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Strong BUY HDIL – I-Sec

January 8, 2008

Breaking NewsI-Sec has initiated coverage on Mumbai’s real Estate Developer HDIL with a Strong BUY Rating. On the back of strong project pipeline and imminent upsides from GVK Slum Rehabilitation Scheme (SRS) and upcoming special economic zones (SEZs). HDIL has presence across all key segments – residential, commercial, retail, SEZs and particularly SRS. Presence in prime Mumbai property market adds to the advantage. HDIL has development pipeline of ~120mn sqft (excluding GVK SRS and SEZs).

HDIL has considerable land in Vasai-Virar and intends developing a multi-product SEZ across ~5,000 acres (~2,500 acres in phase I) that would include industrial development, IT/ITES parks, residential townships and other commercial developments. Also, HDIL is developing a multi-service SEZ in Bhayander across 600 acres (~450 acres in phase I). Both projects will be developed over the next 9-12 years. Based on potential development of >300mn sqft requiring an investment of ~Rs594bn.

HDIL is executing ~120mn sqft of saleable area in the next 5-7 years (37 projects). 23 projects with 42.7mn sqft developable area are ongoing. Of the total land bank, ~95mn sqft (79%) fall within Mumbai Metropolitan Region and ~5.6mn sqft (5%) under SRS.

HDIL is developing/rehabilitating 276 acres of slum land adjacent to Mumbai airport where it and could generate ~7.5mn sqft saleable space, and ~31mn sqft of transferable development rights (TDRs) through rehab.

Sum of The Parts Valuation of HDIL:
SEZ Projects Rs 891/share
Airport Slum Rehab Project Rs 503 / share
Other Projects Rs 667 / share

HDIL NAV estimate of Rs444bn or Rs 2,076 / share which is the target price set by ICICI Securities.

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