Patel Engineering (PATEN)

March 27, 2008| Engineering & Construction
Initiating Coverage
Patel Engineering (PATEN)
Realty engine …
Patel Engineering is a mid-sized infrastructure player with a strong
presence in high-margin hydropower construction projects. With a
burgeoning order book and access to leading-edge technology, Patel
appears well placed to capitalise on the current infrastructure spending in
the country. The company has also initiated moves to unlock the value of
its urban land bank by transferring the rights to Patel Realty, a 100%
subsidiary.
• Set to capitalise on increased thrust on infrastructure
Patel’s core competence is the construction of dams and powerhouses. With
the increased focus on enhancing power generation capacity, the company's
strength in terms of technology and experience is likely to ensure that it has
an edge over competitors. Patel has contributed to a total of 7,000 MW out
of the country’s total operating hydropower capacity of 32,000 MW.
Assuming a 40% execution ratio and a 22% market share, the company is
well poised to grab the underlying opportunity of nearly Rs 30,800 crore.
• Robust order book, revenue mix in of favour high-margins projects
The company’s order book amounts to Rs 5,500 crore. Hydropower projects
accounted for 56% of the order book and irrigation 21%. The balance 23%
was from transportation and urban infrastructure projects. Order inflows
amounted to Rs 1,230 crore in H1FY08 against Rs 700 crore in H1FY07. The
average size improved from Rs 150 crore to Rs 300 crore, with execution
period of around 36 months. We expect the strategy of focusing on highmargin,
high-value hydro power projects to boost margins.
• Premium land bank; NAV at Rs 344 per share
The company plans to monetize its historically held land bank by transferring
the rights to a 100% subsidiary, Patel Realty. Patel has land bank of 986
acres spread across tier I and tier-II cities such as Hyderabad (640 acres),
Chennai (232 acres), Bangalore (82 acres), Mysore (21 acres), Mumbai (6
acres), and Navi Mumbai (Panvel - 20 acres). It proposes to exploit the
existing land bank in different phases and has already initialized phase 1 in
Mumbai. The total developable area is estimated at 130 million sq ft (around
12% of which will be developed in the first phase).
Valuations
Riding on its experience in constructing tunnels and pump houses for
hydropower projects, Patel has also strengthened its position in the irrigation
sector We have valued the stock using a SOTP valuation. We have valued
the core business at 15x FY09 earnings, translating into Rs 418 per share.
The NAV for the real estate segment works out to Rs 344 per share. We
believe it should trade at a 20% discount which gives us a value of Rs 275
per share. This gives us a total value of Rs 693.
Exhibit 1: Key Financials
Year to March 31 FY07 FY08E FY09E FY10 E
Net sales ( Rs cr) 1317.03 1705.719 1770 2340
Net Profit (Rs cr) 115.67 141.16 166.85 243.59
Shares (cr) 6 6 6 6
EPS (Rs) 19.28 23.53 27.81 40.6
% Growth NA 22.04 18.2 45.99
P/E (x) 30.34 24.87 21.04 14.41
Price/Book (x) 4.99 4.30 3.67 2.92
RONW (%) 15.77 15.68 14.59 21.30
Source: ICICIdirect Research
Price trend
1200
1000
800
600
400
200
0
3/30/2007
Current price
Rs 586
Potential upside
18.25%
Sales & EPS trend
2500
2000
1500
1000
Analysts’ Names
Rupesh Sankhe
rupesh.sankhe@icicidirect.com
Sheetal Malpani
sheetal.malpani@icicidirect.com
500
0
Stock metrics
FY08E FY09E FY10E
Sales ( In Rs Cr) EPS ( Rs)
1 | P age
Target price
Rs 693
Time Frame
12-15 months
Bloomberg code PECIN
Reuters code PENG.BO
Promoters holding (%) 54.31
Market Cap(Rs crore) 3510
52 Week H/L 1090/462
Sensex 16,050
Average volume 145643
Comparative return metrics
Stock return 3 M 6M 12M
Punj Lloyd (43.20) 5.50 89.60
HCC (36.68) (4.43) 40.40
Patel Engineering (32.32) 28.20 69.67
4/30/2007
5/30/2007
6/30/2007
7/30/2007
PEFORMER
8/30/2007
9/30/2007
10/30/2007
11/30/2007
12/30/2007
50
40
30
20
10
0
Target price
Absolute Buy
1/30/2008
2/29/2008

