RESEARCH INITIATING COVERAGE REAL ESTATE

29 March 2019

Sunteck Realty

Now shining in affordable segment

Biplab Debbarma +91 22 4031 3427 [email protected] ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 1

Reco : BUY INITIATING COVERAGE CMP : INR459 Target Price : INR550 Sunteck Realty Potential Return : 20% Now shining in affordable segment Strong balance sheet and successful launch of its first affordable project: initiating with a BUY Biplab Debbarma, CFA Sunteck Realty Ltd (SRL) is emerging as a dominant real estate developer in in the +91 22 4031 3427 residential segment. With total receivables of INR 11.5 bn and a ready-for-possession inventory [email protected] of ~INR 18.8 bn at prime locations (in Mumbai suburbs) like the - Complex (BKC) and Goregaon West, the company has cashflow visibility in the near-to-medium term. With ongoing residential projects of 2.82 mn sq ft (SRL's share) across Mumbai and 3.37 mn sq ft of immediate launches in FY20, sales booking is further expected to increase FY20 onwards. Foray into the 'affordable segment Having cemented its presence in Mumbai's premium residential market, the company has Market data forayed into the affordable segment with the successful launch of Sunteck West World in Sensex : 38,546 Naigaon East, which is an extended western suburb of Mumbai Metropolitan Region (MMR) Sector : Real Estate between Borivali and Virar. The West World Phase I (1.65 mn sqft) launched in Market Cap (INRbn) : 67.3 September 2018 has already sold more than 60% of the inventory with the Market Cap (USDbn) : 0.977 O/S Shares (m) : 146.3 value of area sold (SRL's share) at INR 3.3 bn; another 1.65 mn sq ft is expected to 52-wk HI/LO (INR) : 527/296 be launched in FY20. The total development potential of West World is 12 mn sq ft in ~150 Avg Daily Vol ('000) : 220 acres of land under the joint-development structure (JDA). Bloomberg : SRIN IN Ready-for-possession inventory at prime locations Source: Bloomberg Valuation SRL has three premium ready-for-possession projects in BKC, namely, Signature Island, Signia FY19e FY20e FY21e Isles, and Signia Pearl. Being the financial hub of the country, BKC has become a preferred EPS (INR) 16.3 24.8 44.2 destination for commercial property; consequently, it is much sought-after for residential property. P/E (x) 33.7 22.2 12.4 The value of the ready-for-possession inventory (0.31 mn sqft) in BKC is P/BV (x) 2.7 2.4 2.0 estimated at INR 16.9 bn and the receivable of the sold units is at INR 3.8 bn. EV/EBITDA (x) 0.6 0.0 0.0 The company expects to sell the entire stock in the next three years, which would provide EV/Sales 0.3 0.0 0.0 comfort through enhanced liquidity. Source: Antique Returns (%) Strong balance sheet to propel growth 1m 3m 6m 12m While many developers are reeling under heavy debts and slow sales in Mumbai, SRL Absolute 33 32 15 8 comparatively is in a comfortable position with low leverage levels and excellent financial Relative 24 24 8 (7) discipline. It has one of the lowest D/E ratios (~ 0.17) in the industry with gross Source: Bloomberg debt of INR 5 bn and cash/cash equivalent at INR 1 bn. Moreover, the cost of debt to the Shareholding pattern company is quite low (at ~ 9.5%). Promoters : 67% Diversification into annuity assets Public : 33% Others : 0% The company is now creating a good mix of residential/annuity assets with two commercial

Source: Bloomberg space projects (totaling 0.4 mn sq ft) under construction and further 2.6 mn sq ft of mixed-used in the pipeline. Once the commercial and retail assets stabilize, a Price performance vs Nifty steady annuity income of INR 5-6 bn is expected from these assets. 140 120 Leasing risk of 2.6 mn sq ft of upcoming rental assets and a slowdown in sales 100 of the high-value inventory in BKC are the downside risks. 80 60 With future projects in Jaipur, Sion, in Mumbai and Dubai not included in NAV and Mar-18 Jul-18 Nov-18 Mar-19 potential volume growth due to new project acquisitions, we have assigned no discount to Sunteck Realty NIFTY NAV. The target price of INR 550/ share is a significant upside. Source: Bloomberg Indexed to 100 ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 2

Valuations (NAV) and outlook: Sum of the parts (SOTP) : Residential Future Sales value + Receivables Project NAV Projects Status FY20 onwards (INR mn) (INR mn) BKC, Borivali, Nagpur Complete 22,600 12,074 District Corporation (ODC) - Ph 1&2, Naigaon - Ph 1, Airoli, Andheri W, Andheri E Ongoing 13,209 6,097 ODC - Ph 3 & 4, Naigaon - Ph 2, Upcoming 35,779 7,493 Naigoan - remaining phases Planning 17,415 (A) Total Residential 71,588 43,079

Source: Company, Antique

Income-Producing Assets Project NAV Projects Status (INR mn) Ikon and Gateway in BKC Under-construction 5,292 ODC Ph-5 & 6 Upcoming 29,471 (B) Total Income-Producing Asset value (Rs mn) 34,763

(C) Total Project Asset Value = (A) + (B) 77,842 (D) Total Gross Debt (INR mn) in FY20E 5,680 (E) Cash + Cash Equivalent (INR mn) in FY20E 5,566 (F) Net Asset value (NAV) = (C-D+E) (INR mn) 77,728 (H) Total Number of Shares (mn) 140 (I) NAV per share = (G/H) (INR/ Share) 555 No Discount or Premium Assigned to SRL NAV 0 Target Price* (INR/ Share) 550 We have not assigned a discount to the NAV (P/BV of 2.4X in FY20E) of SRL for the volume growth from future projects (of Sion, Dubai, and Jaipur) and the high liquidity of SRL, which could enable new project acquisitions (primarily through Joint Development structure) at an attractive valuation in the current stressed and illiquid market and fuel volume-driven growth. NAV has been calculated only including those projects that have visibility. * Rounding off ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 3

