90,000 footfalls
- Using industry average norms for occupancy rates at 6575% for weekends and 35-45% for weekdays (Inox cinema
in Vijayawada city has an average occupancy of 60-70%)
Multiplex operators have already started eyeing underpenetrated markets such as Vijaywada for their next
phase of growth
National multiplex chain such as PVR and Inox have opened 4
screen multiplexes and large chains such as Cinepolis and
Asian Films are expected start operation in current year in PVP
Mall and Trendset Mall in Vijayawada
Watching movies is one of the primary mode of
entertainment for people in Vijayawada
March
2014
Inox, LEPL ICON
mall
53
Commercial &
entertainment
^ Existing supply of hotels rooms in the region will be insufficient in 3.54.5 years if demand increases at a CAGR of 25-35% over next 5 years
Growth in demand for rooms at 25-35%
CAGR can lead to higher occupancy
levels for the existing and upcoming
hotel supply resulting in demand for
new hotels over next 3.5-4.5 years
Projected Demand-Supply* scenario in 3 Star Hotels and above segment

1347
1,300
1,307
1,223
1,137
1,100
1,080
Number of rooms
1,019
942
988
963
900
849
830
859
747
700
702
Current
supply
688
708
639
650
590
565
500
491
3
Years
3.8
Years
5.5
Years
If demand
If demand
increases at 40% increases at 30%
CAGR
CAGR
Current demand
6+
Years
If demand
increases at 20%
CAGR
If demand
increases at 15%
CAGR
300
FY 13
Supply
FY 14
FY 15
Demand@15% CAGR
FY 16
FY 17
Demand@20% CAGR
FY 18
FY 19
Demand@30% CAGR
FY 20
FY 21
Demand@40% CAGR
*For supply, only planned additions to room inventory till FY15 -16 have been taken into account, after which supply has been considered to be constant

PwC
Source: Industry Discussions, PwC Analysis
March 2014
55
Commercial &
entertainment
^ The project can target a 4/5 star hotel at the site. The hotel can be planned
in a phased manner starting with 100-120 rooms, with option to add
another 100-120 rooms as demand picks up
Demand for Hospitality in VGTM region
Annual demand from hotel guests by 2020
(25-35% CAGR)
Existing demand (FY14)
Current demand estimated at
c. 60,000
220,000 +
# of guests
# of guests
Currently there are only a handful of 3 star and 3 star
plus hotels in the region; these hotels together
comprise over 700 rooms
Factors driving increase in demand in the region...

i. Increase in business
activity in the region
Business travelers form more than 85% of the demand

for 3/4 star hotels in the city
Current occupancy levels are 65-70%; however hotels
are witnessing increase in demand in recent months
due to increase in air connectivity and business
interest in the region
We are now having occupancy of more

than 80-90% in certain months
- Taj Gateway
Vijayawada being the potential capital of the new

state will witness an influx of business travelers
due increase in commercial and business activity in
the region
ii. Increase in traffic &

international airport
Increase in flight options with new operators such as

Air Costa and proposed international airport can
significantly increase the existing air traffic of 1 lakh
passengers annually
iii. Limited supply of

upscale hotels
Vijayawada and Guntur have few existing and

planned hotels in the upscale/luxury segment, and
with renewed investments in the region, there will be
demand for such hotels by executives/senior
management traveling to the region
Targeting 7-8% of the demand translates into overall opportunity for setting up a 200-240 room hotel. A phasewise strategy can be employed starting with 100-120 rooms in the initial phase and subsequently expanding to
200-240 rooms depending on growth in demand
PwC
Note 1 Assuming a lower occupancy of 60% and average length of stay of 3

days, a 200-240 room hotel will have 14,000-17,000 guests annually (representing
7%-8% of projected demand of 220,000)
Source: PwC Research & AnalysisMarch 2014
56
Commercial &
entertainment
^ ARRs in Vijayawada have been traditionally low; given the upcoming

demand we expect a moderate growth in rates over the next 5-6 years
Existing ARR for 3/4 star property (FY14)
Expected ARR by 2020 (for 4/5 star property)
Current ARR in Vijayawada
4800-5400
2500-3000
INR
INR
Market discussions with leading 3/4 star hotels in the