Company Background
Patel Engineering is a prominent player in the hydro power and irrigation
space. The company's strength in terms of technology and experience is
likely to ensure that it has an edge over competitors in this space. Riding
on its experience in constructing tunnels and pump houses for
hydropower projects, Patel has also strengthened its position in the
irrigation sector.
Its project basket includes tunnels, dams, underground hydroelectric and
irrigation projects, water conductor systems, nuclear and thermal power
projects, bridges and marine works, highways, and residential and
commercial complexes. The company has carved out a niche in
underground works in the hydroelectric, transport and urban
infrastructure space with its technical expertise in RCC works and micro
tunneling.
Source: ICICIdirect Research
Patel Engineering
Multipurpose power Irrigation Projects Transportation
56% of current order
book (Rs 3,080 crore)
21% of current order
book (Rs 1,155 crore)
Share holding pattern
Shareholder % holding
Promoters 54.31
Institutional investors 19.37
General Public 26.15
Promoter & Institutional holding trend (%)
60
50
40
30
20
10
0
23% of current order
book (Rs 1,265 crore)
EBITDA: 17-22% EBITDA: 10-13% EBITDA: 7-9%
Source: Company, ICICIdirect Research
ICICIdirect | Equity Research
Q3 2007 Q2 2007 Q1 2007 Q4 2006
Promoters Institutions General Public
2 | P age
Real Estate
15.6 million sq ft
developmental plan
in phase 1
EBITDA: 45-50%

INVESTMENT RATIONALE
• To capitalise on increased thrust on infrastructure
Patel’s core competence is construction of dams and
powerhouses. With the increased focus on enhancing power
generation capacity, the company's strength in terms of
technology and experience is likely to ensure that it has an edge
over competitors. The 11th Five-Year Plan (2007-2012) has
envisaged $492 billion for infrastructure spending.
Through its subsidiaries in the US, Patel has access to
technology that gives it an advantage to bid for new projects.
Roller Compacted Concrete (RCC) technology for building dams
reduces project execution time and cost by replacing cement
with fly ash. RCC is internationally accepted and has already been
used by the company in Maharashtra.
Exhibit 3: Order-book break-down by segment (FY07)
22%
19%
Source:: Company, ICICIdirect Research
12%
Exhibit 4: Hydropower opportunity
Particulars 11
3 | Page th Five Year Plan 12 th Five Year Plan Total
MW 20,000 50,000 70,000
Implementation ratio (%) 40 40 40
Cost per MW (Rs crore) 5 5 5
Total cost (Rs crore) 40,000 100,000 140,000
Patel’s market share (%) 22 22 22
Opportunity size for Patel(Rs.crore) 8,800
Source: Planning Commission, ICICIdirect Research
22,000 30,800
16%
31%
Power Roads Real estate Water and irrigation Others
Hydro and thermal power: A huge opportunity
The Central government plans to increase power generation
capacity by 20,000 MW in the 11th Five Year Plan, and 50,000 MW
in the 12th Plan. Currently, Patel has a 22% market share in hydro
and thermal power projects. At an investment of Rs 5 crore per
MW and assuming a 40% implementation ratio, we believe the
potential opportunity size for the company is Rs 30,800 crore.
Patel is already a major player in the hydropower space and has
contributed to a total of 7,000 MW out of the country’s total
operating hydropower capacity of 32,000 MW.
Patel is present in power, roads,
and irrigation segment and will be
a major beneficiary of the
increased thrust on infrastructure