Methodology 1. Residential a. Only those projects are considered for valuations (DCF) where approvals have been received. Projects such as in Sion, Dubai and Jaipur have not been considered for valuation. b. The projects were categorized base on the status of the projects - completed, ongoing and upcoming i. Sales velocity for completed projects kept as same as the current year ii. Sales velocity has been conservatively assumed for each ongoing project. Sales velocity for ongoing projects has been evenly distributed over the project timeline and rationalized looking at current sales velocity. iii. For the upcoming projects ODC Ph 3 and ODC Ph 4 - the timeline of sales has been extended to 7 years and Naigaon Ph 2 has been extended to 5 years. iv. Sales timeline of each project has been assumed based on the current sales velocity, micro-market, overall real estate trends, product offerings and discussion with industry experts. c. Cost of development of each project assumed based on our cost estimates based on company inputs and industry experts inputs d. Other costs including sales & marketing and corporate costs have been estimated based on the prevailing costs incurred by the Company. e. The resultant cashflow is the cashflow from residential projects (pre-tax) and DCF is used to find the gross asset value of residential projects 2. Income-producing assets a. For the upcoming office + mall assets in ODC, construction period is assumed to commence in FY20 and would take 4 years for completion; post-operation another 4 years for the assets to be stabilized. Occupancy is ramped up from 40% in 1st year of operation to 95% (stabilized) in 4th year. Cashflows post-operationalization of the assets and terminal values have been considered for valuation b. For the under-construction offices in BKC, 3 years for construction and 3 years for stabilization assumed as they are small-format standalone office buildings 3. Projects such as the ones in Dubai, Jaipur, Vile Parle and Sion haven't been considered for valuation 4. Income tax has been estimated based on the prevailing tax rate to the company. 5. Net debt has been calculated based on the gross debt minus cash and cash-equivalents 6. Final NAV is deduced after subtracting net debt from gross asset value ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 4

Assumptions WACC calculation 12.04% Cost of Equity 13.0% Risk free rate 7.4% Market premium 4.13% Beta 1.12 Cost of Debt 9.5% Tax Rate 30.6% Target D/E 0.18 Cap rate for rental assets for terminal value 9% Annual escalation of residential sale rate 5% Annual inflation of construction cost 3%

Selling rate of completed and ongoing residential INR/sqft Signature Island, BKC 61,000 Signia Isle, BKC 49,000 Signia Pearl, BKC 40,000 Signia High, Borivali E 13,500 Signia Sky, Nagpur 5,500 Sunteck City Avenue (Ph 1 & 2), Goregaon West 13,500 Sunteck West World (Ph 1), Naigaon 5,000 Selling Rate of Upcoming Residential (FY2020E) INR/sqft Sunteck City Avenue (Ph 3 & 4), Goregaon West 14,500 Sunteck West World (Ph 2), Naigaon 5,500 Leasing Rate of Under-construction/Upcoming Assets INR/sqft/month Sunteck City Avenue (Ph 5 & 6), Goregaon West (FY24E) 185 Icon and gateway, BKC (FY22E) 289

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 5

Investment rationale Successful foray into affordable housing segment Earlier, SRL was exclusively in super luxury and luxury segment of residential real estate. To tap the growing demand of the affordable segment within MMR, the company launched Sunteck West World Phase 1 in 2018. Launched in September 2018, West World Phase 1 already sold 2,000 of 2,476 units, of which 1,232 units were registered. Thus, with the launch of West World Phase 1, the company has successfully forayed into the affordable segment as well. The company focused on affordability by economizing the size of the units - 1 BHK of 393 sq ft (INR 2.6 mn+) and 2 BHK of 547 sq ft (INR 3.2 mn), making it appealing to the target segment of home buyers. The economization of the units reduced the tickets sizes (INR mn) of the units, making housing relatively-affordable without compromising on the selling rate (INR/ sq ft) prevailing in the micro- market. The premium affordable housing projects include all the modern amenities such as swimming pools, club houses, and multi- purpose halls. Although supply in the micro-market is very high, the supply is mainly from small/ mid-tier developers. With many projects on hold or delayed due to a liquidity crunch faced by these developers, assurance of delivery in such a market is key. The strong Sunteck brand has given the company competitive advantage in such a crowded market. Although the project is located at the periphery of Mumbai city and outside the purview of MCGM, the connectivity of the location is excellent, with Naigoan's suburb-station at a distance of 1.5 km from it. West World also offers very good connectivity with the 6-lane Mumbai- Ahmedabad Highway, which is going to be completed soon. Future infrastructure like the a 5-km sea link on the Vasai creek will enhance Naigaon's connectivity to major locations, driving up demand further. The project is expected to be developed in many phases with total development potential of 12 mn sq ft in a total land area of 150 acres. The project is a joint development structure (JDA) with SRL assuming the role of construction and sales and its partner contributing in terms of land and approval. SRL will get 75% of the revenue and bear the entire development costs, excluding land and approval. The first phase of 1.63 mn sq ft is being developed on 10 acres with seven towers of 22 floors each. The project falls under the PMAY scheme, which will help a buyer get INR 0.25 mn in subsidy and help the company benefit from 80IBA tax exemption. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 6

Ready-for-possession inventory in Bandra-Kurla Complex (BKC) BKC, the financial hub of the country, has very limited residential supply with approximately only 14-15% of the total area earmarked for residential development. The three projects of SRL, namely Signature Island, Signia Isles and Signia Pearl, are all located in the G Block of BKC, which houses prominent commercial buildings, notable financial institutions, and other important institutions.

Bandra-Kurla Complex - G Block : limited residential supply

Source: Company, Antique

The land supply in BKC is controlled by the Mumbai Metropolitan Region Development Authority (MMRDA) and land use decided as per the MMRDA plan. Thus, new additional residential supply is constrained. Most of the residential supply and potential supply are in the neighborhood of Bandra East and Kalina (Santazcruz East) where selling rates are 40-50% lesser than the prevailing selling rate in BKC. Thus, due to paucity of residential supply, Sunteck's projects in BKC would continue to command a premium with virtually no comparison in the entire micro-market and nearby micro-markets, including Santacruz East and Bandra East. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 7

In the three completed projects, 52 ready units (0.31 mn sqft) are yet to be sold. All the projects are debt-free, providing financial flexibility and immense liquidity to the company.

Ready - for - possession projects in BKC Area Value of Inventory Receivables Project Units to be sold (mn sqft) (INR mn) (INR mn) Signtaure Island 18 0.19 11,396 1,197 Signia Isles 4 0.02 870 1,895 Signia Pearl 21 0.10 4,645 688 Total 4 3 0.31 16,911 3,780

Source: Company, Antique

As per company estimates, the entire stock is expected to be sold in next 3 years. The proceeds from the sale of inventory would be utilized for meeting upcoming residential and commercial construction cost. BKC Projects: marquee residential destination in a prime business district

Signia Pearl Signature Island Signia Isles

The projects are ultra luxury projects. Signature Island has units which are duplexes with sizes of the remaining units varying from 8,000 - 13,000 sqft. whereas the units of Signia Pearl are much smaller in sizes (average of 4,700 sqft). With expected selling rate of INR 61,000/ sqft and 0.19 mn sqft to sell, Singature Island is the most valuable of the three projects with total value of inventory at INR 11.4 bn and another INR 1.2 bn as receivables. The total cashflow expected from these projects in next 3 years is estimated at INR 20.7 bn i.e. INR 6.9 bn per year. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 8

Strong balance sheet to propel growth At the current market, low net debt-equity ratio is an advantage. SRL is well-placed with its low gross debt estimated at INR 5.6 bn and cash-in hand at INR979 mn. The debt-equity ratio of 0.17 is one of the lowest in the industry. In addition, the incremental cost of debt for SRL would be less than 9.5% p.a. Thus, low debt equity ratio and steady cashflows from debtless completed projects (estimated ready inventory and receivables at INR 20.7 bn) would sustain and propel the growth of the company.

