Ansal API eyes Rs30K crore investment

After wrapping up a private placement deal with a select group of investors including the Enam Group, realty infrastructure major, Ansal API, is now in talks with some of the leading institutional investors for another equity investment deal.

Ansal Housing and Construction: Buy

Investors with a two-three year perspective can consider investing in the stock of Ansal Housing and Construction (Ansal Housing). Proven execution capabilities, a good number of ongoing projects and healthy financials suggest that the company’s present earnings growth may sustain over the medium term.

However, being a small player in the realty market and a small-cap stock poses higher risks than those faced by larger players. Investors willing to take these risks can consider buying the stock in small lots (as the stock is prone to sharp surges and declines).

At the current market price of Rs 310 the stock trades at 10 times its trailing 12-month earnings on a standalone basis. We believe the price is at a steep discount, even after considering the lower premium enjoyed by regional players.

While the subsidiary businesses of hospitality and car sales and services are significant contributors to the consolidated revenues, they are yet to make much impact on the per share earnings. The consolidated picture may require attention if there is an accelerated growth in these businesses.

Focussed approach

Ansal Housing is a developer with predominant presence in Tier-II and Tier-III cities in North India. Unlike a number of players foraying into smaller cities after establishing a foothold in the bigger ones, Ansal had entered these markets very early in its business cycle, thus providing it with an edge in not only buying low cost land but also establishing its brand.

The company had completed projects in upcoming cities such as Ghaziabad and Greater Noida as early as 2002.

Ansal Housing has about 55 million sq feet of developable area, a majority of which is already under progress and a part of which may be booked by FY-09, lending visibility to medium-term revenues.

The projects in hand are well-diversified across residential and commercial buildings, malls, apartments and group housing. Over 50 per cent of the current land bank is ear marked for selling of plots. Plot development has traditionally constituted a high proportion of Ansal’s revenues. The company has been successful in this strategy on account of three issues.

In smaller towns, there exists stronger demand for individual plots (which can be built into independent houses) than apartments. Two, selling of plots around the vicinity of a bigger project (that the company develops) provides scope for commanding better prices. Three, in projects such as integrated townships, selling plots typically frees cash flows that can be deployed for developing the township.

As there is little value-addition in plotted developments, the projects do not normally command high-profit margins. However, Ansal’s OPM of 33 per cent in FY-07 suggest that it has managed high profitability mainly on account of low-cost land. That net profits have grown at a CAGR of 135 per cent over the last three years also suggests that the company has been a major beneficiary of a surge in land prices.

While we expect the OPMs to moderate as the company replenishes its land bank, a more active entry into the construction of various realty projects (as indicated by the current projects in hand) may provide some cushion to the profit margins.

Subsidiaries hold potential

Ansal’s restaurants in Greater Noida and its car dealership venture with a Japanese company have witnessed healthy revenue growth over the last couple of years. The company’s tie-up with Radisson Worldwide for restaurant chains across India and expansion of its car sales and service business if successful may warrant a look at the consolidated numbers.

Steep hike in the price of construction materials and equity expansion with delayed earnings growth are impending risks. The latter now appears insignificant going by the recent approvals received for preferential warrants.

IPO makes DLF's KP Singh richest realtor

DLF promoter K P Singh has emerged as the richest real estate baron after his company’s initial public offering closed on June 14.

Promoters of the dozen top listed real estate developers in the country, including DLF Ltd, which will be listed next month, are worth a massive Rs 125,845 crore (or over $30 billion).

However, the lion’s share of this net worth (derived on the basis of the latest m-cap) lies with DLF’s K P Singh and his family — Rs 77,915 crore (around $19 billion) based on the allotment price of Rs 525 per share and their shareholding of around 87.3 per cent in the company.

According to BS research, this makes K P Singh the fourth richest Indian by today’s market capitalisation, after Mukesh Ambani, Anil Ambani and Sunil Mittal. He overtakes Wipro’s Azim Premji, who ranks immediately after him. In effect, the DLF promoter family accounts for around 60 per cent of the realty wealth as denoted by market cap.