The present installed capacity is largely in the states’ sector (about
55%) and this is followed by the central sector (33%), and the
balance by the private sector. Going forward, most of the
investments would come from the private sector due to paucity of
funds by state and central governments, and the increased ability of
the private sector to mobilize funds for these projects.
Exhibit 5: Planned capacity additions (MW)
Thermal Hydro Total
Year Incr. add Cum. Add Incr. add Cum. Add Incr. add Cum. Add
FY08 13,000 114,000 2,000 40,000 15,000 154,000
FY09 18,000 132,000 2,000 42,000 20,000 174,000
FY10 7,000 139,000 4,000 46,000 11,000 185,000
FY11 4,000 143,000 7,000 53,000 11,000 196,000
FY12 3,000 146,000 4,000 57,000 7,000 203,000
Total 45,000 19,000 64,000
Source: ICICIdirect, Research
Additional power requirement in India will be nearly 70,000-75000
MW in the 12 th Five Year Plan (2012-17) under different economic
scenarios. Majority of the additional requirement will come from
hydro and thermal power, where Patel has significant presence.
Exhibit 6: Total capacity addition required in 12th Five Year Plan
GDP/Electricity
Installed Additional capacity
GDP growth
Elasticity Peak demand
capacity
required
8% 0.8 215700 280300 70800
8% 0.9 224600 291700 82200
9% 0.8 224600 291700 82200
9% 0.9 233300 303800 94300
10% 0.8 232300 302300 92800
10% 0.9 244000 317300 107500
Source: ICICIdirect, Research
Exhibit 7: Thermal power capacity expansion (MW)
70000
60000
50000
40000
30000
20000
10000
0
Source: ICICIdirect Research
8th Plan 9th Plan 10th Plan 11th Plan
4 | P age
The government’s initiatives
of “Power for All” and other
programmes would require
significant capacity additions
from private sector players
The demand supply mismatch is
going to continue going forward
and Patel could leverage its
experience to further strengthen its
market position.
This huge plan by the Central
government augurs well for Patel
Engineering, due to its track record
in the thermal sector and would
benefit from these government
initiatives

Exhibit 8: On-going hydro power projects
Project State Client
Construction of RCC Dam for Ghatghar
Irrigation Department of
Pumped Storage Scheme Maharashtra
Maharashtra State
Hydro Electric Project, Stage IV –
Department of
Extension of HRT
Civil and Hydro-mechanical works for
Diversion Dam and Part Head Race
Tunnel for Parbati H.E. Project – Lot PB.1
Maharashtra
Maharashtra State
(4 x 200MW)
Sewa H.E. Project, Stage-II - Lot-SW.2 of
Himachal Pradesh NHPC
120MW (3 x 40MW)
Teesta Low Dam H.E. Project, Stage-III -
Jammu & Kashmir NHPC
Lot TL-1 of 132 MW (4 x 33MW)
Kameng Hydro Electric Project, Package I,
West Bengal NHPC
II and III,
PB III : Lot 1:Construction of Diversion
Cum Spillway Tunnels including Gates,
Coffer dams, Rockfill dam, Spillway,
Intake Structures and Part Head Race
Arunachal Pradesh NEEPCO
Tunnel, Stage III ( 4 x 130 MW )
Source: Company, ICICIdirect Research
Himachal Pradesh NHPC
Water and irrigation projects
According to the 11 th Five Year Plan, the government has targeted 10
million hectares under Accelerated Irrigation Benefit Program. Riding on its
experience in constructing tunnels and pump-houses for hydropower
projects, Patel has also strengthened its position in the irrigation sector. It
has now bagged orders for lift irrigation projects in Andhra Pradesh as an
EPC (Engineering, Procurement and Construction) contractor. Entry into
EPC has enabled it to move up the value chain and is likely to fetch better
operating margins.
Exhibit 9: Order book for irrigation projects (Rs crore)
March 31, 2005 1,150
March 31, 2006 1,500
March 31, 2007 1,280
December 31, 2007
Source: Company.ICICIdirect Research
1,190
5 | P age

Exhibit 10: On-going irrigation projects
Project State Client Value (Rs
crore)
Bhima Lift Irrigation Project, Lift-I, Andhra
Pradesh
Kalwakurthy Lift Irrigation Project, Stage-
I Pumping Station with 5 x 30MW Pump
Motors
Jawahar Lift Irrigation Project, Stage-I &
II
Source: Company, ICICIdirect Research
Andhra
Pradesh
Andhra
Pradesh
Irrigation & CAD
Department, Andhra
Pradesh
Irrigation & CAD
Department, Andhra
Pradesh
Irrigation & CAD
Department, Andhra
Pradesh
Road and transport: Moving towards annuity based projects
According to Crisil, over the next five years, investment in the roads sector
is expected to increase at a CAGR of 24%. During this period, it is expected
that investments amounting to US$19 billion would be incurred on roads
related projects. Private investment is expected to bring in US$1.8 billion
as an equity component in respect of the NHAI BOT projects that are
expected to be awarded in the next five years.
Patel has a considerable experience in various segments in building
highways, tunnels and flyovers. Recently it has started focusing on annuity
projects and BOT projects, whereas earlier it was focusing on cash
projects. This move will provide a lot of stability towards the cash flows
and thus will give impetus to the company for future projects.
Patel currently has two projects underway which are on annuity based and
these projects are low risk as the company is assured of fixed annuity
payment irrespective of the traffic movement and toll collection. These
projects will provide the stability to the cash flows. In this case, the only
drawback is that the margins are on the lower side.
Exhibit 11: Annuity-based road projects
Project cost (Rs
Project Length ( km)
crore) Debt to equity
AP7 61 600 3 to 1
KNT 1 53 440 3 to 1
Source: Company, ICICIdirect Research
Exhibit 12: Order book for road and transport projects (Rs crore)
Mar 31, 2005 100
Mar 31, 2006 850
Mar 31, 2007 1180
Dec 31, 2007 1265
Source: Company, ICICIdirect Research
6 | P age
210
480
640
Patel’s order book has been
growing consistently