D/E Ratio of RE Companies 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 - Sobha Godrej Oberoi realty Brigade Prestige Sunteck Koltepatil Indiabulls Puravankara

Source: Company, Antique

The company has been consciously reducing the debt over the past few years. Although gross debt is expected to increase marginally in next quarter as SRL is going to kick start the construction of West World in Naigaon, the reverse cash flow from collections in Naigaon, ODC and BKC projects in the next 1 year will be adequate to reduce debt in some other projects and fund the construction of upcoming annuity projects as well as acquisition of new projects.

Decreasing Leverage

14,000 0.80

12,000 0.70 0.60 10,000 0.50 8,000

0.40 D/E 6,000 INR Mn INR 0.30 4,000 0.20 2,000 0.10 - - FY15 FY16 FY17 FY18 H1FY19 Gross Debt (LHS) Net Debt (LHS) D/E (RHS)

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 9

Diversification into Income Generating Assets Hitherto, the company has been into mostly residential development, with a few commercial developments that were all strata sale models. It is now venturing into income-generating assets to create a good mix of residential/annuity assets portfolio. Four projects comprising 3 mn sq ft of commercial supply from SRL are expected to be operational in the next 3-4 years, under the leasing model. Two standalone office buildings, Sunteck Gateway (0.18 mn sqft) and Sunteck Icon (0.20 mn sqft), are currently under construction in BKC; both these projects are under joint development structure (JDA) and are expected to be operational in another 2-3 years. The company has two more commercial (with allied retail) projects in the pipeline in ODC, Goregaon West - Sunteck City Avenue 5 and 6 with a total development potential of 2.6 mn sq ft. The projects will have allied retail development too. Once the commercial and retail assets stabilize, steady annuity income of INR 5-6 bn is expected from these assets. The capex expected to be incurred in these ODC projects is INR 15-16 bn. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 10

ODC is the new planned development by MMRDA as was the Bandra Kurla Complex (BKC). Located strategically between Andheri-Lokhandwala and Goregaon, ODC lies in the center of . The district center promises to offer world-class residential premises, commercial and retail spaces with state-of-the-art facilities spread across 160 acres. MMRDA is planning the plush new district with wider roads, top multinational companies, banks, IT and media hubs. The existing commercial developments such as NESCO, Nirlan, and Mindspace are very successful and occupied with good tenant profile, indicating the demand for quality commercial space in the Western Suburb. To decongest , which was the erstwhile Central Business District, BKC was planned and developed by MMRDA; BKC is the new Central Business District (CBD) now. However, BKC is not able to cater to the growing demand of quality office space at affordable rental. Thus, there is a growing need for a new business district near the residential clusters in the western suburb whose profile has been augmented by infrastructure development. ODC, Goregaon West, is expected to be the next CBD in North Mumbai, which will stimulate both housing demand and spur all-around development. ODC is expected to reap the benefits of infrastructure projects at various stages of implementation. 1. Two flyovers connecting East to West a. WEH JVLR SV Road flyover is a crucial east-west link connecting arterial (WEH) to SV Road. b. Oshiwara Flyover connecting ODC to WEH provides quick access from ODC to the arterial NH8 and link with rest of the city. 2. The Ram Mandir Road is a vital road that provides the last mile access to ODC. The widening of the Ram Mandir Road has provided better access by removing traffic bottlenecks. 3. The under-construction Dahisar-DN Nagar metro line (metro line 2) will provide modern mass transport along the north-south corridor, enhancing accessibility of ODC. 4. The under-construction JVLR WEH SV Road-New Link Road flyover will boost access to New Link Road. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 11

Low execution risk for ongoing and pipeline projects SRL's key ongoing and pipeline projects are Sunteck City in ODC, Goregaon West, and Sunteck West World in Naigaon. Sunteck City in ODC is being developed in phases on land parcel of 23 acres through outright purchase. Phase 1 and 2 are under construction with more than 60% (in sq ft) sold. Phases 3 and 4 with development potential of 1.74 mn sq ft are in pipeline. The company has approvals/clearances for both phases 1 and 2, thus de- risking itself of its near-to-medium term cashflows from any delay in statutory clearances/ approvals. Land-related issues for phases 3 and 4 have also been de-risked as the land has already been acquired. The commercial projects Sunteck City phase 5 and 6 of 2.6 mn sq ft are also a part of the existing 23 acre land parcel. For Sunteck West World, the company has a JD agreement with the landowner. The landowner is contributing land and responsible for approvals (including the approval costs). Thus, the company has not locked its cash in land of this project (150 acres) and has de-risked itself from any land-related issues and kept its land price under check. Phase 2 is expected to be launched in FY20. The entire 150 acres would be developed in phases. Cashflow visibility in the near-to-medium term from ready inventory, ongoing projects and healthy pipeline SRL has a total inventory of 0.44 mn sq ft in completed projects (BKC, Borivali and Nagpur), inventory of 1.02 mn sq ft in under-construction projects (including ODC, Naigaon, and Airoli) and 2.96 mn sq ft pipeline projects (ODC and Naigaon) to be launched in FY20. Thus, SRL has around 4.42 mn sq ft of residential projects to be sold in the next 4-5 years, including high-value completed projects at BKC and Borivali, along with other ongoing and upcoming projects. The expected sales value of the ready, under-construction and pipeline inventory is estimated at INR 65 bn. Pending receivables of INR 4.5 bn from ready inventory already sold and INR 6.9 bn from under-construction inventory already sold are sufficient for meeting pending construction and other costs for the above inventory. The 150 acres project in Naigaon will be launched in phases, providing cashflow visibility over a 10-years horizon. Asset-light model The company has a strong land acquisition track record; both its marquee projects in BKC and ODC are outright land purchase with clean title and were developed in phases. However, SRL is gradually shifting from a land banking model to a Joint Development (JD) model, keeping its land price under check. The strategy would enable the company to infuse capital only in construction work/working capital, leading to better cashflow management and lessen the liquidity risk as capital will not be locked in illiquid land asset. Given the prevailing market conditions in residential segment, SRL with its strong balance sheet and easy access to capital market would benefit from opening up of opportunities post RERA and NBFC crisis. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 12

Financial overview Sales booking is expected to increase substantially in FY19 and expected to increase in FY20 and FY21. Although sales booking is expected to increase in FY19, the collection is expected to increase marginally due to tranche payment in BKC projects and various subvention schemes available to customers.