Promoter	Net worth (Rs crore)
KP Singh & Associates (DLF Ltd)	77,915
Ramesh Chandra & Associates (Unitech)	30,544
Sobha Menon & Associates (Sobha Developers)	5,277
Pradeep Jain & Associates (Parsvnath Developers)	4,768
Shah family & Associates (Akruti Nirman)	2,075
Pranav, Sushil Ansal & Associates (Ansal Properties & Infrastructure)	1,965
Piramal Family & Associates (Peninsula Land)	1,291
Mahindra Gesco Developers	1,076

Second, and by a distant margin, is the Unitech Ltd promoter family —which includes Ramesh Chandra and his sons Sanjay and Ajay. Their net worth is about half of DLF’s — at Rs 30,544 crore (around $7.4 billion).

The Unitech promoters hold a 74.33 per cent stake in the listed entity. Last August, Business Standard had valued Ramesh Chandra’s net worth at Rs 12,670 crore.

In March, Forbes ranked Chandra as the world’s 114th richest billionaire.

The substantial difference between the net worth of DLF and Unitech promoters is significant because the two companies are considered comparable in terms of their land assets, among other things.

The Bangalore-based Menon family and associates own just under 87 per cent of Sobha Developers. At Rs 5,277 crore ($1.28 billion), the Menons’ net worth is nearly a fifth of the Unitech family’s.

Parsvnath Developers’ Pradeep Jain and family are ranked fourth — with Rs 4,768 crore ($1.16 billion) of net worth on the basis of their 80.33 per cent stake in the company.

The list also includes Mumbai-based Akruti Nirman, promoted by the Shah family, whose net worth stands at Rs 2,075 crore.

Citigroup - Indian Real Estate Sector, Ansal Housing, Parsvanath Developers, Unitech

Indian Real Estate Sector

Ansal Properties & Infrastructure

Parsvanath Developers

Unitech

Ansals keep Rs200 crore to buy distressed companies

Ansal Properties & Infrastructure Ltd (APIL) is setting aside about Rs200 crore to buy small development companies that have run into financial trouble. The company said it has been approached by several such sellers, an indication that some pockets of India’s overheated real-estate market have started to cool.
India’s fourth-largest listed real-estate developer said it hasn’t sealed any deals yet. “The market is slowing down and funds from banks are not easily available,” said Anil Kumar, chief executive officer, APIL. “Some of them would like to exit.”
The acquisitions are likely to be in the same places where the company operates: Rajasthan, Punjab, Uttar Pradesh and National Capital Region. Kumar said the company might also consider other financial arrangements with distressed companies. Ansals, for example, could build a project on a company’s land, and then return a portion of it to the company, he said.
Real-estate prices in most cities have increased by 30% in the past year, fuelled by a booming economy, easier availability of home loans and a rush to buy property in anticipation of high returns. But analysts say the market, in some pockets, has begun to show signs of a slowdown as interest rates rise and higher prices of lands slow buying. The concern over sky-high land deals has prompted the country’s central bank to warn banks against excessive lending to the real-estate sector.
Kumar said small companies have more difficulties riding out problems such as delays in approvals which add to their cost of developing a property. Ansals could get a discount of up to 25% on market value for the properties it buys, depending on site approvals, the status of the project and location of the land. But the larger advantage is that Ansals would be able to buy assembled land rather than having to endure price increases as it pieces together the site.
Typically, developers who want to acquire large tracts of land have to often buy it bit- by-bit because of fragmented holdings. While they may get the first few parcels at relatively affordable prices, land-owners, who hold out for long, charge several times more, taking advantage of splintered ownership which makes it mandatory for developers to negotiate with each owner to ensure continuity of the land parcel.
Sujit Jain, a real estate analyst at PINC Research in Mumbai, said many smaller companies paid high prices in land auctions and were unable to make projects viable. Now it makes sense for large developers to sweep in and acquire the distressed companies’ land banks, he said.
“Instead of going out and buying plots at high prices, why not go and buy companies who have already built up land banks,” Jain asked. “These people (promoters of smaller firms) will look to liquidate and take out as much money as possible.”

Emkay - Ansal Housing Investsmart - South Indian Bank

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Breaking Premium News - Ansal Housing

Ansal Housing & Construction Ltd. said on Friday it would invest 2 billion rupees to develop a residential project in Indore, Madhya Pradesh.