Exhibit 13: Transport projects underway
Project State Client name
Karnataka
Rehabilitation of Road from Alnavar to
State
Yellapur in Belgaum and Uttar Kannada
East-West Corridor, Assam, Contract
Karnataka
highways
Package No. EW-II (AS-18) Assam NHAI
Northeast
Construction of Single Line BG Tunnel
Frontier
No. 7 & No 10
Lumding to Lanka section I/c Lanka
Bypass of NH-54 in Assam on East
Assam
Railway
West Corridor under Phase-II (AS - 15) Assam NHAI
Rehabilitation of Road from Pune Nagar
New Pune
Road Ramvadi Jakar Naka to New Pune
Municipal
Municipal Co. limit.
Source: Company, ICICIdirect Research
Maharashtra
Corporation
Robust order book – revenue mix in of favour high-margins projects
Patel’s order book amounts to Rs 5,500 crore comprising multi-purpose
power projects, irrigation & water supply and transport & others.
Currently the company has L1 status for contracts worth Rs 200 cr and
has bid for projects worth Rs 9,000 crore. The order book composition
has changed in the favour of high-margin multi-purpose power projects
in the last 2-3 years. The company has a very well-diversified order book
with the right mix of short as well as long gestation project. Patel has
maintained its presence by ensuring balance mix of projects in its
pipeline without over depending on single stream of projects.
Exhibit 14: Order-book (% break-up for last 3 years)
60%
50%
40%
30%
20%
10%
0%
Source: Company, ICICIdirect Research
FY06 FY07 FY08
Multipurpose Irrigation Transportation
7 | P age
Patel has maintained its leadership
position in hydropower business due
to its technological edge over its
peers and this will help it to maintain
margins better

Order-book mix shifting towards high-margin business
The revenue mix is moving in favour of hydro and multipurpose
power projects where the margins are higher. The order mix is
expected to improve the margins of the company by 150 bps in next
financial year. These projects are long gestation projects, but the
business mix is moving in favour of power (56% to 66%), where
margins are higher than irrigation and transport projects.
Exhibit 15: Projected order-book mix for next 3 years
120
100
80
60
40
20
0
4
40
56
22
38
40
20
26 24 19
25 16 16
55 58 60
FY05 FY06 FY07 FY08 FY09E FY10E
Source: Company, ICICIdirect Research
Multipurpose Power Irrigation and water supply Transpor and others
The company has a focused approach on high margin projects and a
right mix of short as well as long gestation projects. The company’s
EBITDA margins are on the higher end of the comparable peer set
spectrum (13.6%- FY07).
Plans to unlock value from land bank; Real estate; NAV at Rs 344 per
share
Patel has forayed into real estate development and has transferred
the development rights of 987 acres of land in various cities to its
100% subsidiary, Patel Realty. The company has finalised
development plans for 124 acres at the initial stage. Apart from this,
Patel also has another 186 acres of land which it does not wish to
take on hand for development as on date.
Exhibit 16: Land bank details
Location Area ( acres)
Hyderabad 650
Chennai 190
Bangalore 100
Panvel 20
Mumbai 6.5
Mysore 20
Total
Source: Company, ICICIdirect Research
986.5
8 | P age
15
66