Sales booking and collection 18,000 16,000 14,000 12,000 10,000 8,000 INR Mn INR 6,000 4,000 2,000 - FY16 FY17 FY18 FY19E FY20E FY21E Sales Booking Collections

Source: Company, Antique

The collections from BKC projects comprise > 40% of the total collections. Status-wise sales booking Status-wise collections 18,000 25,000

16,000 14,000 20,000 12,000 15,000 10,000

INR Mn INR 8,000 INR Mn INR 10,000 6,000

4,000 5,000 2,000 - - FY19E FY20E FY21E FY22E FY19E FY20E FY21E FY22E Completed Ongoing Upcoming Completed Ongoing Upc oming

Source: Company, Antique Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 13

Expected cashflow from the three completed residential projects in BKC is sufficient to fund the construction of ongoing residential projects and the upcoming commercial projects

Construction cost to be incurred

6,000

5,000

4,000

3,000 INR Mn INR 2,000

1,000

- FY20E FY21E FY22E FY23E Ongoing Residential Upcoming Residential Commer c ial

Source: Company, Antique

In the ongoing ODC projects (Sunteck City Phases 1 and 2), the receivable of INR 3.3 bn of the already-sold inventory is adequate to finance the remaining construction costs. Similarly, the receivable of the already-sold inventory in Naigaon Phase 1 is adequate to finance its construction. Thus, the collections from ready-for-possession projects in BKC and Borivali could easily fund the capex of commercial projects in ODC and BKC.

Construction cost to be incurred (INR Mn)

ODC Ongoing, 2,795 Commercial - ODC, 15,958

Naigaon Ongoing, 3,028

ODC Upcoming, Commercial - BKC, Naigaon Upcoming, 8,253 643 3,787

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 14

The completed residential projects in BKC are the biggest contributors to the company's topline and EBITDA. Similarly, ODC Phase 1 in FY20 and ODC Phase 2 in FY21 would improve the EBITDA. Rental assets would contribute to revenue and EBITDA only after commencement of operation in FY22.

Revenue projection Revenue (INRmn) FY19E FY20E FY21E FY22E FY23E FY24E FY25E FY26E FY27E Residential 8,342 12,094 20,719 19,479 11,973 3,888 6,438 - - Completed 4,563 4,796 5,163 5,843 1,935 - - - - Ongoing 3,778 7,299 6,505 5,544 544 - - - - Planned - - 9,052 8,092 9,494 3,888 6,438 - - Office - - - 443 582 2,551 3,611 4,526 5,781 Operational Under-Construction - - - 443 582 774 813 853 896 Planned - - - - - 1,777 2,798 3,673 4,884 Retail - - - - - 1,034 1,628 2,166 2,274 Operational Under-Construction Planned - - - - - 1,034 1,628 2,166 2,274 Total 8,342 12,094 20,719 19,923 12,555 7,472 11,677 6,692 8,054

Source: Company, Antique

EBITDA projection EBITDA (INRmn) FY19E FY20E FY21E FY22E FY23E FY24E FY25E FY26E FY27E Residential 3,811 5,525 9,465 8,899 5,470 1,776 2,941 - - Completed 2,085 2,191 2,359 2,669 884 - - - - Ongoing 1,726 3,334 2,972 2,533 248 - - - - Planned - - 4,135 3,697 4,337 1,776 2,941 - - Commercial - - - 355 495 2,118 3,151 4,116 5,492 Operational Under-Construction - - - 355 495 697 772 811 851 Planned - - - - - 1,421 2,378 3,305 4,640 Retail - - - - - 827 1,384 1,949 2,160 Under-Construction Planned - - - - - 827 1,384 1,949 2,160 Total 3,811 5,525 9,465 9,254 5,965 4,721 7,476 6,065 7,652

Source: Company, Antique We expect SRL to maintain margin of 45% in residential projects and 95% in commercial projects when stable. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 15

Risk Project concentration risk Of the ongoing and completed projects, the top two residential projects in BKC (Island, Isles and Pearl) and ODC (Sunteck City 1 & 2) together comprises around 77% of the total future sales value; including receivables these two projects constitute 74% of the total cash inflow from residential projects.

Future sales value of ongoing Potential cash inflow from ongoing and ready projects Receivables of sold units and ready projects

Naigaon Others Naigaon 8% 10% ODC 1 & 13% 2 Others 30% 15% Others BKC 14% BKC Naigaon 47% 52% 27%

ODC 1 & ODC 1 & 2 BKC 2 25% 33% 26%

Source: Company, Antique Source: Company, Antique Source: Company, Antique The pipeline projects are in ODC (phase 3 & 4) and Naigaon (phase 2). Thus, if we include the pipeline projects, then the three projects in BKC, ODC and Naigaon would contribute to > 90% of cash inflow.

Total potential cash inflow from ready, ongoing and pipeline projects

Others 8%

Naigaon 16%

ODC 48%

BKC 28%

Source: Company, Antique

Any disruption in these projects in terms of collections, slow sales velocity or significant delay in construction would severely impact the cashflow of the company. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 16

Sales velocity of BKC Singature Island, BKC is an uber luxurious project and was completed in FY15. Till date it has sold ~ 70% of its inventory. The ticket sizes of the remaining units are INR 0.5 - 0.80 bn. Although the project does not have any comparable in the BKC micro-market, but there is an over supply of such ultra luxurious residential projects in Worli micro-market. The much sought-after Worli micro-market has high level of inventory. With over-supply in this much sought-after location, the sales velocity of the luxurious project in BKC is also expected to be a challenge.

Inventory in worli, Lowqer , Mahalaxmi Sales and new supply in Worli, Lower Parel, Mahalaxmi 12.00 120.00 6.00

10.00 100.00 5.00 8.00 80.00 4.00 6.00 60.00

months 3.00 Mn Sqft

4.00 40.00 Mn sqft 2.00 2.00 20.00 1.00 0.00 0.00 0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Unsold Stock (left Axis) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Inventory Overhang -Months (right axis) New Launches (mn sqft) Total Absorption (mn sqft)

Source: Company, Antique Source: Company, Antique Construction and leasing risk of commercial projects in ODC ODC has been projected to be the next BKC of western suburbs with already existing commercial developments such as NESCO, Nirlan, and Mindspace. There is a growing demand for Garde A commercial space in the Western Suburb further north of BKC. However, leasing 2.6 mn sq ft of commercial development is going to be a challenge as plenty of supply is coming up in the western suburbs. In addition, SRL, until date, has been a residential player with no experience in leasing. The complete lease-out may take a longer time. Any significant delay or cost overrun in these projects could be a key downside risk. Potential catalyst Traction in real estate Whilst sectoral headwinds remain, SRL is expected to overperform when the residential market turns around. The company, with its presence across the price spectrum and reputation for on- time delivery, would benefit from a positive traction in housing demand, which would boost its sales in the large-format ODC and Naigaon projects. New project acquistion With a strong balance sheet and easy access to capital markets, SRL has the ability to strike an outright purchase or join development agreement at this juncture that few developers have, given that the sector is weighed down by significant unsold inventory and high D/E ratios. The company is actively looking for opportunities in distressed and affordable projects. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 17

