>INDIABULLS REAL ESTATE (EDELWEISS)

Power Play

Presence in space starved Mumbai CBD to be value accretive going forward
The commercial business district (CBD) space in Mumbai is a fraction of that available in other major cities of the world. Indiabulls Real Estate (IBREL), with ~ 5 mn sq. ft of projects is a leader in this space. Enquiries for these have picked up sharply and we anticipate increased traction for IBREL going forward. The company has also launched 9.5 mn sq ft of projects and plans to launch an additional 9.8 mn sq ft of projects in FY10.

Power ventures: Firing on all cylinders; PPA tilt could dent RoEs
IBREL is developing three power plants with a total capacity of 3,960 MW. Coal and water linkages are in place for all, and land and environmental clearances for two projects have been bagged. We estimate that 65% of the output will be sold through PPA – diluting RoEs. Thus, we have valued the power division at a P/BV of 1.3x.

Cash is king: Exciting options at hand to deploy cash
IBREL is one of the few realty developers with net cash of INR 22.7 bn. It can utilize this cash for big ticket realty development projects for which the company has bid— Dharavi Redevelopment, New Delhi railway station modernization, etc. The other option is to utilise the cash for meeting the equity commitment for its power plants.

Strong execution capabilities of Indiabulls group
The Indiabulls Group has presence in financial services, real estate, and power segments. The group has witnessed strong growth in revenues, topline, and market capitalization over the past few years. We believe its real estate venture, IBREL, will also benefit from the strong execution capabilities of the group in the future. Outlook and valuations: Triggers in place; initiate with ‘ACCUMULATE’ IBREL is in project execution mode as far as both realty and power businesses are concerned. It will be some time before the operations achieve significant scale and start generating revenues.

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