city indicate an average room rate (ARR) of INR
2500-3000. This is lower than other Tier 2 state
capitals cities such as Ahmedabad (INR 4300-4500)
Most of the corporate guests to Vijayawada

currently are mid-level executives, who have lower
entitlement. Hence we keep our rates to ensure we
can target the corporate traveller
DV Manor
Room rates have been largely flat in the last 2-3

years. This year, with increase in air connectivity we
have seen more footfalls, and we revised our rates
upwards marginally
Demand for hotel rooms is expected to grow as

business activity in the region picks up (refer previous
slide). As a likely state capital, Vijayawada is likely to
attract senior cadre of corporate travellers and
business visitors (who are less sensitive to increase in
room rates).
At the same time, additional supply of c. 650 rooms is

expected to come up in the next 2-3 years; this is likely
to keep price increase low in the short term
After 3.5-4.5 years, room rates are expected to grow as

demand outpaces supply. We expect an overall growth
in ARR at a CAGR of 5-7% between FY14-FY20 (in line
with historical growth rate in Tier 2 cities such as
Ahmedabad and Jaipur )
Taj Gateway
Source: Industry discussions, HVS report on Hotels in India, PwC research and analysis

PwC
March 2014
57
Healthcare
& While the region is well-covered in terms of general healthcare, there are
few large specialty hospitals in the region
Vijayawada-Guntur region is a hub for healthcare in the

region...
Vijayawada and Guntur have one of the highest ratio of beds
per 1000 population at 6.6, compared to the national average
of 1.2 and the Andhra Pradesh state average of 1.4
The region is well-covered in terms of general hospitals, which
are mostly private in nature
Provision of cover by the Government (upto 2 lacs per annum)
under Aarogyashri and state insurance schemes, as well as a large
catchment of high income population in surrounding areas has
encouraged private healthcare players to set up operations
here
The region also has a large number of medical colleges, doctors
and health consultants
However, majority of the hospitals in the city are small

(<100 beds); large specialty hospitals are limited
Majority of the hospitals in the region are small hospitals set up
by private consultants and doctors . Currently there are only
7-8 major specialty hospitals in the region. (Refer slides 2829 for more details on healthcare market in Vijayawada)
# of hospitals in Vijayawada and Guntur, by size
385
353
9
Vijaywada
<100 beds
100-300 beds
Guntur
>300 beds
In order to tap the opportunity for offering specialized care, 3-4

hospitals specializing in cardiology, oncology etc are also
coming up in the region
The catchment of patients for these super-specialty and multispecialty hospitals is larger, comprising of the population from
nearby coastal areas as well.
Bed occupancy rates in the city vary from 50-70%, depending
on type of hospital and consultants in the hospital

PwC
March 2014
57
Healthcare
& A super/multi specialty hospital of 250-300 beds can address this needgap and can be set up in the proposed area of 17.5 acres
While there is sufficient coverage for general healthcare in the region, there is a need-gap for specialty healthcare
which can be bridged by a multi-specialty or super-specialty corporate hospital
Most residents of Coastal Andhra currently go to Hyderabad or other
cities for specialized treatments. They can be targeted by exploring
various options
Super-specialty hospital specializing in

oncology, nephrology, cardiology etc
Multi-specialty hospital
Novel concept such as a heath village with multiple niche offerings

such as geriatric care etc.
Competition in the specialist healthcare space could increase
as newer hospitals are eyeing the market to bridge the need
gap in the region. Early entrants are likely to have a first
mover advantage
Upcoming hospitals
Type
Bed size
Kamineni Hospital
Super
specialty
250+
Nagarjuna Cancer Centre
Oncology
150
Andhra Hospital
Cardiac
150

