Anantraj Industries Ltd.

Steep discount to its real estate peers

(Discussion with the Company Management)

February 2010

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 Anantraj Industries Ltd (AIL)
¾ The Delhi based Real estate player has very defensive business model coupled with cushion of Rs. 500
Crs of cash balance and almost zero debt level which has helped the Company to ride out of downturn
without any sort of hiccups.

¾ AIL has land bank of around 1000 acres of which 500 acres is in Delhi & balance 500 acres in
surrounding NCR area. Till date the Company has constructed over 11.1 Mn Sq. Feet. As a policy the
Company leases out the constructed area rather than selling it our right. In a way AIL is assured of
continuing lease/ rental income during the life of the asset.

¾ The Company's business model of leasing out constructed areas helps it to finance the new projects
from the cash generated by the business & not to rely on external borrowings.

¾ AIL expects to construct over approx 4.0 Mn square feet over FY11E & FY12E. AIL’s plan for FY11E
include 300000 Sq. ft of Residential complexes in Delhi, around 750000 Sq ft of commercial space in
Delhi & 1.8 Mn Sq Ft, part of its IT SEZ in Panchkula.

¾ We expect topline to touch Rs. 990 Crs for in FY11E, mainly on account of the residential projects in
Delhi. The operating margin are likely to stay at healthy rate of close to 90%. As per our estimate, AIL
will throw up Cash Profit of Rs. 700 Crs in FY11E.

¾ We recommend “BUY” on AIL, based on our DCF model, with price target of Rs. 481. The NAV based
method values AIL at Rs. 509. Currently at CMP Of Rs. 130, the stock is trading at PE multiple of 4x
based on its FY12E EPS of Rs. 32.2. The valuation for AIL is at steep discount to average industry PE of
25x.

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 Construction coming in 2011 & 2012
IT PARK – PANCHKULA, HARYANA (FIRST PHASE) ( Lease rentals @ Rs. 30 per Sq. Ft.)
• Land Area – 10 acres
• Total Constructed Area – 1.8 million sq.ft.
• Constructed Area (first phase) – 7,00,000 sq.ft.
• 10 kms from Baddi (industrial area developed by HP Govt. and offered various incentives/tax benefits).

RESIDENTIAL - HAUZ KHAS, NEW DELHI (Selling Price Rs. 30000 per Sq. ft.)
• Constructed Area - 2, 60,910 sq.ft., • Saleable Area – 0.30 million sq.ft.
RESIDENTIAL – KAPASHERA, NEW DELHI (Selling Price Rs. 7000 per Sq. ft.)
• Constructed Area - 2,95,000 sq.ft., • Saleable Area – 0.30 million sq.ft.
RESIDENTIAL-CUM-INSTITUTIONAL - BHAGWAN DAS ROAD, CONNAUGHT PLACE, NEW DELHI
• Constructed Area – 2, 43,946 sq. ft., • Prime Location in the heart of Delhi. (Selling Price Rs. 45000 per Sq. ft.)

MALL - KIRTI NAGAR, NEW DELHI (Lease Rentals @ Rs. 130 per Sq.Ft.)
• Total Constructed Area – 0.75 million sq.ft.; • Centrally located in the posh area of Delhi

Including above, overall AIL is planning following project to be executed over period of next 24
months.
ƒ 5 IT Parks expected by having total constructed area of 6.5 Mn sq.ft.
ƒ 2 Commercial Malls expected by having total constructed area of 0.83 Mn sq.ft.
ƒ 6 Hotels having a land area of 36.29 acres.
ƒ 3 Residential buildings having a land area of 8.35 acres (Construction area 0.36 Mn Sq. Ft.).

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 Valuation
Year FY07 FY08 FY09 FY10E FY11E FY12E
PBT 133 537 437 343 825 1140
CAPM
Add: NCC 8 8 9 16 23 30 R= Rf+ B*(Rm-Rf) 16.7
Less : Capex 147 210 268 (5) 37 164 Cost of Debt (%) 12.0
Less: Cahnge in WC 101 452 (1209) (1114) (1062) (1140) Rf (1 year G-Sec) 4.7
FCFF (107) (117) 1387 1478 1873 2146 Beta 0.9
Dis factor (107) (117) 1387 1270 1382 1360
Rm 18.0
Residual Value 16210
PV of Residual Value 10275 ERP 13.3
Total PV 14287 WACC 16.4
Debt for FY10E 95 Tax rate 33.0
Value for Equity 14192 Terminal Growth (%) 1.0
No. of Equity Shares 29.5
Value per Share 481

Net Asset Value

Current Land Bank (in Mn Square Feet) 44
FSI 1.5
Total Construction area (in Mn Square Feet) 65
Realisable Value per square feet 3500
Cost of Construction per square feet 1200
Net Realisable Value per square feet 2300
Value of land Bank (Rs. In Mn) 150282
No. of Shares (in Mn) 295
Value per Share 509.4

Based on our DCF model, with price target of Rs. 481. The NAV based method values AIL at Rs. 509.
Currently at CMP Of Rs. 130, the stock is trading at PE multiple of 4x based on its FY12E EPS of Rs. 32.2.
The current valuation of AIL is at steep discount to average industry PE of 25x.