Company background and management profile Company background (SRL) is a Mumbai-based real estate development company, catering to the ultra-luxury, luxury, mid-segment and affordable residential segments; SRL has some exposure in other cities such as Jaipur, Nagpur, Goa and Dubai. SRL boasts of a city centric development portfolio of about 23 million square feet spread across 25 projects. Sunteck's flagship projects at Bandra Kurla Complex (BKC) comprises of three residential projects: Signature Island, Signia Isles and Signia Pearl which are home to some of the head honchos of top global conglomerates. Another key project of Sunteck is a 23-acre township known as Sunteck city, a mixed-used development in Goregaon (W). Sunteck also has projects in Sion, Borivali, Andheri, Airoli (Navi Mumbai) amongst other locations in Mumbai. Sunteck is listed on BSE and NSE, SRL is backed by respected strategic partners like Ajay Piramal, Kotak Realty Fund and noted pension funds, FIIs and Private Equity. Sunteck today enjoys one of the strongest balance sheets with negligible debt levels and visible cash flows. SRL is promoted by Mr. Kamal Khetan, with the promoter group holding 66.7% stake. SRL follows the percentage completion method for revenue recognition.

Residential Projects Completed (with Unsold Inventory) Project Location Total Area ( mn sqft) Area Sold (mn sqft) 1. Signature Island BKC 0.58 0.39 2. Signia Isles BKC 0.37 0.35 3. Singia Pearl BKC 0.40 0.29 4. Signia High Borivali 0.24 0.13 5. Signia Skys Nagpur 0.07 0.04 Ongoing 6. Sunteck City Avenue 1 Goregaon W 0.73 0.40 7. Sunteck City Avenue 2 Goregaon W 0.63 0.39 8. Signia Pride Andheri E 0.05 - 9. Signia Waterfront Airoli 0.14 0.07 10. Sunteck Gilbird Andheri W 0.06 - 11. Sunteck West World 1 Naigaon 1.22 0.71 Upcoming 12. Sunteck City Avenue 3 Goregaon W 0.88 - 13. Sunteck City Avenue 4 Goregaon W 0.86 - 14. Sunteck West World 2 Naigaon 1.22 -

Commercial Projects Sunteck Icon & Gateway BKC 0.21 - Sunteck City Avenue 5 Goregaon W 1.2 - Sunteck City Avenue 6 Goregaon W 1.4 -

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 18

Sunteck in MMRDA

Management profile Mr Kamal Khetan, Chairman and Managing Director Founder and Managing Director of Sunteck Group, Mr Khetan is a first-generation entrepreneur involved in the formulation of corporate strategy, planning, overall execution, management along with diversification plans of the company. He holds a Bachelors Degree in electronics and communications from Manipal Institute of Technology, Manipal. He is associated with and represents various industry bodies such 'Young President's Organization', Member of Royal Institute of Chartered Surveyors (MRICS) and Indian Merchants Chamber (IMC). He is also on the Council of Governors Board of Asia-Pacific Real Estate Association. Mr Atul Poopal, Executive Director Mr. Atul Poopal has been an Executive Director of Sunteck Realty Limited since September 29, 2015. Mr. Poopal is a Civil Engineer with more than 30 years of experience in regulatory field. He has profound knowledge of regulations/ acts governing development. He has in- depth insights in conceptualizing, planning, devising and streamlining approval process. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 19

Mumbai - Real Estate Overview Mumbai is referred to as three different geographic entities: Mumbai City, Greater Mumbai, and Mumbai Metropolitan Region (MMR). Mumbai City is the core of the old port city of Mumbai during the colonial period. Since then, its territory has expanded northward to cover the suburbs and extended suburbs. The Mumbai Island City plus the comprise what is now called as Greater Mumbai. It is under the political administration of the Municipal Corporation of Greater Mumbai (MCGM). The Mumbai Metropolitan Region was formed to create the urban agglomeration consisting of 7 Municipal Corporations and 13 Municipal Councils. In addition to MCGM, it includes the Municipal Corporations of Navi Mumbai, Mira-Bhayandar, , Kalyan-Dombivali, Bhiwandi-Nizampur and Ulhasnagar. We have classified MMR into following real estate market : 1. Mumbai - , Western Suburb, Central Suburb and Harbor 2. Thane 3. Navi Mumbai 4. Beyond Thane 5. Beyond Mira Road MMR sub-markets

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 20

Residential Real Esate Real estate sector in 2017 was in a state of flux due to demonetization, RERA and GST. Particularly post 2016, Demonetization and RERA disrupted the residential sector, hindering the flow of new supply. While the market was recovering slowly from the hangover of demonetization, the Real Estate (Regulation and Development) Act, 2016 (RERA) came into effect and the residential sector took a hit as developers could not launch new projects without registering on RERA as developers were scrambling to comply with RERA for their on- going and new projects. Once policy and process were streamlined, the dust settled on RERA. However, GST came into effect in the second half of 2017 and caused confusion on the exact rate of GST applicable on the real estate industry and on availability of input tax credit for land, impacting the new supply. Overall, 2017 was a bad year for residential sector in general. However, with currency in circulation back to pre-demonetization levels and implementation of RERA the residential sector consumer confidence has increased in residential sector. The residential sector was slowly gearing up for momentum in new supply and demand in 2018 but was hit by the liquidity crisis in the Non-Banking Financial Companies' (NBFCs) post the IL&FS default. The liquidity crisis of NBFCs hit both demand and supply of residential sector. Several NBFCs started delaying new loan disbursals and few were not even honouring sanctioned credit lines. This had an adverse impact on the overall buyer sentiments and sales started to witness a significant slowdown since then. On the supply side, the smaller and mid-tier developers were severely affected. The NBFC crisis exacerbated the problems faced by small and mid-teir developers who were still reeling under difficult cashflow situation due to RERA. Developers deoendent on sub-vention scheme and real estate finance from NBFCs were the worst hit. Post the crisis, NBFCs dithered or stopped disbursing loan amount which were already approved and at the same time were also delaying disbursals on the home loans. However, the crisis had least impact on developers with sound balance sheet and put these financially stable developers on a vantage point. Such financially sound developers (viz Oberoi, Sunteck etc) who have the ability to do write a big cheque and close transactions promptly would have many opportunities to take over stuck projects or purchase land outright at attractive valuations. The interim budget in 2019 has given some breather to the real estate residential market. „ For Home Owners/ Buyers :

z Rollover of Capital Gain Tax has been extended from investment in one house to two houses for capital gains up to INR20 Mn. Incentivizing home buyers to "invest" in real estate sector (impact in all major cities including major micro-markets of Mumbai)

z No income tax on notional rent on the second self-occupied houses if one has more than one self-occupied house.

z The TDS threshold for deduction of tax on rent is proposed to be increased from INR180,000 to INR240,000.