PwC
Potential for 250 -300 bed specialty hospital in

the given area of 17.5 acres
There are no standard norms around the land area
required for setting up a hospital of 200-300 beds; it
varies as per the building plan and availability of open
space at the site
Based on benchmarking the land area for hospitals of
varying bed sizes in other cities, the current area of
land at 17.5 acres is well-suited for setting up of a 250300 bed hospital Apollo Hospital in Ahmedabad: 234 beds in 10
acre
Apollo Hospital in Hyderabad: 550 beds in 35
acre
Fatima Hospital in Kochi: 500 bed in 25 acre
Sankara Eye Hospital in Guntur: 225 beds in
4.3 acres
March 2014
58
Healthcare
& ARPOB for speciality hospitals in Tier 2 cities typically ranges from INR
12 16000 currently; we expect the proposed hospital to match market
rates in the long term
Current ARPOB in Tier 2 cities (FY14)
Expected ARPOB by 2020

(5-8% CAGR)
12-16000
18 - 22000
INR/day
INR
Average room rate per occupied bed (ARPOB) ranges

from INR 12 16000 in Tier 2 cities for branded
specialty hospitals. In Tier 1 cities such as
Mumbai, Delhi & Chennai this can range from INR
22-26000
-
For Apollo Hospitals, the ARPOB from its Tier 2/3

cluster (which includes cities such as
Madurai, Bhubaneshwar, Vizag, Mysore etc)
ranges from INR 11,000 - 16000
Growth in ARPOB is a function of internal factors (type

of specialisations added, ability to capture market
share, hospital reputation etc) and external factors
(overall demand for healthcare in the
region, competing corporate hospitals, oversupply
issues etc)
We have taken a conservative estimate of growth of 58% (in line with inflationary trend) in ARPOB over the
next 5-6 years
ARPOB from Apollo hospitals in Hyderabad is

estimated at INR 18-20,000 while it is INR 2526000 in Chennai
Source: Industry discussions, Apollo annual report, PwC research and analysis

PwC
March 2014
60
Golf course
* Golf courses are gaining in popularity in prestigious real estate projects

in India
Golf courses in India

There are nearly 200 golf courses currently in India, of which more than
half belong to the Indian army and operate for non-profit purposes.
Over 50% of the golf courses are 18-hole courses, 40-45% are 9-hole
courses with just a few 27-hole courses
Membership models
Vast majority of golf courses operate on a membership only basis and
generally allow only the club members and their guests to play
- Memberships are typically on an annual subscription + usage charges
for most golf clubs
Corporate memberships have been rising for golf clubs with increase in
expat employees
The membership strength for a golf course typically ranges from ~1500
members for 27-hole golf course, 1000-1200 members for 18-hole
golf course and 300-500 members for 9-hole golf course.
Typically only 20%-30% of the members constitute active members.
Operating model
The design and development of the golf course is typically contracted to a
specialist agency. Once the golf course is ready and operational., the
maintenance and management is done in-house by the developer (a
dedicated team is hired for management and maintenance of golf course)
Other components such as pro-shop (for equipment & accessories) and
food & beverage units are typically outsourced
PwC
While Golf as a sport is still in a very nascent stage in

India, it is fast becoming a status symbol and a lifestyle
statement
Hence, in recent years, real estate developers have started
building golf courses as part of residential complexes to
demand premium prices for their property and attract
aspirational as well as affluent customers as
potential residents/ investors
A number of golf centric townships have come up in India
in recent years
Jaypee Group has announced a 452-acre golf course
centric mixed use real estate project in Greater Noida
(18-hole Greg Norman Signature championship course)
Unitech Grande has an ultra-luxury residential project
in Noida, with a 18-hole golf curse designed by Greg
Norman
Royal Indian Raj International Corporation announced
a partnership with professional golfer Jack Nicklaus to
build eight 18-hole courses at the firm's new resort and
residential communities across India.
Omaxe is developing a golf-themed township in
Raipur, Chhattisgarh
IVRCL Assets & Holdings Limited has started on a 700
acre township project Aavisa which is also the first
private golf-centric community in Chennai
March 2014
59
Golf course
* The golf course appears prima facie viable, by targeting affluent