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 Financial Snapshots
Anantraj inds. (All figs in Rs. Crs unless otherwsie mentioned)
FY06 FY07 FY08 FY09 FY10E FY11E FY12E
Income
Gross Revenue 58.2 171.9 539.9 414.9 360.1 899.0 1252.2
Ceramic Tiles 22.0 34.7 26.7 17.2 14.4 15.8 16.9
Sale of Assets 22.3 110.4 175.1 373.3 310.5 732.3 1012.3
Sale of Investments 12.2 18.4 327.2 8.5 5.0 6.0 6.0
Rental income 1.7 8.4 10.8 16.0 30.3 145.0 217.0
Less: Excise Duty (1.4) (2.0) (1.7) (1.1) (0.9) (1.4) (1.5)
Operating Income 56.8 169.9 538.2 413.8 359.2 897.6 1250.7
Other Income 0.9 4.3 48.0 61.6 35.4 40.0 40.0
Stock Adjustments 1.5 0.2 0.3 0.0 (2.4) (2.9) (2.9)
Total Income 59.2 174.3 586.4 475.4 392.1 934.7 1287.8
Expenditure
Raw Materials, Store & Consumable 11.8 15.6 16.5 8.6 5.5 15.2 21.8
Power Costs 2.5 3.3 3.7 1.4 2.2 9.7 15.9
Employee Costs 1.8 3.4 5.9 7.4 9.5 18.4 24.2
Other Operating Exp. 1.5 5.7 8.6 9.4 11.5 22.3 29.2
SG&A Exp. 0.6 1.7 3.3 2.8 3.9 20.3 26.2
Total Expenses 18.3 31.0 38.1 29.7 32.5 85.9 117.3
Operating Profit 38.6 138.9 500.1 384.1 326.6 811.7 1133.4
PBDIT 40.9 143.4 548.3 445.7 359.6 848.8 1170.5
Interest 1.2 2.2 3.0 0.5 0.3 0.3 0.3
PBDT (Gross Profit) 39.8 141.1 545.3 445.2 359.3 848.5 1170.2
Depreciation 2.9 7.8 8.2 8.6 16.4 23.2 29.9
PBT 36.9 133.3 537.1 436.6 342.9 825.3 1140.3
Tax Provisions 8.8 32.6 85.6 70.6 59.5 137.0 191.3
Reported Net Profit 28.1 100.7 451.5 366.1 283.4 688.3 949.0
Cash Profit 31.0 108.5 459.7 374.7 299.8 711.5 978.9
Shares in issue (Nos. in Crs) 3.1 24.0 29.5 29.5 29.5 29.5 29.5
Earning Per Share (Rs) 9.1 4.2 15.3 12.4 9.6 23.3 32.2
Book Value (Rs) 80.6 47.6 98.0 109.7 118.6 140.4 170.2

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 Financial Snapshots
(Rs. In Crs)
Sources Of Funds FY06 FY07 FY08 FY09 FY10E FY11E FY12E
Total Share Capital 33.5 57.0 59.0 59.0 59.0 59.0 59.0
Equity Share Capital 30.8 47.9 59.0 59.0 59.0 59.0 59.0
Share Warrants 2.7 9.0 0.0 0.0 0.0 0.0 0.0
Reserves 214.6 1082.9 2834.1 3179.3 3442.0 4084.6 4963.5
Revaluation Reserves 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Networth (RHS) 248.1 1139.8 2893.2 3238.3 3501.0 4143.6 5022.5
Secured Loans 19.1 310.0 57.0 110.9 95.0 90.0 90.0
Unsecured Loans 5.8 18.2 1.1 0.3 0.5 0.5 0.5
Total Debt 24.9 328.2 58.0 111.2 95.5 90.5 90.5
Total Liabilities 272.9 1468.0 2951.2 3349.4 3596.5 4234.1 5113.0

Application Of Funds
Gross Block 232.2 896.6 1029.9 1094.2 1233.8 1454.7 1751.9
Less: Accum. Depreciation 25.2 33.9 42.0 50.4 66.8 90.0 119.9
Less: Impairment of Assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Block 207.0 862.7 988.0 1043.9 1167.0 1364.7 1632.0
Capital Work in Progress 29.0 176.4 386.9 654.5 650.0 687.2 850.9
Investments 9.9 238.3 275.9 360.9 360.9 460.9 460.9
Inventories 6.8 8.9 9.8 9.8 10.1 13.0 25.4
Sundry Debtors 9.8 11.8 309.8 239.9 230.4 567.0 722.4
Cash and Bank Balance 2.2 60.6 597.1 602.7 650.0 704.8 882.6
Total Current Assets 18.8 81.2 916.8 852.4 890.5 1284.8 1630.4
Loans and Advances 34.3 302.5 574.9 562.0 562.0 562.0 706.0
Total CA, Loans & Advances 53.0 383.7 1491.7 1414.4 1528.9 1846.8 2336.4
Current Liabilities 23.6 191.0 189.6 121.9 97.8 122.5 164.2
Provisions 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total CL & Provisions 23.6 191.0 189.6 121.9 97.8 122.5 164.2
Net Current Assets 29.4 192.7 1302.0 1292.5 1431.1 1724.3 2172.2
Miscellaneous Expenses 0.2 0.2 0.3 0.2 0.0 0.0 0.0
Net Defered Tax (2.6) (2.3) (1.9) (2.6) (3.0) (3.0) (3.0)
Total Assets 272.9 1468.0 2951.2 3349.4 3606.0 4234.1 5113.0