Exhibit 17: Percentage distribution of land bank
19%
Source: Company, ICICIdirect Research
9%
3%
69%
Mumbai Hyderabad Chennai Bangalore
Profits from phase 1 developmental estimated at Rs 1,990 crore
The company plans to develop nearly 15.63 million sq ft by FY14.
The initial developmental phase will cover properties in Mumbai,
Bangalore and Hyderabad. The company expects sales of Rs 4,860
crore and net profit of Rs 1,990 crore. It plans to fund all its real
estate projects through short-term debt and internal accruals. Most
of the revenues from real estate projects are likely to come post
FY09.
Exhibit 18: Phase developmental plans
Location Area (mn sq ft) Completion time
Expected sales
( Rs crore)
9 | P age
Expected profit
(Rs crore)
Jogeshwari Corp Park 0.08 July 2008 80 60
Jogeshwari Corp Tower 0.75 June 2011 750 520
Gachibowli, Hyderabad 2.7 Sept 2011 1008 352
Electronic City, Bangalore 12.1 Sep t2014 3025 1058
Total
Source: Company, ICICIdirect Research
15.63 4863 1990

NEW DEVELOPMENTS
MoU with Arunachal Pradesh government
Patel Engineering has entered into a MoU with the Arunachal
Pradesh government for setting up a 100 MW Gongri hydel project
in West Kameng district. The project shall be implemented on a
BOOT basis for a lease period of 40 years from the commercial
operation date. The expected revenue from the project is Rs 120
crore a year. The company is already executing the Kameng 600
MW hydel project for NEEPCO on cash contract. Therefore,
logistics will be easily managed and there will be saving in
overhead costs as well. This will help Patel to boost its margins
further.
Looking to acquire coal mines in foreign countries
The company is looking to acquire coal mines in South Africa,
Mozambique and Indonesia. The company is looking to have coal
requirements for next 15-20 years and plans to raise funds for the
same. The company is planning a capex requirement of nearly Rs
100 crore.The acquisition of cola mines will provide raw material
for its power projects as coal is in short supply in relation to its
demand
JV with KNR constructions: Bagged projects worth Rs 200 crore
Patel Engineering, in a joint venture with KNR constructions,
recently bagged a contract worth Rs 200 crore from NHAI for sixlane
road between Madurai and Kanyakumari in Tamil Nadu.
10 | P age

RISKS & CONCERNS
Increasing competition in power sector
Many big players have identified the power sector as major
opportunity and they are bidding aggressively to get the
hydropower projects. The main players emerging in this segment
is L&T and Jai Prakash Hydro. With new companies such as India
bulls Power and GMR Energy entering the fray, competition will
only go up going forward.
Lack of clarity on real estate development
Any downturn in the real estate sector would impact the bottomline
of the company over a long period of time, as the company
has plans to foray into real estate. The company has given little
clarity on the developmental plan and just given the details on the
12% of the total developmental plan.
Execution risk
Project execution risk and payment risk are the major risks
associated with the construction companies.
11 | P age

FINANCIAL SUMMARY
Sales and net profit to post steady rise
Patel will have stable sales growth for next 2 years, but the revenue
mix will change from low margin business to high margin business.
From FY10 onwards, real estate business will start contributing to the
top line. The net margins from the real estate would be around 25%
and give overall margins of 14% on the net profit level. We expect
sales to rise at a 22% CAGR from Rs 1,300 crore in FY07 to Rs 2,340
crore in FY10E.
Exhibit 19: Revenue mix
2500
2000
1500
1000
500
0
Source: ICICIdirect Research
FY09E FY10E
Power Irrigation Transport Real estate
Exhibit 20: Steady growth in sales and net profits
2500
2000
1500
1000
500
0
Source: ICICIdirect Research
FY08E FY09E FY10E
Sales ( In Rs Cr) Net Profit Margin (%)
14
12
10
8
6
4
2
0
12 | P age
From FY10, real estate business will start
to contribute to the PEC top line, thus it
will further improve the margins. Also
multipurpose power contribution will
increase relatively to irrigation and
transport business

High margin revenue mix to boost operating efficiency
Patel’s main business of hydropower construction and irrigation
projects has yielded superior operating profit margins (OPM) over
the years. We expect the company would improve its margins going
forward. Once the high margin real estate business starts
contributing, the margins are expected to further improve. Patel’s
margins are expected to rise from 14% in FY08 to 15% in FY09, and
further to 24% in FY10E. From FY08E to FY09E, margins will improve
due to higher proportion of revenue from hydropower business and
then in FY10E, margins are likely to show jump as real estate
business starts to contribute. The real estate business will have
operating margins between 45-50%.
Exhibit 21: Operating margins trend
30
25
20
15
10
5
0
14.260
8.38
Source: ICICIdirect Research
15.774
9.53
FY08E FY09E FY10E
Operating Margin Net Margins
23.821
13.06
13 | P age