individuals in the city in addition to villa residents and senior corporate
cadre
Target population for Gold Course memberships
Golf course
memberships will
target...
1
Villa residents
2
Affluent
individuals in
Vijaywada
Corporate
memberships
(senior
management)
Demand drivers
Target population
The buyers of premium villas in the project township can be targeted for
golf club membership
Typically golf club memberships are not mandatory
In most cities, private golf club memberships are targeted at the top income
bracket; membership to such clubs are considered a status symbol and sign
of affluence
Excluding Mumbai and Delhi, for other Tier 1 cities affluent households
(income > INR 2 lakhs per month) accounts for 3% of the households. For
Hyderabad, this is 2%.
Assuming a similar distribution in Vijayawada, this translates to 12,500
households (2% of 6.3 mn HHs in Vijayawada and Guntur, as on 2020)
Corporate memberships of golf clubs (for senior management and expat
employees) can be another target segment for the gold club
Targeting the senior employees/top management of IT/ITeS companies
within the project township translates to a corporate target population of c.
350-400 potential members1
1. Taking 2% of overall employee base of 18500 IT/ITeS employee base within the
IT/ITeS park in the project township

PwC
~450
~12,500
350-400
Even a 5-8% success rate with

the target population can result
in 600-1000 members for the
golf course
March 2014
60
Section 2.6
Summary

PwC
March 2014
61
Section 2.6 Summary
Demand for residential and retail components is expected to absorb

planned supply from the project; office and IT saleable areas need some
correction from the original plan
Project
Component
Plotted
development
Land allocation
(acres)
Saleable area
(mn sq ft)
324.4
553,502 sq
yards
Residential
apartments
High end Villas
Office
Land
allocation
(acres)
324.4
Saleable area
(Sq ft)
553,502 sq
yards
10.33
10.33
148,733 sq
yard
148,733 sq
yard
Comment
Large demand is expected for

residential housing due to growth in
existing population and influx of
workforce
There are few large residential projects
that have been announced in the
region; hence we expect robust offtake
for LEPLs planned 5900 housing units
72.4
14.5
22-251
4-5
The project will have to reduce its

planned allocation for non-IT office area
to 4-5 mn sq ft, else it is likely to face a
supply overhang
IT Park
19
2.8
19
1.8
For the IT park, the current allocation of

2.84 mn sq ft could lead to a supply
overhang. Expected demand for IT park
is estimated at 1.8 mn sq ft
Retail
4.1
0.6
4.1
0.6
The project and its surrounding regions

are expected to provide a reasonable
retail catchment of 80-90,000 potential
customers, which can support viability of
the retail component
1. Initial phase

PwC
March 2014
62
Section 2.6 Summary
Education, multiplex, hotel and hospitals are prima-facie viable at the

project site; a golf course will boost project popularity and enhance its
positioning in the market
Project
Component
Land allocation
(acres)
Saleable area
(mn sq ft)
Land allocation
(acres)
Saleable area
(Sq ft)
19
na
191
na
LEPL can consider an international

school or a professional college as part of
the educational complex envisaged in the
township; there appears to be high
feasibility for an IB school in the project
Commercial &
Entertainment
10.4
3.4
10.41
3.4
The project is likely to have sufficient

demand from the local catchment for
setting up a 500-seater multiplex
There is also scope for setting up a 100120 room hotel in the township
Hospital
17.5
1.75
17.5
1.75
A super/multi specialty hospital of 250300 beds can be set up in the proposed

area of 17.5 acres
Golf course
45.9
Na
45.9
Na
Golf courses are gaining in popularity in

prestigious real estate projects in India.
Targeting affluent individuals in the city,
in addition to villa residents and senior
corporate cadre, makes the golf course
prima facie viable
Education
complex
Total
512.7
1. Initial phase

PwC
462 - 465
Comment
The various components are likely to spread over

460-470 acres in the initial phase; the remaining
land can be used for expansion in subsequent phases
(eg, hotels, educational institutions, office space etc).
This will also add to the overall viability of the
March 2014
project, from a land owners perspective
63
Section 3
Other successful mixed use projects in India