„ For Developer

z Benefits to Developers in Affordable Housing segment under 80-IBA of the Income Tax Act has been extended for one more year, i.e. to the housing projects approved till 31st March, 2020. Sustained focus on affordable housing

z Under this act the developers can get a total tax exemption for profit from affordable housing.

z Exemption from Tax on notional rent on unsold flats extended from 1 year to 2 years. Relief to Developers with large unsold inventory especially with residential sectors witnessing low sales velocity ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 21

Trends - Supply, Demand and Inventory Residential segment contributes nearly 80 per cent to the overall real estate development in the country. So far, 2018 has been a mixed year for the segment, despite government's policy push for affordable housing. Government sustained focus and impetus for "Housing for All 2022 Scheme" under Pradhan Mantri Awas Yojana (PMAY) primarily in affordable segment has aided in upturn of affordable segment. Buoyed by the tax benefits and incentives associated affordable housing, all major developers started catering to this segment in last few quarters. However, overall new supply still hasn't seen much traction and has been subdued in 2018 due to the NBFC crisis in H2 2018. The new supply going forward in next few quarters is expected from established players with good financial health.

New Launches (Units) in MMR 40,000 Impact of Demonetization, RERA and GST 35,000 30,000 25,000 NBFC liquidity crisis 20,000 Units 15,000 10,000 5,000 0 Q1-CY15 Q2-CY15 Q3-CY15 Q4-CY15 Q1-CY16 Q2-CY16 Q3-CY16 Q4-CY16 Q1-CY17 Q2-CY17 Q3-CY17 Q4-CY17 Q1-CY18 Q2-CY18 Q3-CY18

Source: Company, Antique Developers are increasing looking out for new markets and have been thronging Thane/ Mulund area for new growth due to ease of availability of land parcel compared to Greater Mumbai. We expect supply in Thane to increase further as more and more reputed Mumbai developers enter the market.

Locations of the new launches

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 22

Buyers are still being cautious while investing money in residential properties. Most of the demand is primarily driven by end user demand and with limited existence of investors' activity. Lifestyle or premium housing remains sluggish while affordable housing, as a segment, is increasingly gaining traction. Due to uncertainty of project delivery, buyers are staying away from new or under-construction projects unless they are by reputed developers such as Oberoi, Godrej, Sunteck etc. Thus, sales are more happening for projects that are nearing completion or ready.

Total Absorption (Units) in MMR 30,000

25,000

20,000

15,000 Units 10,000

5,000

0 Q1-CY15 Q2-CY15 Q3-CY15 Q4-CY15 Q1-CY16 Q2-CY16 Q3-CY16 Q4-CY16 Q1-CY17 Q2-CY17 Q3-CY17 Q4-CY17 Q1-CY18 Q2-CY18 Q3-CY18

Source: Company, Antique Another factor for buyers' eagerness for ready properties is Goods and Services Tax (GST). GST has been a big deterrence for sale of under-construction apartments. Buyers are reluctant to pay the 12% GST applicable on under-construction apartments is burning holes in the pockets of the buyers especially for big ticket properties especially in Mumbai. Thus, buyers are willing to wait for projects to get Occupation Certificate (OC) on which GST is not applicable. As a consequence, majority of sales are happening in ready properties or just launch phases where developers have the credibility to deliver the projects on time. Ideally, the price of under-construction and ready units shouldn't vary due to GST as the developers don't get input tax credit in ready units. However, developers don't have the control to charge ready units incorporating the lost input tax credit as selling rates are determined by market force.

Market-wise Absorption in MMR

14

12

10

8

6 mn sqft

4

2

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 South Mumbai Central Suburb Western Suburb Harbour Nav i Mumbai Thane

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 23

However, several developers are now willing to absorb majority of the GST impact on buyers as GST has been a major factor keeping buyers away from under-construction apartments. The rise in apartment prices due to GST should ideally be borne by the customer; however, the developer willing to bear the cost is a form of an indirect discount offered to buyers., As the market has been subdued for few years now developers to boost the sales of ready to move inventories or otherwise are inducing several other freebies in addition to GST waivers such as various subvention plans, assured two-year rental schemes and a host of other indirect discounts. Some developers especially for ready properties are offering deferred payment plans. As new launches were subdued and absorption were flat, the inventory has been slowly reducing and its age is slightly decreasing quarter after quarter as the buyers are pushed to turn to under-construction or ready tom move inventories.

Inventory in MMR

340,000 60 330,000 50 320,000 40 310,000 300,000 30 Units

290,000 months 20 280,000 10 270,000 260,000 0 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017 Q3-2017 Q4-2017 Q1-2018 Q2-2018 Q3-2018 Unsold Inventory -LHS Inventory Overhang (Months) -RHS

Source: Company, Antique Inventory should keep decreasing as the new launches remain lower than they used to be and the liquidity crisis might encourage buyers to look for ready to move in. Indeed, due to the lack of cash flow, some developers had to put some projects under construction in hold, generating delays in the delivery. Ready to move in can be seen by buyers as a safe alternative to this issue. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 24

Focus on Affordability Affordable houses continued to drive sales. Sales in the relatively affordable markets of MMR - Thane, Peripheral Central Suburbs and Peripheral Western Suburbs grew by 7% YoY, 6% YoY and 6% YoY respectively during H2 2018 . The Western Suburbs and Thane are the two markets to have substantial sales; Thane due to affordability factor.

New launches in 2018 Size of Launched Units

Source: Company, Antique Source: Company, Antique The trend of constructing compact homes in Mumbai continues and is becoming pervasive. In some locations, the projects with such compact apartments have done well, while in others, despite the project being in better locations and established catchments, they are struggling. It is a big challenge for developers to get the product size right as per the location in this segment. Thane market's attractiveness should be maintained over the next few years, as an important metro project is planned for the city, as well as different projects expecting to ease the traffic congestion (Thane coastal road, Mulund- Ghodbunder foothill roads and Kalwa-Kharegaon link road) making it more accessible and more connected. Thane is around 30% less expensive than Mumbai with an average weighted price of 13,500 Rs./Sqft, and its launches are mainly in the ticket size brackets of INR5-10 million and 10-20 million. The average size of the launched units is also 25% smaller than Mumbai's for the last quarter, making clear developer's position on the premium affordable segment of the market. Another micro-market emerging as the affordable housing destination is Naigaon. Sunteck already has launched projects with 1.2 mn sqft of saleable area and sold more than 80%. The project has a total potential of 150 acres of which 10 acres have been launched. Suraksha Realty an emerging developer is acquiring around 300 acres in the micro-market. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 25

The Western suburb and Central Suburb The Western suburb is the key driver of the market in terms of sales and launches. Mulund in central suburb is another sought after micro-market for the developers leading to supply saturation.