VALUATION
Core business valuation
Patel’s core business comprises of multipurpose power, irrigation
and transport business. The company has set up in-house
capability for the purpose of its business lines. We expect net sales
to grow at a 22% CAGR over FY07-FY10E, while the EPS will see a
28% CAGR during the same period due to higher margins.
Margins are expected to improve due to scalability, experience and
higher margin revenue mix which would help company to make
higher margins and thus would command higher P/E multiple. We
have valued the company at 15x its FY09E EPS which gives us a
value of its Core business at Rs 418. FY09E EPS reflects earnings
form core business and does not include any income form real
estate business.
Exhibit 22: P/E band
900
700
500
300
100
Apr-05
Jul-05
Source: ICICIdirect Research
Oct-05
Jan-06
Apr-06
Jul-06
`
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
14 | P age
30X
25X
21X
18X

Real estate business valuation
The company’s real estate plans are still in the nascent stages and
there is lack of clarity as far as developmental plan is concerned.
The management just revealed developmental plans on 15.6
million sq ft out of total developmental plan of 135 million sq ft. We
have done the valuation of the real estate business by taking the
current realization from the land and adding the developer’s
margins. The developer’s margin is assumed at 30%. The base
case value per share comes to Rs 344 at the NAV.Under current
market conditions most real estate companies are trading at 20%
discount to theirs NAVs and we believe that same should be
applied to patel real estate business and hence we assigned per
share value of real estate business at Rs 275 per share
Exhibit 23: Real estate valuation matrix
Pessimistic case Base Case
15 | P age
Optimistic
case
Land ( Acre)
Mumbai
Jogeshwari Mumbai 6 12 16 20
Panvel Mumbai 20 2.8 4 6
Total realizations from Mumbai 128 176 240
Add :Net developmental margin 20.00% 25.6 35.2 48
Total value of Mumbai property 153.6 211.2 288
Chennai 232 0.4 0.7 1
Total realizations from Chennai 92.8 162.4 232
Add :Net Developmental margin 20.00% 18.56 32.48 46.4
Total value of Chennai property 111.36 194.88 278.4
Bangalore 82 5.5 7.5 9
Realizations from Bangalore 451 615 738
Add: Net Developers margin 20.00% 90.2 123 147.6
Total value of Bangalore property 541.2 738 885.6
Hyderabad 174 6.5 9 10
Realizations from Hyderabad 1131 1566 1740
Add :Net developmental margin 20.00% 226.2 313.2 348
Total value of Hyderabad property 1357.2 1879.2 2088
Total Value of Land 2163.36 3023.28 3540
Less :Taxes 757.18 1058.15 1239
Net Asset Value 1406.18 1965.13 2301
No of shares 5.7 5.7 5.7
Value per share 246.7 344.76 403.68
Source: ICICIdirect, Research
Exhibit 24: SOTP valuation
Particulars Rs per share Valuation comment
Core business 418 15 X FY09 E Earnings
Real estate 275 At 20% dis. to NAV
Total 693
Source: ICICIdirect, Research