PwC
March 2014
64
Section 3 Other successful mixed use projects in India
There are a number marquee integrated townships that have been

successful in India. While townships started as a Tier 1 phenomenon, this
model is gaining popularity in Tier 2 cities as well
Townships are large real estate developments with mix of
residential, commercial, retail, educational and recreational
space
We have looked at the several townships in India to identify

the critical success factors
1. Jaypee Greens Wish Town 1162 acres
Townships have their own infrastructure backbone of

security, power, roads, sewage, drainage etc. There are planned
open and green spaces, with social amenities such as
parks, playgrounds, entertainment zones etc in order to create a
self-contained city within a city
Increasing pressure of infrastructure development and poor civic

amenities in the mainstream city regions have lead to increasing
popularity of the township model in real estate in India
-
As urban areas are getting more crowded and infrastructure

development has not kept pace with real estate
growth, integrated townships provide the long term solution
-
Pacific Developers
Successful townships in India include Hiranandani Gardens in

Mumbai, Magarpatta City in Pune, Mahindra World City in
Chennai and Jaypee Greens Wish Town near Noida.
With the success of the township model in Tier 1 cities and

availability of large tracts of land (a key requirement for the
township model), Tier 2 cities has witnessed a number of township
projects being launched in recent years
-
2. Hiranandani Gardens, Mumbai 250 acres
3. Mahindra City, Chennai 1550 acres
4. Magarpatta City, Pune 430 acres
Shubh Griha by Tata Housing in Ahmedabad

Integrated townships in by HIRCO in Panvel, Nagpur, Nasik
among others
Tanaji Malusare City by Matheran Realty in Karjat
Vedanta City by Vedarya Township in Surat

PwC
March 2014
65
Section 3 Other successful mixed use projects in India
Critical success factors for a successful township development

Self sustained environment
Balanced mix of residential and commercial spaces along with welldeveloped infrastructure and recreational amenities besides green
and open spaces
Typical components in an integrated township include residential
apartments & villas, shopping complex, convenience
stores/supermarket, entertainment avenues
(eg, multiplex, restaurants), hotels, hospital, parks/gardens, sports
venues etc
"Townships should be self-sutained, with all ameneties, including
elements such as schools, recreation
areas, hospital, retail, available to residential and office users"
Tata Housing
Well designed environment with

developed infrastructure
The design aspect is improtant in
kmaintaining the overall integrity of the
township. Clearly demarcated business vs
commercial vs residential areas, ample
green cover, easy accessibility to various
social/entertainment components need to
be ensured
While expanding into newer geographies,
companies would prefer places which have
ready infrastructure including power,
water and housing
- Tata Housing

PwC
World class office space within the premises

The office space within integrated townships find takers in
sectors such as IT/ITeS, telecomm, BFSI, electronic hardware
etc.
Customers expect the building to be designed as best in class,
with necessary telecomminucation & IT connectivity, power
backup, parking facilities, secrity system etc
Without commercial space, no township can be called fully
successful. The two most successful townships in India
Hiranandani Gardens and Magarpatta City have a
significant amount of office space within the townships
- JLL
Low dependence on amenities

provided by civic authorities
Most of the internal amenities (sewage
management, water supply and overall
maintenance of the immediate
surroundings) are managed by the
township themselves
Maintenance of township is managed by
inhouse team of develop for initial 2-3
years, after which the developer continues
to manage some part of the premises
(commercial building, shopping area etc)
but may handover the residential part to
third party service providers
Accessibility to main city

While townships are typically located on the
outskirts of the city, since large tracts of
land are typically available only at the city
periphery,
"A good project, even if at some distance
from the city centre, finds favour
professionals who would prefer to live in
urban environment without the
congestion"
Sobha Developers
"A township which is completely cut-off
from the main city does not serve
anybody's purpose"
- JLL
March 2014
66
Appendix 1
Annexures

PwC
March 2014
67
Residential
Appendix 1 Annexures
Annexure Growth in population in the region

Expected new employment in the region (leading to influx of people) Growth in existing population in Vijayawada and Guntur
Yearly incremental skilled
workforce requirement
Krishna
and
Guntur
Districts
Population and growth rates
Share of Vijayawada- Guntur

cities1
%
Yearly
require
ment
Requirement
for 5 years
(FY 15-20)
FY 11
(in
millions)
Growth
rate
Incremental
population
(FY 15- FY 20)
Vijayawada
1.17
3.4%
0.24
2%
0.12
Construction
19,088
30%
5,727
28,633
Tourism, Travel &