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 Financial Snapshots
Ratios FY06 FY07 FY08 FY09 FY10E FY11E FY12E
Growth in Sales -29.26% 195.3% 214.1% -23.1% -13.2% 149.7% 39.3%
Expenses as % of Sales 31.4% 18.0% 7.0% 7.1% 9.0% 9.6% 9.4%
Raw Materials Costs as % of Sales 20.2% 9.1% 3.1% 2.1% 1.5% 1.7% 1.7%
Power Costs as % of Sales 4.3% 2.0% 1.1% 1.8% 2.6% 2.0% 1.9%
Employee cost as % of sales 3.1% 3.3% 1.6% 2.3% 3.2% 2.5% 2.3%
Operating Profit / Sales 66.3% 80.8% 92.6% 92.6% 90.7% 90.3% 90.5%
Interest as % of Debt 4.7% 0.7% 5.2% 0.4% 0.3% 0.3% 0.3%
Depreciation as % of Op Gr Bl 1.2% 0.9% 0.8% 0.8% 1.3% 1.6% 1.7%
Tax as % of PBT 24% 24% 16% 16% 17% 17% 17%
PAT/ Sales 48% 59% 84% 88% 79% 77% 76%

Addition to Gross Block 261 890 344 332 135 258 461
As % of Op Gross Block 112% 99% 33% 30% 11% 18% 26%
Sr Drs in no of days sales 61 25 209 211 234 230 211
Inventories in no of days sales 42 19 7 9 10 5 7
Debt Equity Ratio 0.10 0.29 0.02 0.03 0.03 0.02 0.02
Sales/ Gross Block 0.25 0.19 0.52 0.38 0.29 0.62 0.71
Div as % of NP 47% 30% 11% 6% 7% 8% 9%

CMP 135.00 220.00 228.00 130.00 130.00 130.00 130.00

Market Cap 415.73 5271.89 6728.28 3836.30 3836.30 3836.30 3836.30
Cash profit 31.00 108.55 459.73 374.67 299.80 711.54 978.85
Cash Profit as % of Mkt Cap 7.46% 2.06% 6.83% 9.77% 7.81% 18.55% 25.52%

EPS 9.13 4.20 15.30 12.40 9.60 23.33 32.16

CEPS 10.07 4.53 15.58 12.70 10.16 24.11 33.17
CMP/EPS 14.79 52.34 14.90 10.48 13.54 5.57 4.04
CMP/CEPS 13.41 48.57 14.64 10.24 12.80 5.39 3.92
RoNW 11% 9% 16% 11% 8% 17% 19%
RoMC 7.5% 2.1% 6.8% 9.8% 7.8% 18.5% 25.5%
Book Value 80.56 47.56 98.04 109.74 118.64 140.41 170.20
CMP/ BV 1.68 4.63 2.33 1.18 1.10 0.93 0.76
Mkt Cap/ Sales 7.14 30.67 12.46 9.25 10.65 4.27 3.06

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 Other Information
Shareholding pattern as of December 2009
1200.0 35.00
P ublic , 4.8 C ash Profit
F II , 27 .5
P ro mo te rs , Mkt C ap/ Sales (RHS)
61.4

D II , 1.2
600.0 17.50

N o n P ro mo t er 0.0 0.00
C o rpo ra te , 5 .2 FY06 FY07 FY08 FY09 FY10E FY11E FY12E

15-Feb-10
CMP (Rs.) 130
Equity (Rs.) 59.0
Face Value (Rs.) 2
52 week high/ low (Rs.) 37.65/ 163.90
Market Cap (Rs. Crs.) 3836
Avg. Volume (3 month) 33194

Codes
BSE Code 515055
BSE Group S
ISIN No INE242C01024
NSE Symbol ANANTRAJ
Bloomberg Code ARCP IN

Key Ratios
EPS (TTM) (Rs.) 7.7
PE 16.8
P/ BV 1.2
EV/ EBITDA 10.9
Mcap/ Sales 10.7

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 Thank You

Disclaimer:
This product is distributed for information purposes only. The information in this report does not constitute an offer to sell or a solicitation of an offer to buy any
of the securities mentioned in the report. The readers may note that neither the company, its Directors, Officers or employees take any responsibility, financial or
otherwise, due to any transaction undertaken or any action based on the information contained herein. The Company, its Directors, Officers or Employees may
have a position or may otherwise be interested in the investment referred to in this document.

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