DSP Merill Lynch in its Investment update has put a BUY recommendation on IndiaBulls Financial Services Ltd. It has also revised the target for IndiaBulls to Rs 750.
The upward revision is mainly due to the rise in value of its Real Estate Holdings. The NAV of Real estate business is estimated at Rs423/share (FY08) by Merill Lynch, a 47% discount to KF’s value of Rs796/share principally owing to the difference in SEZ valuation. They have pegged SEZ valuations at the price paid by Farallon last month (Rs173/shr v/s RS496/shr done by KF) owing to uncertainty in SEZ policies and extended timeline of SEZ. Hence, SEZ valuations may remain muted at 0.5-1.0x NAV.
Merill Lynch is however, positive on the non-SEZ properties, where our value of Rs250/shr is just 13% lower than KF’s value largely owing to absence of any price escalations. These properties could trade up to 1.2-1.3x NAV.
IndiaBulls Financial Securities business is valued at 15-17x FY08E earnings as markets remain
buoyant. Consumer finance business valued at 1.5-1.8x FY08E book given the rapid rise in earnings and loan book.
Total value of real estate business valued at Rs337-498/share. Total ‘sum of parts’ valuation range at RS650-855/share, underpinning our PO of Rs750.
The record date of Demerger of IndiaBulls Financail Services Ltd and IndiaBulls Real Estate / properties is fixed at Jan-09-2007.