Multi Baggers

Ansal Properties and Infrastructure Ltd.

Company Overview:

Ansal API is a household name in infrastructure in the country. Incorporated in 1967 the company, it went public in 1993 and is listed both on the National Stock Exchange and Bombay Stock Exchange. It has large shareholder base of over 45,000 shareholders. This includes several institutional and FIIs shareholdings. Ansals developed majority of Commercial buildings which came up in the 60's to 80's in the Connaught Place area of Delhi. It developed and delivered approx 5.6 mn sq ft of the commercial buildings in the CBD of Delhi (including the landmark buildings like Amba Deep, Antariksh Bhawan, Statesman House, Tolstoy House and many more). Ansal API also developed India's first retail mall 'Ansal Plaza' in Delhi. Clientele includes Reliance, Airtel, Croma, Adidas, Vodafone, Shoppers Stop, Reebok, KFC, kaya, Cafe Coffee Day, Pizza Hut etc. Till date it has developed and delivered over approx. 240 mn sq ft with a mix of different asset classes, including plots, residential and commercial built ups - low rise and high rise, retail and others. The developed area included integrated townships in Sushant Lok (Gurgaon). Palam Vihar (Gurgaon), Sushant City Kundli (Sonepat) and various other townships in the states of Haryana, Rajasthan and Punjab.

Current Operations:

Ansal API is currently operating in four states of India, namely, Uttar Pradesh, Haryana, Punjab and Rajasthan and is developing over 15 integrated townships and two Hi-Tech townships spread across the states of Uttar Pradesh, Haryana, Punjab and Rajasthan. The major projects under development are 3530 acres Hi-Tech Township in Lucknow (recently expanded to 6500 acres), 2504 acres Hi-Tech township at Dadri, adjoining Greater Noida, 141 acres development in Gurgaon (Versalia). The main focus is on development of Mid Segment Residential Development. Current Land reserves are approx. 8640 acres of which over 7400 acres are purchased and balance is yet to be acquired though it has right to develop. The 7400 acres purchased is fully. Out of total land reserves 85% constitutes Residential segment of which ~ 90% is Mid or Lower segments development. With the recently passed Land Acquisition Act, 2013, the acquisition of land will be much more difficult than in earlier days. Also, the land will become a lot more expensive approximately four times of the current market value. The total land reserves translate into ~ 280 Mn Sq fts of saleable area.

Financial Analysis:

The quarterly sales pattern has shown a sharp increase in the fourth quarter of FY14 with deliveries in excess of 4.1 mn sq ft as compared to less than 3 mn sq ft in the previous quarter. The turnover also went up from Rs. 216 crores in Q3 of FY14 to Rs. 273 crores in Q4. The company expects to increase deliveries by 40% to 13.25 mn sq ft by FY 14-15. The realization per sq ft has also gone up to from Rs. 1235 per sq ft to Rs. 1780 per sq ft. For the year ended March 31, 2014 on a standalone basis the company made a net profit of Rs.13.52 crores. The estimated institutional debt outstanding was Rs.1110 crores as against the net worth of R.s 1590.82 crores. The consolidated debt has been brought down from Rs.1700 crores in FY11 to the current Rs. 1110 crores. This leaves a debt equity of 0.70. The book value for a Rs.5 share is Rs. 114.

Recommendation:

Ansal API is a good regional player in the Real Estate market which has started showing some signs of revival. It is likely that the sector get good benefits in the coming days, as the Government is very keen on improving affordable housing and also on employment creation. The level of Debt is less compared to other players like DLF, Unitech, Jaypee etc. Though the share has surged with many other mid cap shares in the market, the upward potential is still good.

We recommend this stock at Rs 36.45/- per share with a price target of Rs. 50/- per shares within next one year.

The key risk to this recommendation is an absence of any incentive for housing and construction sectors from the Government and persistence of high interest rates in the economy.