Hospitality
Guntur
1.03
14,980
50%
7,490
37,450
2.2
Transportation,
Logistics,
Warehousing &
Packaging
Total (in
mn)
2,396
50%
1,198
5,991
IT & ITES Sector
5,140
90%
4,626
23,129
11,268
70%
7,887
39,437
Food processing
2,330
50%
1,165
5,825
Auto & Auto

components
5,000
50%
2,500
12,500
Textile & leather
2,427
30%
728
3,640
31,321
156,604
Banking &
Financial Services
Insurance
Total
62,629

PwC
0.36
Note 1 We have adjusted the share of skilled workforce requirement in the VGTM region on the basis
of suitability and potential of the sector in the Vijayawada-Guntur belt. Hence, services such as
IT, banking, hospitality, transportation, food processing and automotive are expected to have a higher
share of the demand in the VGTM region.
Source: Zonal Development Plan 2021, VUDA
March 2014
68
Retail
Appendix 1 Annexures
Annexure Calculation for retail catchment
Calculation of catchment area for retail in the township

Type
Description
Primary captive catchment
Number of residents in
township
Secondary catchment
Floating population of
workforce, students and
visitors in the township
Tertiary catchment
Population of Vijayawada and

Guntur regions in FY 20
Population
26,550
55,000
2,823,201
Comments
As per the number of units planned in
the township
Comprising of expected IT and office
workforce by FY 20 and students
Population of Vijayawada and Guntur
has been grown at their historic growth
rates of 3.4% and 2%, respectively to
arrive at population in FY 20.
Source: PwC Analysis

PwC
March 2014
69

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Transaction Services Strategy

LEPL Projects Limited

Strictly Private and Confidential

Scope and Process

The Tier 2 growth story

Vijayawada - An emerging destination

Vijayawada city attractiveness

Attractiveness of the proposed location

Micro-market assessment for project components

Other successful mixed use projects in India

LEPL Projects Limited Feasibility Study

Section 1 Project background

LEPL intends to undertake development of an integrated township on a

Population (2011 census)

Geographic Area (sq.km)

Source: Zonal Development Plan, VUDA

Our understanding of project details

LEPL (LEPL Projects Limited or the Company) is a Vijayawada-based

LEPL Projects Limited Feasibility Study

Source: LEPL management

Section 1 Project background

As an integrated mixed-use residential township, the project will comprise

Commercial & Entertainment

High end Villas

Net Land area for development

Source: LEPL management

LEPL Projects Limited Feasibility Study

Section 1 Project background

During the course of this engagement, we interviewed several

Real estate players

LEPL Projects Limited Feasibility Study

We have carried out

LEPL Projects Limited Feasibility Study

Section 2 Feasibility Assessment

We have used a hypothesis based approach to evaluate the feasibility of the

Vijayawada as an emerging investment

Vijayawada will emerge as an

LEPL Projects Limited Feasibility Study

Location Attractiveness of the project

The location has an attractive

Investment inflow into Vijaywada will

Attractivess of each of the project

Demand and supply scenario

LEPL Projects Limited Feasibility Study

Section 2.1 The Tier 2 growth story

As Indias economy continues its growth trajectory, growth is likely to

New York, Los Angeles, Chicago and Washington

Stage of development of the economy

Expansion to other cities: Factors such as housing

First wave of growth: Limited to top cities of

Expansion to other cities: With rising wages nationwide, interior

Note 1 GDP refers to the Nominal GDP as on FY 2012

LEPL Projects Limited Feasibility Study

regions started receiving greater investment and government support.

First wave of growth: Historically, growth in India has been concentrated

Expansion to other cities: As metros reached saturation levels and with

Section 2.1 The Tier 2 growth story

India will have 68 cities with a population of more than

This rapid urbanization has propelled the creation of

LEPL Projects Limited Feasibility Study

With saturation in Tier 1 cities, Tier II and III cities are

Section 2.1 The Tier 2 growth story

...They are plagued by rising cost and unavailability of land , manpower

Paucity of land and rising