Top 10 micro-markets based on Sales in 2018 Top 10 micro-markets based on inventory in 2018 in Greater Mumbai in Greater Mumbai Malad(W) Andheri(E) Mulund(W) Andheri(W) Worli Mulund(W) 4% Andheri(W) 9% 6% 6% 6% 5% 4% Malad(W) Chembur 5% 4% Kanjurmarg (E) Mahalakshmi 4% 3% Chembur Others Jogeshw ari(W) Others 4% 58% 3% 55% Malad(E) 4% Kandivali(W) 3% Bhandup(W) Borivali(E) 4% Malad(E) 3% Wadala Andheri(E) 3% 3% 4%

Source: Company, Antique Source: Company, Antique Thane and Navi Mumbai Top 10 micro-markets based on Sales in 2018 in Thane Top 10 micro-markets based on Sales in 2018 in Navi Mumbai

Sector 37 Teen Hath Naka Nerul 3% 4% Hiranandani 3% Others Estates Others Sector 23 15% 5% 30% 3% Taloja Kasarvadavali 36% 6% Airoli Kolshet 3% Vartak Nagar 11% 6% Sanpada Majiw ada 4% Ghansoli 7% Bhayandarpada Sector 35 13% Anand Nagar 9% 5% 7% Dhokali Balkum Kalamboli Seaw oods 7% 8% 7% 8%

Source: Company, Antique Source: Company, Antique

Residential Market in MMR Markets Micro-markets Total Absorption % (YoY) Unsold % sales of Inventory in FY 2018 (mn sqft) (mn sqft) total stock Overhang Western Suburb Bandra to Dahisar 8.96 13% 27.20 25% 31 Central Suburb BKC Bhandup Kalina Kurla Ghatkopar Mulund etc 4.94 3% 19.10 21% 45 South Mumbai to Nariman point 3.88 16% 16.94 19% 40 Harbour Chembur, Sion, Mankhud, 1.06 19% 3.88 22% 50 Thane 5.86 4% 19.61 23% 38 Navi mumbai Vashi, Khargarh, Belapur 3.90 46% 10.06 28% 27 Total 28.60 96.79

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 26

Although, South Mumbai has 18% of the total inventory (in sqft) in MMR but value-wise it constitutes 34% of the total inventory. Thus, South Mumbai market is critical for the industry because of its value. At the other end, Thane has 20% of the inventory in MMR in terms of area (sqft) but value-wise constitutes only 11% of the inventory in MMR.

Performance of sub-market in MMR Markets Total Absorption in FY 2018 (INR mn) Unsold (INR mn ) Western Suburb 219,727 789,681 South Mumbai 160,874 907,073 Central Suburb 113,021 474,961 Harbour 25,700 110,188 Thane 79,851 307,626 Navi mumbai 32,805 96,903 Total 631,979 2,686,432

Source: Company, Antique

Snapshot of MMR Residential Real Estate in 2018

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 27

Grade A Office Market Overview (Greater Mumbai) India's commercial real estate market is one of the most well-organized markets in the Asia- Pacific region and the introduction of Real Estate Investment Trust (REITs) structure is expected to help the sector become even more efficient. Commercial assets have been the most preferred asset classes in real estate by institutional investors over the last couple of years. It has attracted about 80 % of the total investments between 2016 and YTD-2018. Office space supply has lagged demand since 2013 as developers chose to commit a majority of investments into residential real estate in hopes of saving existing projects or scoring a comparatively quicker profit, despite a strong underlying demand from office occupiers. Even private equity investors have been more inclined to acquire stabilized assets as an overwhelming majority of the investors are pension funds, sovereign funds, insurance companies etc and their investments have been routed toward the acquisition of already matured assets. The ensuing supply crunch caused vacancy levels to plummet and in some cases to less than 5%; correspondingly rental levels also rose across cities as occupiers were left with increasingly fewer choices. However, in last few years many developers entered the office market and the Grade A office development has gained momentum. Mumbai office market continues to be top performing office market in India with heightened leasing activity. BFSI sector continued to lead the demand for Grade A office space with H2 2018 seeing leasing of more than 32% of the total leasing in BFSI sector.

Absorption of Grade A office Space

7

6

5

4

mn sqft 3

2

1

0 2013 2014 2015 2016 2017 2018 Offices IT Parks

Source: Company, Antique Office space absorption during 2018 was recorded at approximately 3.83 mn sqft, with 2.55 mn sqft in H2 2018. This robust leasing activity could partly be attributed to the new completions entering the market periodically as well as healthy pre-commitments. The office market witnessed substantial demand from the co-working space operators and the segment continues to expand rapidly, buoyed by the demand from smaller firms and start-ups, along with demand from the usual BFSI and IT sectors. ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 28

Leasing sector-wise in 2018

32%

43%

16% 9%

BFSI IT/ITeS Manufacturing Other Services

Source: Company, Antique The city has been seeing steady supply of new office space in last 5 years. Additional 10 mn sqft of office space is expected in next 2 years. Western suburb (Goregaon, Andheri belt) is expected to see the most supply in next few years.

New Supply of Grade A Office 7

6

5

4

3 Mn sqft

2

1

0 2013 2014 2015 2016 2017 2018

Offices IT Parks

Source: Company, Antique The vacancy rate has been consistently going down despite the large volume of supply. As the vacancy rate is going down the rentals have been increasing Vacancy rate and Rental

Vacancy rate and Rental

165 17% 17% 160 16% 16% 155 15% 150 15% 14%

Rs/sqft/mth 145 14% 13% 140 13% 135 12% 2013 2014 2015 2016 2017 2018 Rentals (Rs/ sqft/ mth) (LHS) Vacancy Rate (%) (RHS)

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 29

BKC is the top micro-market with 8.84 mn sqft of occupied space and at the same time has the highest vacancy in greater Mumbai area. Lower Parel has formidable office space but vacancy rate is very low.