Profit and Loss account
(Year-end March) FY07 FY08E FY09E FY10E
Sales 1295.63 1684.32 2000.00 2340
% Growth 41.13 30.00 18.74 17.00
Op Profit 174.68 240.19 271.47 557.40
% Growth 21.86 37.50 13.02 105.33
Depreciation 34.90 41.60 43.68 52.86
EBIT 139.78 198.59 227.79 504.54
% Growth 24.57 42.07 14.70 121.49
Interest 9.67 17.62 23.76 32.90
Profit before Tax 130.11 180.97 208.56 304.49
% Growth 61.07 39.09 15.24 45.99
Taxation 14.44 39.81 41.71 60.89
Net Profit 115.67 141.16 166.85 243.59
% Change YoY 57.31 22.04 18.20 45.99
Balance sheet
Liabilities FY07 FY08E FY09E FY10E
Share Capital 5.97 5.97 5.97 5.97
Reserves Total 697.20 727.36 894.21 1137.79
Total Shareholders Funds 703.17 733.33 900.18 1143.76
Secured Loans 409.24 391.61 459.36 576.29
Unsecured Loans 51.13 97.90 114.84 144.07
Total Debt 460.37 489.37 574.21 720.36
Current liabilities 284.62 352.85 423.65 517.25
Net differ tax 10.81 10.81 10.81 10.81
Total
Assets
1458.99 1586.27 1908.76 2392.10
Gross block 196.19 259.13 280.72 390.00
Acc dep: 41.60 85.28 138.14
Net block 196.19 217.53 195.44 251.86
Capital In progress 7.92 0.00 0.00 0.00
Investments 191.83 191.83 191.83 191.83
Cash 88.64 53.04 197.62 390.54
Trade receivables 263.94 341.16 510.87 712.46
Loans and advances 320.64 350.00 350.00 350.00
Inventories 389.83 432.71 463.00 495.41
Total Current assets 1063.05 1315.70 1515.70 1749.70
Total 1458.99 1586.27 1908.76 2392.10
16 | P age
The growth in EBIT is mainly
contributed by real estate business
The interest cost will rise in due
course as company has huge
capex plan in coming 2 years.

Cash Flow statement
FY07 FY08E FY09E FY10E
Profit before Tax 123.06 180.97 208.56 304.49
Depreciation 26.74 41.60 43.68 52.86
Cash flows before WC 165.01 222.57 252.24 357.35
Net increase in Current Assets 316.66 252.65 200.00 234.00
Net increase in current Liabilities 54.53 68.23 70.80 93.60
Others 25.97 0.00 0.00 0.00
Cash flows after WC changes
Extraordinary items
-138.30 38.15 123.04 216.95
Purchase of fixed assets -51.54 -62.94 -21.59 -109.28
Others/investment -150.54 0.00 0.00
Cash flows from investing activities -202.08 -62.94 -21.59 -109.28
Equity capital 425.00 0.00 0.00 0.00
Inc./Dec in loan funds 9.57 29.00 84.84 146.15
Others/taxes 57.56 39.81 41.71 60.90
Cash flows from financing activities 377.01 -10.81 43.13 85.26
Operating bal cash and cash equivalents 52.01 88.64 53.04 197.62
Closing Cash 88.64 53.04 197.62 390.54
Ratios
(Year-end March) FY07 FY08E FY09E FY10E
EPS 19.28 23.53 27.81 40.60
Book Value 117.20 135.98 159.50 200.10
Net Profit Margin (%) 8.93 8.38 8.34
10.41
RONW (%) 15.77 15.68 14.59 21.30
ROCE (%) 12.32 13.10 15.15 15.97
Enterprise Value 3,881.73 3,835.33 3,775.59 3,728.82
EV/EBIDTA 22.22 15.97 11.97 6.69
Sales to Equity 1.84 1.99 1.98 1.86
Market Cap 3,510.00 3,510.00 3,510.00 3,510.00
Market Cap to sales 2.71 2.08 1.76 1.50
Price to Book Value 4.99 4.30 3.67 2.92
PE 30.34 24.87 21.04 14.41
No. of Shares 6.00 6.00 6.00 6.00
DuPont Analysis
FY07 FY08E FY09E FY10E
PAT/PBT 0.89 0.78 0.80 0.80
PBT/EBIT 0.93 0.91 0.77 0.60
EBIT/sales 0.11 0.12 0.14 0.22
Sales/asset 0.63 0.82 0.88 0.84
Asset/equity 2.75 2.24 1.92 2.40
RONW (%) 15.77 15.68 14.59 21.30
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The real estate business will
improve the return ratios due to
better profitability

RATING RATIONALE
ICICIdirect endeavors to provide objective opinions and recommendations. ICICIdirect assigns ratings to its
stocks according to their notional target price vs. current market price and then categorises them as
Outperformer, Performer, Hold, and Underperformer. The performance horizon is 2 years unless specified and
the notional target price is defined as the analysts' valuation for a stock.
Outperformer: 20% or more;
Performer: Between 10% and 20%;
Hold: +10% return;
Underperformer: -10% or more.
Harendra Kumar Head - Research & Advisory harendra.kumar@icicidirect.com
ICICIdirect Research Desk,
ICICI Securities Limited,
Mafatlal House, Ground Floor,
163, H T Parekh Marg,
Churchgate, Mumbai – 400 020
research@icicidirect.com
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18| P age