Top 10 Micromarkets with office space Micromarket No. of Projects Occupied (MnSqft) Bandra Kurla Complex 17 8.37 Andheri(E) 46 7.74 Lower Parel 16 7.63 Goregaon(E) 23 6.16 Powai 10 3.43 Malad(W) 13 2.47 Kurla (W) 11 2.1 Andheri Kurla Road 8 1.87 Chandivali 5 1.64 Andheri(W) 15 1.56 Others (38) 116 17.32

Source: Antique

Top 10 Micromarkets with office space vacancy Micromarket No. of Projects Vacancy (MnSqft) Bandra Kurla Complex 17 2.38 Kurla (W) 11 2.00 Dadar(W) 3 1.17 Andheri(E) 46 1.11 Powai 10 0.90 Malad(E) 5 0.90 Wadala 1 0.76 Sakinaka 5 0.66 Goregaon(E) 23 0.65 Bhandup(W) 5 0.58

Source: Antique

Top players in office sector: Kanakia, Indiabulls, Lodha are the leading players in office space in Greater Mumbai Developer Name No. of Projects Supply (MnSqft) Kanakia 9 3.96 (5.35 %) ( 1 Rank) Indiabulls Real Estate 3 3.31 (4.48 %) ( 2 Rank) Lodha Group 8 3.22 (4.36 %) ( 3 Rank) Godrej Properties 4 3.08 (4.17 %) ( 4 Rank) Hiranandani 7 2.97 (4.02 %) ( 5 Rank) K Raheja Constructions 5 2.01 (2.72 %) ( 6 Rank) Nirlon 3 1.91 (2.58 %) ( 7 Rank) 1 1.87 (2.53 %) ( 8 Rank) The Wadhwa Group 5 1.69 (2.29 %) ( 9 Rank) Radius Developers 2 1.50 (2.03 %) ( 10 Rank) Others (151) 229 48.36 (65.46 %) ( 11 Rank)

Source: Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 30

Grade A office Rentals across Mumbai

Source: Company, Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 31

Financials

Profit and loss account (INRm) Cash flow statement (INRm) Year ended 31 Mar 2017 2018 2019e 2020e 2021e Year ended 31 Mar 2017 2018 2019e 2020e 2021e Net Revenue 9,522 8,883 8,442 12,195 20,820 PBT 3,084 3,375 3,300 5,012 8,951 Op. Expenses 5,500 4,610 4,724 6,896 11,715 Depreciation & amortisation 23 17 19 21 22 EBITDA 4,022 4,272 3,718 5,299 9,105 Interest expense 455 421 492 492 492 Depreciation 23 17 19 21 22 (Inc)/Dec in working capital (499) (4,607) 465 1,985 (1,389) EBIT 4,000 4,256 3,700 5,278 9,083 Tax paid (647) (1,365) (1,011) (1,535) (2,741) Other income 82 93 93 226 360 Less: Interest/Dividend Income Recd. 15 (74) (93) (226) (360) Interest Exp. 997 973 492 492 492 Other operating Cash Flow (4) (4) - - - Other Adjustment (10) (63) - - - CF from operating activities 2,427 (2,237) 3,173 5,749 4,976 Reported PBT 3,074 3,312 3,300 5,012 8,951 Capital expenditure (38) (1) (133) (2,069) (3,189) Tax 872 1,078 1,011 1,535 2,741 Inc/(Dec) in investments 210 (26) 0 0 0 Reported PAT 2,202 2,233 2,289 3,477 6,210 Others 711 206 156 (485) (1,243) Net Profit 2,202 2,233 2,289 3,477 6,210 CF from investing activities 882 180 23 (2,554) (4,432) Adjusted PAT 2,212 2,297 2,289 3,477 6,210 Inc/(Dec) in share capital 8 6,424 - - - Adjusted EPS (INR) 18.4 16.4 16.3 24.8 44.2 Inc/(Dec) in debt (2,899) (3,757) 0 0 0 Dividend Paid (139) (218) (253) (253) (253) Balance sheet (INRm) Others (341) (496) (492) (492) (492) Year ended 31 Mar 2017 2018 2019e 2020e 2021e CF from financing activities (3,371) 1,953 (745) (745) (745) Share Capital 120 140 140 140 140 Net cash flow (61) (105) 2,451 2,450 (201) Reserves & Surplus 18,539 26,938 28,974 32,199 38,156 Opening balance 657 596 491 2,942 5,392 Networth 18,659 27,078 29,115 32,340 38,297 Closing balance 596 491 2,942 5,392 5,191 Debt 9,454 5,694 5,694 5,694 5,694 Net deferred Tax liabilities 168 (118) (66) (66) (66) Growth indicators (%) Others 8 8 8 8 8 Year ended 31 Mar 2017 2018 2019e 2020e 2021e Capital Employed 28,289 32,662 34,751 37,976 43,933 Revenue(%) - -6.7 -5.0 44.5 70.7 Non-Current Assets 722 708 739 769 796 EBITDA(%) - 6.2 -13.0 42.5 71.8 Capital work in progress - - 83 2,103 5,242 Adj PAT(%) - 3.8 -0.3 51.9 78.6 Net Fixed Assets 722 708 823 2,871 6,038 Adj EPS(%) - -11.3 -0.3 51.9 78.6 Investments 3,615 2,254 2,254 2,254 2,254 Non Current Investments 3,072 1,709 1,709 1,709 1,709 Valuation (x) Current Investments 543 545 545 545 545 Year ended 31 Mar 2017 2018 2019e 2020e 2021e Current Assets, Loans & Adv. 32,152 33,385 33,105 34,444 34,131 P/E 29.8 33.6 33.7 22.2 12.4 Inventory 28,017 26,927 24,374 21,280 16,700 P/BV 3.5 2.9 2.7 2.4 2.0 Debtors 1,620 2,906 2,792 4,064 6,930 EV/EBITDA 2.1 1.1 0.6 0.0 0.0 Cash & Cash Equivalent 595 491 2,942 5,392 5,191 EV/Sales 0.9 0.5 0.3 0.0 0.0 Bank balance 2 608 608 608 608 Financial ratios Loans & advances and others 1,917 2,452 2,389 3,100 4,703 Current Liabilities & Prov. 8,201 3,685 1,432 1,594 (1,509) Year ended 31 Mar 2017 2018 2019e 2020e 2021e RoE (%) 11.9 10.0 8.1 11.3 17.6 Liabilities 8,197 3,548 1,294 1,457 (1,646) RoCE (%) 14.4 14.3 11.3 15.1 23.1 Provisions 4 137 137 137 137 Asset/T.O (x) 0.4 0.3 0.3 0.4 0.5 Net Current Assets 23,951 29,700 31,674 32,850 35,641 Net Debt/Equity (x) 0.4 0.2 0.1 0.0 0.0 Application of Funds 28,288 32,662 34,751 37,975 43,933 EBIT/Interest (x) 4.0 4.4 7.5 10.7 18.5 Per share data Margins (%) Year ended 31 Mar 2017 2018 2019e 2020e 2021e No. of shares (m) 120 140 140 140 140 Year ended 31 Mar 2017 2018 2019e 2020e 2021e EBITDA Margin(%) 42.2 48.1 44.0 43.5 43.7 Diluted no. of shares (m) 120 140 140 140 140 EBIT Margin(%) 42.0 47.9 43.8 43.3 43.6 BVPS (INR) 156 193 207 230 273 PAT Margin(%) 23.0 25.6 26.8 28.0 29.3 CEPS (INR) 18.5 16.0 16.4 24.9 44.4 DPS (INR) 1.0 1.3 1.5 1.5 1.5 Source: Company Antique

Source: Company Antique ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 29 March 2019 | 32

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